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"Anexo Group Plc Annual Report 2022 The specialist integrated credit hire and legal services provider Anexo is a specialist integrated credit hire and legal services group. At a glance: Investment case Executive Chairman’s Statement Our strategy Financial statements Risk management Overview The Anexo Group Operational and Financial Highlights Financial and Operational KPIs At a glance Investment case Strategic Report Executive Chairman’s Statement Market overview Our strategy Our business model Financial Review Risk management Risk and Regulation Committee Report Streamlined Energy and Carbon Reporting Governance Board of Directors Directors’ Report Chairman’s Statement on Corporate Governance Audit Committee Report Remuneration Committee Report Statement of Directors’ Responsibilities Financial Statements Independent auditor’s report Consolidated Statement of Total Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Company Statement of Financial Position Company Statement of Changes in Equity Notes to the Company Financial Statements Other Information Company Information We provide replacement vehicles and associated legal services to impecunious customers who have been involved in a non-fault accident. These individuals typically do not have the financial means or access to a replacement vehicle. This allows the Group to charge credit hire rather than spot hire rates, recovering these charges from the at-fault insurer at no upfront cost to the individual alongside legal fees for the Group. 2022 was a year of consolidation for the Group’s core business following the disruption and uncertainty caused by the Covid-19 pandemic. Despite this, healthy general demand and a positive contribution from MCE in the early part of the year has ensured that the average number of vehicles on the road during 2022 actually rose marginally from 1834 to 1892. This underlines the robust health of the core credit hire business and the continued demand for non-fault claims. The Group continues to place more emphasis on motorcycle claims, which tend to have a lower take-on cost than cars and therefore constitute a more efficient use of working capital. Bond Turner has continued to invest in good quality staff and related infrastructure and this is reflected in the overall rise in cash collections. We highlighted in 2021 that Bond Turner’s performance was impacted by the lack of judicial time available following prolonged periods of closure of the courts. The backlog of cases and associated delays in the hearing of new ones continued to impact on the settlement of credit hire claims. This has been mitigated by our investment in the Housing Disrepair team, which has led to a significant increase in the number of cases taken on and settlement revenue. The average settlement period for a Housing Disrepair claim is significantly less than for a credit hire claim and the working capital cycle is reduced accordingly. The Group continued its focus on the prudent management of fleet levels within our credit hire division, EDGE, and the level of cash collections within our legal services division, Bond Turner. We have also continued to expand our involvement in Housing Disrepair claims following the announcement of this new area of expertise in December 2021; and work has continued on the emissions claims originally announced in April 2020. The Group ended 2021 with record numbers of vehicles on the road, driven both by an increase in activity following the general lifting of Covid-19 restrictions and also investment in both fleet and infrastructure in response to the major contract with MCE Insurance announced in November 2021. Vehicle numbers at the end of 2021 stood at 2366. As a consequence of the insolvency of MCE’s underwriter, Green Realisations 123 Limited, the anticipated activity levels deriving from the MCE contract were not sustained and the Group undertook a series of measures to reduce the size of the fleet and associated infrastructure costs to reflect a revised level of forecast activity. Staff numbers within Bond Turner continued to grow, driving improvements in performance and cash collections. Staff numbers in the legal services division reached a total of 678 in 2022, a 6.9% rise from 2021 and one which reflects the growth of the Housing Disrepair team. Overall cash collections rose 22.8% to £146.1 million (2021: £119.0 million). This ongoing growth in staff will underpin further growth in cash collections in 2023, helped by the gradual reduction in the courts’ backlog. The Group seeks to develop the Housing Disrepair business further in 2023, while consolidating the Credit Hire division by focusing on fleet management and efficient use of working capital."
"The Board believes there are significant opportunities to manage the overall Group so that it generates cash whilst continuing to seize opportunities for growth as they present themselves. We remain optimistic for the future. We have provided certain data and statistics below and on the following pages to give further detail around the trading and operational performance of the Group. The measures presented are those which management believes provide the best reflection of performance. Anexo Group Plc Annual Report 2022 Operational and Financial Highlights Profit margin 21.9% Revenue 17.0% Basic EPS 16.6p Dividend 1.5p Net assets £146.3m Note: The basis of preparation of the consolidated financial statements for the current and previous year is set out in the Financial Review on page 20. Revenue increased by 17.0% to £138.3 million (2021: £118.2 million) Operating profit reported at £30.4 million (2021: £27.4 million) – an increase of 10.9% in line with updated market expectations Adjusted operating profit before exceptional items increasing in line with revised market expectations, by 9.0% to £30.2 million (2021: £27.7 million) Adjusted operating profit margin reduced to 21.9% (2021: 23.5%) Profit before tax of £24.1 million (2021: £23.7 million) – an increase of 1.7% Adjusted profit before tax and exceptional items reported at £23.9 million, (2021: £24.1 million) – a reduction of 0.8% after significant investment in both principal divisions including the continued investment in staff (£5.8 million) and associated IT and infrastructure costs associated with the headcount increase (investment in 2021: £7.0 million) Adjusted basic EPS at 16.5 pence (2021: 16.8 pence) Proposed final dividend of 1.5p per share giving a total dividend for the year of 1.5p per share (2021: 1.5p) Equity attributable to the owners of the Company reported at £146.3 million (2021: £128.2 million) representing an increase of 14.1% A reduction in net cash used in operating activities reporting a net cash outflow of £3.1 million in 2022 (2021: net cash outflow: £7.3 million) Net debt balance at 31 December 2022 was £73.1 million (31 December 2021: £62.0 million) During 2022 we saw the continued improvement in a number of key performance measures. Financial performance has been strong, despite continued delays in the court system. Opportunities within the Credit Hire division remain strong, following the introduction of the Civil Liabilities Act 2021, but the Group has been careful to manage its fleet size prudently, especially in the light of the lower than expected vehicle contributions from the major insurance contract announced in November 2021. Consequently, although the average number of vehicles on hire rose year on year, the fleet numbers at the end of the year declined 26.9% to 1730 (2021: 2366). The number of new cases funded during the year also declined slightly, falling 2.7% to 9986 (2021: 10265). Our ability to fund growth in our core business has been supported by ongoing investment in legal staff. In 2021, the number of senior fee earners grew by 6.8% to reach 253 at the year end. This investment has driven increased cash collections in the year despite the challenges of the reduced operation of the court system. Much of the investment will start to impact during 2023 and beyond, reflecting both the shorter life cycle of a typical housing disrepair claim and the time a new credit hire starter takes to reach settlement maturity. Average vehicles on hire for the year New cases funded Number of hire cases settled Total revenues Adjusted operating profit Gross profit Adjusted operating profit margin Cash collections from settled cases Vehicles on hire at the year-end Anexo Group Plc Annual Report 2022 Anexo is a specialist integrated credit hire and legal services group focused on providing replacement vehicles and associated legal services to impecunious customers who have been involved in a non-fault accident. Credit Hire (EDGE) Our Credit Services division operates under the brands DAMS (cars and commercial vehicles), McAMS (motorcycles) and CAMS (bicycles). We have a network of around 1150 introducer garages across England and Wales which are typically small independent operators. Following a recommendation from one of our garage partners, a customer claim is vetted by our experienced team and, if approved, a replacement vehicle is provided on the same or the following day from one of our four depots strategically located across England. The garage is visited by an independent court-appointed engineer who assesses the damage to the vehicle and either authorises the repair or declares it a write-off."
"The client retains the hire vehicle until the repaired vehicle is returned or a cheque for the value of the write-off is received. Returned vehicles are valeted and checked for roadworthiness before being reallocated to a new customer. These individuals typically do not have the financial means or access to a replacement vehicle. This allows the Group to charge credit hire rather than spot hire rates, recovering these charges from the at-fault insurer at no upfront cost to the individual alongside legal fees for the Group. Average vehicles on hire 3 Brands 8 Locations 20000+ Cases in progress 600+ Employees Road Traffic Accident Not at fault motorists Impecunious claimant Direct capture sources Body shops Vehicle workshops Recovery agents Anexo Sales Representatives Legal Services and Claim Management Credit hire CAMS McAMS DAMS Bond Turner is our wholly-owned firm of solicitors. We employ both qualified solicitors and paralegals to facilitate our claim work. In addition to our original office in Liverpool we opened an office in Bolton in December 2018. This has subsequently doubled in size and following this success we opened a third office in Leeds in early 2021. Advocacy In addition to the claims work which forms the majority of our caseload we are also involved in general advocacy, including professional and clinical negligence cases, complex medical claims, defamation and wills and estates disputes. The Group currently comprises four business units under the two main reporting divisions – credit hire, being the trading and balances of Direct Accident Management Limited, and legal services, covering Bond Turner Limited, Professional and Legal Services Limited and IGCA 2013 Limited: Direct Accident Management Limited (trading principally as DAMS, McAMS and CAMS and defined as EDGE) – a specialist credit hire and initial claims management business providing cars, motorcycles and cycles from a fleet of over 2000 vehicles; Bond Turner Limited – a dedicated provider of legal services to customers, principally to recover any losses the client may have suffered alongside the associated hire charges and repair costs. Bond Turner also provides advocacy which is headed by Alan Sellers with the Group utilising external barristers as necessary to support the legal process. Bond Turner also contains a division dedicated to pursuing Housing Disrepair actions against Local Authorities, Housing Associations and private landlords whose tenants live in sub-standard rental accommodation, and a further separate division pursuing class actions against a variety of major car manufacturers for breaches of regulations around engine emission requirements; Professional and Legal Services Limited – a medical legal agency which arranges expert third-party reports to support the customer’s claim from either a credit hire and/or personal injury perspective; and IGCA 2013 Limited – administers after the event insurance policies for independent third-party insurers which have been obtained by customers to ensure that the customer’s risk of any adverse costs associated with the claim are reduced or eliminated. The lifecycle of a claim Once a customer has been introduced to us, we provide an end-to-end service, handling their replacement vehicle hire and subsequent recovery of all costs from the other side. EDGE provides replacement vehicles at commercial credit hire rates. RTA happens to no fault motorist Individual put in touch with EDGE Direct capture sources: Body shops Vehicle workshops Recovery agents Anexo sales representatives Vetting of claim Three validation steps: 1. Establishment of liability 2. Customer statement 3. Witnesses Approximately 50% of claims result in a vehicle being issued. Bond Turner collects cash from the at-fault insurer. Bond Turner contacts the at-fault insurer with credit hire and repairs claim. Most introduced RTA cases also include a personal injury claim. Should the at-fault insurer refuse to settle at an acceptable rate, Bond Turner issues court proceedings. The majority of claims are settled by negotiation. If no settlement is agreed, the case proceeds to court, the cost being recoverable from the third party insurer. PALS supports claims by arranging third party medical and legal reports. Anexo Group Plc Annual Report 2022 Investment case The Board is pleased to confirm that cash collections have continued to grow. Unique Customer Proposition Synergistic Integrated Divisions Established Geographic Presence and Fleet We offer a complete service to our customers from the provision of a replacement vehicle following a non-fault accident, through the process of repair or write-off, to the recovery of the cost of repair or the value of the written-off vehicle. We maintain a close relationship with the customer throughout the process."
"By monitoring the repair process and progress of the litigation we are able to manage our fleet requirements in a timely and efficient manner. Anexo provides a complete litigated claims process focused on the recovery of credit hire and repair costs. Much of our business is generated from the significant proportion of the population in England and Wales which is unable to access emergency liquidity in the event of unexpected financial demands. Our direct capture model enables us to deal with our customers directly without recourse to their insurance provider. We maintain five depots which cover the whole of England and Wales. Our Northern and original depot is based in Ormskirk. We have two smaller depots in Solihull and Frome, covering the Midlands and the West Country. Our largest depot is a purpose-built facility in Potters Bar which handles our South, East and London-based customers. In early 2021 we opened a fifth depot in Newcastle-upon-Tyne to service our growing introducer network in the North East of England. Our fleet managers constantly monitor location and demand statistics to ensure that our customers can take delivery of the vehicle they need as quickly as possible. 7922 hire cases settled in 2021 All EDGE cases referred to Bond Turner 5 vehicle depots across England Active Network of Sales People and Introducers Experienced Senior Management Team Robust Financial Backing Our Executive Chairman, Alan Sellers, started the credit hire business in 1995. Several members of our staff who joined at inception continue to use their experience in senior roles within EDGE. The merger with Bond Turner, formerly known as Armstrongs Solicitors, in 1996 gave us access to a pool of experienced litigators. All our Executive Directors have many years’ experience within the consolidated Group and our Non-Executive Directors bring with them a wide range of specialised skills which offer tangible benefits to the Board. Anexo maintains excellent relations with its bankers and finance providers. We have established distinct long-term financing arrangements covering EDGE and Bond Turner. Our revenue recognition policies are recognised as extremely conservative and our constant monitoring of the capacity and needs of both the credit hire and legal divisions means that we can apply financial leverage swiftly and effectively when required. Our team of sales people are responsible for defined areas within England and Wales. They initiate and build relationships with our network of approximately 1150 introducer garages, which are typically sole traders or small partnerships unaffiliated. We operate in the Road Traffic Accident credit hire and claims market and differentiate ourselves with our integrated offering. Anexo is established as a provider of an end-to-end litigated claims service to predominantly impecunious non-fault motorists. These customers typically do not have the financial means to cover the costs of a replacement vehicle while their own vehicle is being repaired. Our model allows us to provide a seamless service that alleviates the financial burden on these individuals, ensuring they can continue their daily lives without disruption. With main dealerships or specific car manufacturers, this independence allows us to approach each potential repair opportunity on an equal footing, without restrictions or obligations to large organizations. The large number of introducer garages allows us to minimize risk exposure to any one counterparty. In 2022, we had 1,150 introducer garages in our network and a dedicated mobile sales force, providing coverage across England and Wales. Executive Chairman’s Statement I am pleased to report a year of solid growth by the Group. On behalf of the Board, I am pleased to report a year of solid growth by the Group in the face of ongoing nationwide challenges and delays. These results reflect our continued focus on increasing cash settlements through the expansion of our Legal Services division, while using our working capital to maximum effect to ensure prudent management of our Credit Hire division. This emphasis on balancing growth in cash collections against commitment of capital on new cases has ensured significant increases in cash collections while managing a decrease in the number of vehicles on the road during the course of the year. We have continued to invest in our advocacy practice, particularly through our Housing Disrepair division, and we believe the division will continue its growth to become a significant contributor to future revenues. The Board continues its close monitoring of progress in our core divisions while seeking to take advantage of the significant growth opportunities which are presenting themselves and believes that the Group is well positioned for further strong performance in 2023 and beyond."
"Group Performance Anexo Group Plc has shown solid performance during 2022. Trading across all our divisions has been resilient and we have managed the core business prudently. As a result, Group revenues in 2022 increased by 17.0% to £138.3 million, gross profits increased by 15.6% from £91.5 million in 2021 to £105.8 million in 2022. Adjusted operating profit increased by 9.1% to £30.2 million in 2022 at a margin of 21.9%. Adjusted profit before tax was broadly in line year on year, reducing by 0.8% to £23.9 million, reflecting the ongoing investment in staff and marketing costs within Bond Turner. To provide a better guide to underlying business performance, adjusted profit before tax excludes share-based payments charged to profit and loss. During 2022, the Group continued to take advantage of the opportunities offered by the withdrawal of a number of competitors from the market following the introduction of the Civil Liabilities Act, which severely curtails the ability of personal injury solicitors to recover substantial legal costs. This has enabled the Group to attract new high-quality staff and expand its infrastructure to facilitate increased case settlements in the future. As a result, cash collections for the Group increased by 22.8% to £146.1 million in 2022. Credit Hire Division The Group’s Credit Hire division, EDGE, saw prudent management during the year to maximize efficient use of the existing fleet and to manage overall fleet numbers to reflect revised expectations. Vehicle numbers in the first half of the year remained very high, finishing H1 on a total of 1,947. The number of vehicles on the road during the course of the year rose as a consequence by 3.2% to 1,892. Due to the insolvency of Green Realisations 123 Limited and its resulting impact on our major motorcycle insurance contract, the decision was taken to reduce vehicle numbers substantially during the second half of the year. Consequently, the year ended with a total of 1,730 vehicles on the road, a decrease of 26.9% on the previous year. New cases funded fell from 10,265 in 2021 to 9,986 in 2022, whilst the number of hire cases settled increased by 28.0% from 6,187 in 2021 to 7,922 in 2022, supporting the increase in cash collections noted above. Revenues within the Credit Hire division grew by 4.8% to £74.7 million. Legal Services Division Within the Group’s Legal Services division, Bond Turner has continued its focus on cash collections and corresponding investment in staff to drive increased case settlements. This strategy has had a significant positive impact on financial performance. Revenues within the Legal Services division, which strongly correlates to cash, increased by 35.6% to £63.6 million. The continued growth of the Bolton office, which has now been operational for four years, the opening of the Leeds office and the expansion of the core office in Liverpool into new ancillary premises have provided considerable opportunities for recruitment. During the pandemic, and following the implementation of the Civil Liabilities Act 2021, the Group has seen a number of personal injury solicitors withdrawing from the market and embarking on a run-off strategy. Taking advantage of these recruitment opportunities has resulted in staff numbers rising at all levels, with the ability to retrain solicitors in the fields of credit hire and housing disrepair for suitable placement within Bond Turner. At the end of December, staff numbers within Bond Turner stood at 678, a 6.9% increase on the 2021 figure of 634. VW Emissions Case The pursuit of the class action against Volkswagen AG and its subsidiaries has continued during 2022. A judgment announced in the High Court of Justice found that VW had indeed subverted key air pollution tests. VW was subsequently refused permission to appeal that judgment. Time limitations for the case expired in September 2021, meaning that no more claims can be brought against VW. Bond Turner is acting on behalf of a number of individuals who have registered claims against VW and is currently actively engaged on over 12,000 cases. The marketing campaign has been largely conducted via social media channels as well as via the use of internal customer records with all marketing costs being written off as incurred. There is no certainty that a settlement in favor of Bond Turner’s clients will be reached, nor is there any guarantee that such a settlement would include financial compensation."
"The Board believes that, in the event of a settlement, the percentage of potential damages and associated costs accruing to Anexo would have a positive impact on the Group’s expectations for profits and cash flow for the relevant accounting period. Dividends The Board is pleased to propose a final dividend of 1.5p per share, which if approved at the Annual General Meeting to be held on 15 June 2023 will be paid on 23 June 2023 to those shareholders on the register at the close of business on 26 May 2023. Corporate Governance Anexo values corporate governance highly and the Board believes that effective corporate governance is integral to the delivery of the Group’s corporate strategy, the generation of shareholder value and the safeguarding of our shareholders’ long-term interests. As Chairman, I am responsible for the leadership of the Board and for ensuring its effectiveness in all aspects of its role. Mercedes Benz Emissions Case Having undertaken our own internal research, which has been subsequently corroborated by counsel, the Group has begun actively sourcing claims against Mercedes Benz, as we have successfully done for VW. In total, the Group invested £4.0 million in 2022 in both staffing and emission claims lead generation fees. Housing Disrepair The Housing Disrepair team has continued its rapid expansion during 2022. During the year we successfully settled approximately 2,000 claims. At the end of the year we had a portfolio of over 3,000 ongoing claims. Some £3.0 million was invested in marketing costs in 2022, all of which was expensed as incurred, and with further investment planned into 2023, the Housing Disrepair team has proven its potential to be a significant contributor to Group earnings. Our Employees and Stakeholders The strong performance of the Group reflects the dedication and quality of the Group’s employees. We rely on the skills, experience and commitment of our team to drive the business forward. Their enthusiasm, innovation and performance remain key assets of the Group and are vital to its future success. A director of a company must act in a way that they consider, in good faith, would most likely promote the success of the company for the benefit of its members as a whole, taking into account the factors listed in section 172 of the Companies Act 2006. Engagement with our shareholders and wider stakeholder groups plays an essential role throughout Anexo’s business. We are aware that each stakeholder group requires a tailored engagement approach in order to foster effective and mutually beneficial relationships. Our understanding of stakeholders is then factored into boardroom discussions, regarding the potential long-term impacts of our strategic decisions on each group, and how we might best address their needs and concerns. In addition, effective engagement with stakeholders at Board level and throughout our business is crucial to fulfilling Anexo’s purpose. While the importance of giving due consideration to our stakeholders is not new, we are taking the opportunity this year to explain in more detail how the Board engages with our stakeholders. We keep in close contact with investors, employees, customers, suppliers and local communities so we are aware of their views. This ensures we can appropriately consider their interests in decision making. We also engage with a number of different regulatory bodies in the course of our operations, such as the Financial Conduct Authority and the Solicitors Regulation Authority. The impact of the continued engagement with suppliers, employees, investors and regulatory bodies has allowed the Board to ensure all viewpoints are taken account of when taking strategic and operational decisions. Principal Risks and Uncertainties The principal risk and uncertainties facing the Group are included within the Risk and Regulation Committee report. Current Trading and Outlook As our financial performance and KPIs have demonstrated, the Group has continued to invest in its people, particularly within the Legal Services division, supporting the growth we have reported in both the number of claims settled and the underlying level of cash receipts for the Group. Since year end, the Board has conducted a Strategic Review and has concluded that the interests of the Group and its shareholders will be best served by concentrating on cash generation. Subsequent Events On 8 March 2023, the High Court handed down a judgment granting a Group Litigation Order. The application sought permission to launch a class action lawsuit against Mercedes Benz for alleged subversion of key air pollution tests."
"Following the success of this application, on 14 April 2023 the Board confirmed that the Group intends to pursue litigation against Mercedes and has already secured over 12,000 claims. The Group’s Annual General Meeting will be held on 15 June 2023. Alan Sellers Executive Chairman 9 May 2023 The means to provide themselves with a replacement means of transport when they are deprived of their existing vehicle through the action of another party. These replacement vehicle hires are charged at commercial credit hire rates. Our business model is underpinned by UK case law which has affirmed the legal right of an impecunious claimant to recover credit hire costs. Credit hire and the law. Our business model is based on legal precedents in common law and is validated by a number of Supreme Court decisions. Case law from 1994 to 2015 has specifically established, among other things, that we can charge and seek to recover commercial credit hire rates; that such rates are reasonable and not excessive; and that there is no time limit on the provision of a hire vehicle for the duration of a claim. Judgments upheld include the principle that an impecunious motorist with no choice but to hire a replacement vehicle on a credit hire basis is entitled to the full cost of such a hire; and that claimants are entitled to a like-for-like vehicle. The Competition and Markets Authority carried out a review in 2014 which included the credit hire market. They found that the provision of credit hire vehicles was not detrimental to the consumer. Advocacy. Bond Turner operates a separate in-house advocacy division. The division deals with complex professional and clinical negligence claims, including high value and high-profile cases, some of which have been ongoing for many years. It also handles data protection and defamation actions, as well as large or catastrophic loss cases arising from road traffic accidents and employers’ liability cases. Some of these actions involve potential claims for damages in excess of ten million pounds. Cash collections governance financial statements. Our strategy. The highest medium and long-term value can be delivered to its shareholders through the Company’s growth strategy. The Legal Services division has continued to grow, with investment driving settlement capacity and increased cash collections, while average fleet numbers remained broadly unchanged as the Group concentrated on careful management of working capital. Average vehicle numbers rose 3.2% over the year but the trend remained firmly downwards, with the number of vehicles on the road at year end declining by 26.9%. The Group continues to monitor its fleet size and retains the capacity to respond quickly and deploy additional vehicles according to the Group’s strategic priorities. The Group’s legal services division, Bond Turner, operates in three locations: Liverpool, Bolton and Leeds. The number of senior fee earners grew 6.8% during the course of 2022 and we continue to recruit high quality staff. The number of cases settled increased by 28.0% during 2022, reaching a total of 7,922, as our investment in legal staff continued to bear fruit. This growth in case settlements resulted in a 22.8% increase in cash collections, reaching a new high for the year of £146.1 million. Increasing number of litigators targeting cash collections managing fleet utilization. Strategic outlook. Anexo continued its investment in the legal services business in 2022 and will maintain this policy in 2023. We have a number of opportunities to grow our market share significantly and the Board is confident that the Group strategy will result in increasing claims generation and an expanding market share for both our Credit Hire and Housing Disrepair divisions. Legal staff at year end. Anexo Group Plc Annual Report 2022. Our business model. The Group has created a unique business model by combining a direct capture credit hire business with a wholly owned legal services firm. What we do. We provide replacement vehicles and associated legal assistance to consumers who have been involved in non-fault motor accidents. The Group comprises two synergistic business divisions: Credit Hire and Legal Services. Legal Services. Bond Turner specializes in road traffic accident claims that typically involve an element of credit hire. Bond Turner has been able to achieve improved recovery rates and periods compared to external law firms. This impact has been particularly marked in respect of credit hire recovery. As a result, Bond Turner has been responsible for acting on all new Edge cases since late 2011 and currently processes all claims generated by EDGE. Credit Hire."
"The business provides vehicles to individuals who have been involved in a non-fault accident, allowing the recovery of costs from the at-fault insurer at no upfront cost to the customer. Sales activities are focused mainly on the impecunious market, allowing the Group to charge commercial credit hire rates which are typically higher than the spot rate or the rates agreed by the ABI under the GTA. Key areas. Credit hire, housing disrepair, personal injury, other professional disciplines including professional and clinical negligence and commercial litigation. Features. 24/7 roadside recovery and storage, like-for-like replacement vehicle, garage of your choice, delivered within 24 hours. The Group’s business model is underpinned by legal precedent supporting the ability of impecunious customers to recover higher credit hire rates from at-fault insurers. All EDGE cases referred to Bond Turner governance financial statements. Key differentiators. We are different from other businesses in the wider RTA credit hire and claims market. Value creation. We were established to meet a clear market need, and our unique model creates value for all of our key stakeholder groups. Complementary divisions providing end-to-end service, no upfront cost for hire and repair charges, convenient geographic reach, quality and capacity of fleet ensuring like-for-like vehicle replacement, processing of any associated personal injury claim. For customers. Our customers receive swift and efficient service. We provide them with a replacement vehicle in a timely manner, allowing them to return to their normal routine without delay. The customer retains the vehicle throughout the repair and/or litigation process. We also take care of any associated personal injury or equipment claims which may arise as the result of a non-fault accident. For partners. Our introducer garages know that they will receive payment in full and on time, which is especially important for the smaller independent operator. The use of a court-appointed engineer to assess vehicle damage means that the estimate or valuation process is accepted by both sides and the garage is not put at any risk. We have excellent relationships with our fleet providers and are well respected within the legal community. For employees. We offer our employees rewarding careers with multiple opportunities for personal development, including specialist training where required. We value the opportunity to nurture and incentivize talent and consequently our staff retention rates are very high. Our geographic spread of office locations allows our staff to maximize work-life balance. For investors. We have consistently outperformed analyst forecasts, with five earnings upgrades since listing. We operate a progressive dividend policy to provide a regular return to our shareholders. Our management team has proven its ability to deliver on its promises and we maintain excellent relationships within the investment community. Anexo Group Plc Annual Report 2022. Financial review. In 2022 the Group increased revenues across both the Credit Hire and Legal Services divisions. Basis of preparation. As previously reported, Anexo Group Plc was incorporated on 27 March 2018, acquired its subsidiaries on 15 June 2018, and was admitted to AIM on 20 June 2018. Further details are included within the accounting policies. To provide comparability across reporting periods, the results within this Financial Review are presented on an underlying basis, adjusting for the charge recorded for share-based payments in 2021 and the credit arising on vesting of the senior management incentive scheme for share-based payments in 2022. A reconciliation between adjusted and reported results is provided at the end of this Financial Review. This Financial Review forms part of the Strategic Report of the Group. New accounting standards and amendments. As reported, there have been a number of amendments to new UK IFRS accounting standards applicable from 1 January 2022, none of which have resulted in adjustment to the way in which the Group accounts or presents its financial information. Revenue. In 2022 Anexo successfully increased revenues across both its divisions, Credit Hire and Legal Services. Group revenues rose to £138.3 million, a 17.0% increase over the prior year. This growth is particularly pleasing given the fact that the Group continued to face delays in the court system during 2022 as a result of the Covid-19 pandemic. During 2022 EDGE, the Credit Hire division, provided vehicles to 9,986 individuals, maintaining similar activity levels to those of the prior year. Our strategy, as previously reported, remains to concentrate investment within McAMS, the part of the business which supplies motorcycles."
"With the number of claims remaining broadly consistent in 2022 with the prior year, the strategy of deploying capital into the most valuable claims to the Group resulted in revenues for the Credit Hire division increasing to £74.7 million in 2022, an increase of 4.8% over 2021. With investment in staff continuing into 2022 following a significant level of recruitment during Covid when other firms made redundancies and furloughed staff, the Legal Services division reported significant revenue growth of 35.6%, with revenues rising from £46.9 million in 2021 to £63.6 million in 2022. Expansion of headcount in Bond Turner across all its three offices has been critical to increasing both revenues and cash settlements within the Group and has provided a crucial platform for growth in both factors. During 2022, the Group continued its recruitment campaign, targeting high-quality experienced staff across all aspects of our business, credit hire, large loss, housing disrepair and class action litigation. By the end of December 2022, we employed 678 staff in Bond Turner, of which 253 were senior fee earners, an increase of 6.8%. The Group has benefitted from continued investment in the Housing Disrepair team during 2022, following the implementation of the Extension of the Homes Act. Revenue increased significantly, rising from £5.1 million in 2021 to £9.3 million in 2022. This revenue is reported within the data noted above for the Legal Services Division. Recruitment is scheduled to continue throughout 2023 across all our three legal services office locations, particularly within the Housing Disrepair team. Gross profits. Gross profits are reported at £105.8 million in 2022, increasing from £91.5 million in 2021. It should be noted that staffing costs within Bond Turner are reported within Administrative Expenses. Consequently, gross profit within Bond Turner is in effect being reported at 100%. Operating costs. Administrative expenses before exceptional items increased year-on-year, reaching £65.0 million in 2022, an increase of £9.9 million. This reflects the continued investment in staffing costs within Bond Turner to drive settlement of cases and cash collections. Staffing costs for Bond Turner increased to £24.5 million, an increase of £4.0 million which, together with significant investment in staff within the Credit Hire division to ensure we maintained our high standards of service to an increasing number of clients, accounted for a total increase of £6.6 million. Following the establishment of our Housing Disrepair team in late 2020, some £3.0 million was invested in marketing costs in 2022, all of which has been expensed as incurred. Profit before tax. Adjusted profit before tax reached £23.9 million in 2022, remaining broadly in line with 2021. This reflects the investment in staff and marketing costs noted above. To provide a better guide to underlying business performance, adjusted profit before tax excludes share-based payments charged to profit and loss. The GAAP measure of the profit before tax was £24.1 million in 2022, reflecting the non-cash share-based payment credit in that year. Where we have provided adjusted figures, they are after the add-back of this item and a reconciliation of the adjusted and reported results is included in the Annual Report. Finance costs. Finance costs reached £6.3 million in 2022, increasing from £3.6 million in 2021, reflecting the additional facilities secured in the year from Blazehill Capital Finance Limited to support the continued investment into the Housing Disrepair team and our investment in the VW and Mercedes Benz emissions claims. As a consequence, the number of claims generated reduced significantly, resulting in a period in which utilization and hence profitability of the Group was impacted. Total fixed asset additions totaled £7.8 million in 2022. The fleet continues to be largely externally financed. Trade and other payables, including tax and social security increased to £13.2 million compared to £12.6 million at 31 December 2021. Net assets at 31 December 2022 reached £146.3 million and net debt increased to £73.1 million at 31 December 2022. Net debt comprised cash balances at 31 December 2021 of £9.0 million, plus borrowings which increased during the year to fund additional working capital investment in the Group’s portfolio of claims, support the investment by the Group in the VW and Mercedes Benz emissions claims and facilitate expansion of the vehicle fleet. The total debt balance rose from £69.6 million in 2021 to £82.2 million at the end of 2022."
"The Group has a number of funding relationships and facilities to support its working capital and investment requirements, including an invoice discounting facility within Direct Accident Management Limited, lease facilities to support the acquisition of the fleet and a revolving credit facility within Bond Turner Limited. In addition, the Group secured a loan of £15.0 million from Blazehill Capital Finance Limited during 2022. The loan is non-amortizing and committed for a three-year period. Having considered the Group’s current trading performance, cash flows and headroom within our current debt facilities, maturity of those facilities, the Directors have concluded that it is appropriate to prepare the Group and the Company’s financial statements on a going concern basis. Cash flow. Notwithstanding the continued impact of Covid-19 on the court system and the Business, we have continued to invest in talent and grow our settlement capacity throughout Bond Turner. The number of senior fee earners increased from 237 to 253 during 2022 and continues to rise across each of our three offices. More recently this investment has sought to diversify the activities of the Group and headcount with the Housing Disrepair team, the number of senior fee earners increasing in number from 30 at 31 December 2021 to 44 at 31 December 2022. EPS and dividend. Statutory basic EPS is 16.6 pence. Statutory diluted EPS is 16.6 pence. The adjusted EPS is 16.5 pence. The adjusted diluted EPS is 16.5 pence. The adjusted figures exclude the effect of share-based payments. The Board is pleased to propose a final dividend of 1.5 pence per share, which if approved at the Annual General Meeting will be paid on 23 June 2023 to those shareholders on the register at the close of business on 26 May 2023. Group statement of financial position. The Group’s net assets position is dominated by the balances held within trade and other receivables. These balances include credit hire and credit repair debtors, together with disbursements paid in advance which support the portfolio of ongoing claims. The gross claim value of trade receivables totaled £393.6 million in 2022, rising from £325.3 million in 2021. In accordance with our income recognition policies, a provision is made to reduce the carrying value to recoverable amounts, the net balance increasing to £165.4 million. This increase reflects the recent trading activity and strategy of the Group and is in line with management expectations given that the Group continued to be impacted during 2022 by delays in capacity within the court system, albeit this continues to improve. The increase has been primarily funded from the significant rise in cash collections seen year on year as well as additional facilities secured from Blazehill Capital Finance Limited. In addition, the Group has a total of £54.7 million reported as accrued income which represents the value attributed to those ongoing hires and claims at the year end, alongside growth in the number of ongoing claims within the Housing Disrepair team. The increases in both trade receivables and accrued income reflect an increase in the volume of claims that remain ongoing together with an increase in the number of claims ongoing where we have identified and secured an admission of liability. During 2021 and into the early part of 2022, significant investment was made into the motorcycle fleet to support the current and expected volumes generated from the insurance contract with MCE announced in November 2021. In an unexpected development, MCE’s underwriter went into administration and all outstanding policies were disclaimed from 1 February 2022. Cash collections for the Group, a key metric for the Group, increased from £119.0 million in 2021 to £146.1 million in 2022, an increase of 22.8%, underlining the Group’s successful evolution in the post-pandemic period. We are here live in Omaha, Nebraska. Good morning, everybody. I'm Becky Quick, along with Mike Santoli. In just 30 minutes, Berkshire Hathaway Chairman and CEO Warren Buffett is going to be taking the stage with his Vice Chair Charlie Munger. Non-fault road traffic accident opportunities in late 2021 led to investment in the fleet and infrastructure to support this significant increase in demand, which resulted in record vehicle numbers at the end of 2021, reaching 2,366. However, the situation with Green Realisations Ltd described above resulted in the number of opportunities reducing sharply, and hence the Group operated with a suboptimal cost base in the first part of 2022."
"Because activity levels did not increase from MCE as expected, management implemented actions to maintain headroom and reduce costs to reflect a revised level of forecast activity. Despite this, and reflecting the number of claims generated from MCE in the early part of 2022, we have actually seen the average number of vehicles on the road rise in 2022, reaching 1,892 compared to 1,834 in 2021. This contributed to the strong revenue performance of the Credit Hire division. Notwithstanding this, as we have previously reported, growth in the Credit Hire division results in an absorption of cash. During the year, management worked to manage expenditure and consequent absorption of cash and actively reduced the number of claims accepted. Vehicle numbers fell accordingly to 1,730 at 31 December 2022. Having anticipated continued growth from MCE, the Board secured an increase in availability from Secure Trust Bank plc (£1.3 million) and Blazehill Capital Finance Limited (£15.0 million) in 2022 to take advantage of these opportunities, whilst ensuring the relationship between the number of new claims taken on within EDGE is balanced with the settlement capacity of Bond Turner. In addition to this, the Group has continued to draw funds from approved hire purchase facilities to support reinvestment of the motorcycle fleet as well as other facilities as necessary to support Group headroom. The total amount of new borrowings in the year reached £24.4 million. Whilst the Group operated for a period at suboptimal levels, the significant improvement in cash collections resulted in the Group reporting a reduction in the level of cash outflows from operating activities of £3.1 million compared to a cash outflow of £7.3 million in 2021. With a net cash inflow of £4.2 million resulting from financing activities, having secured additional facilities from both Secure Trust Bank plc and Blazehill Capital Finance Limited, the Group reported a net cash inflow in 2022 of £1.5 million compared to a net cash outflow of £0.7 million in 2021. In establishing the adjusted operating profit, the costs adjusted include a credit of £0.2 million related to share-based payments. A reconciliation between adjusted and reported results is provided below: Year to December 2022 Adjusted Revenue: 138,329 Share-based payment: 0 Reported Revenue: 138,329 Adjusted Gross profit: 105,776 Share-based payment: 0 Reported Gross profit: 105,776 Adjusted Other operating costs (net): (75,535) Share-based payment: 175 Reported Other operating costs (net): (75,360) Adjusted Operating profit: 30,241 Share-based payment: 175 Reported Operating profit: 30,416 Adjusted Finance costs (net): (6,323) Share-based payment: 0 Reported Finance costs (net): (6,323) Adjusted Profit before tax: 23,918 Share-based payment: 175 Reported Profit before tax: 24,093 Year to December 2021 Adjusted Revenue: 118,237 Share-based payment: 0 Reported Revenue: 118,237 Adjusted Gross profit: 91,481 Share-based payment: 0 Reported Gross profit: 91,481 Adjusted Other operating costs (net): (63,753) Share-based payment: (378) Reported Other operating costs (net): (64,131) Adjusted Operating profit: 27,728 Share-based payment: (378) Reported Operating profit: 27,350 Adjusted Finance costs (net): (3,604) Share-based payment: 0 Reported Finance costs (net): (3,604) Adjusted Profit before tax: 24,124 Share-based payment: (378) Reported Profit before tax: 23,746 By order of the Board Gary Carrington Chief Financial Officer 9 May 2023 Anexo Group Plc Annual Report 2022 Risk management The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and retains ultimate responsibility for them. The Board receives regular reports from the CFO through which it reviews the effectiveness of processes put in place and the appropriateness of the objectives and policies it sets. The Risk and Regulation Committee ensures there is a robust process in place for identifying, managing, and monitoring risks to the Group. The Risk Committee will assess the risk profile of the Group and how the risks arising from the Group’s businesses are controlled, monitored, and mitigated by management. The Audit Committee also has delegated responsibility to review the Company’s internal financial controls and monitor the integrity of the Financial Statements of the Company, including Annual and Interim Accounts and results announcements. The Board recognizes the need for an effective and well-defined risk management framework. The Board is responsible for overseeing and regularly reviewing the current risk management and internal control mechanisms. The Board has delegated the authority for designing and operating processes that ensure the effective implementation of the risk management objectives and policies to the Company’s finance function."
"The Committee is responsible for ensuring that there is a robust process in place for identifying, managing, and monitoring risks, assessing the risk profile of the Group, and ensuring that the Group is compliant with the additional regulatory requirements under the SRA. The Committee supports the Board in fulfilling its obligations to ensure a framework of prudent and effective controls, which enable it to assess and manage risks, including those to the long-term success of the Group. The Committee considers an integrated approach to the risk taxonomy, risk register, and risk assurance activity to be paramount. The Committee is chaired by Richard Pratt, and its other members are Christopher Houghton, Roger Barlow, and Michael Branigan. Michael Branigan joined the Committee during the year, following Elizabeth Sands’ departure from the Company on 11 May 2022. The Committee is assisted by Dawn O’Brien in ensuring regulatory compliance and is attended by members of the executive team as determined by the Committee from time to time. Details of members’ experience, qualifications, and attendance at Committee meetings during the year are shown within the Corporate Governance Statement. The Committee conducted an assessment of its effectiveness in October 2022, the conclusion of which was that the Committee is competent and carries out its function effectively. Some responses highlighted that the Group could benefit from an internal audit function, something that the Committee will continue to review in the 2023 reporting period in conjunction with the Audit Committee. The evaluation also highlighted additional focal areas for the Committee, notably IT and Cyber Security and operational controls. There is an ongoing process for identifying, evaluating, and managing the significant risks faced by the Group, which has been in place throughout the period covered by this report and up to the date of approval of the Annual Report and Accounts for 2022. Key risks facing the Company Anexo conducts a full risk assessment matrix, categorizing all its key risks and outlining the mitigating actions that are in place, a summary of which can be found below: I am pleased to present the Risk and Regulation Committee Report for the financial year ended 31 December 2022. Type of Risk: Statutory Risk Principal Risk: Potential reduction in fee income from potential introduction of changes to legislation or reduction in settlement rates. Risk Description: Any reduction in fee income will directly affect profit levels. Mitigation: Education of key staff members regarding risks and the need to perform. Keep abreast of changes in case law and statute. Type of Risk: Statutory Risk Principal Risk: Government actions and legal developments leading to decrease in costs and negative impact on turnover and profit. Risk Description: The credit hire aspect of the Group is reliant on the House of Lords ruling that non-fault accident victims deemed impecunious have the right to recover credit hire rates from third party insurers. It cannot be predicted with certainty what future legal and regulatory changes may occur or the resultant effect that they may have upon the credit hire aspect of business. Mitigation: The Group keeps abreast of developments employing both senior legal counsel in house and maintaining strong relationships with a number of experts in the sector. Type of Risk: Operational Risk Principal Risk: New costs within the business due to the need to maintain business levels. Risk Description: A rise in payment of issue fees and hearing fees to litigate cases would directly affect profit levels. Mitigation: Closely monitor costs and review monthly. Commercial decision by management to increase settlement and drive cases to conclusion. Type of Risk: Operational Risk Principal Risk: Retention of lawyers. Risk Description: The Group is heavily reliant on its lawyers to manage and settle the Group’s claims. If the Group were to lose the services of key lawyers with high settlement rates, or cease to be able to attract new lawyers, this could significantly impair the strategy, operations, and financial condition of the Group. Mitigation: Maintenance of staff satisfaction levels to help the Group monitor the risk of losing key members of staff. The Group adopts an ongoing recruitment policy. The Group trains staff from a junior level and supports staff in training, education, and development to ensure retention. Key lawyers are incentivized, and the firm offers competitive packages within the market to ensure staff retention. Type of Risk: Operational Risk Principal Risk: Reliance on senior management. Risk Description: The current senior management team has been heavily involved in the Group’s success."
"The Group cannot guarantee that it will be able to recruit suitably qualified staff on a timely basis to replace those individuals in the event of the departure of any of the senior management team. A failure to do so could have a materially adverse impact on the Group’s operations and financial condition. Mitigation: The Group adopts an ongoing recruitment policy. The firm trains staff from a junior level and supports staff in training, education, and development to ensure staff retention. Key lawyers are incentivized, and the firm offers competitive packages within the market to ensure staff retention. Type of Risk: Operational Risk Principal Risk: Losing cases. Risk Description: The Group invests heavily in cases that are reliant on a successful outcome for recovery of money. Bond Turner works on a no win no fee basis, DAMS operate on credit hire, and PALS and IGCA 2013 receive no monies up front. Money is only received upon successful conclusion of any claim. If the claim is lost, no money will be received. Mitigation: Review of circumstances around those cases that are lost. Consideration of factors that may attribute to unsuccessful outcomes and pre-empt any unusually high areas of risk in any new business. Conduct risk/benefit analysis on any potentially new risky claims. Consideration of merits of appealing cases and benefit weighed against wide scale potential negative consequences. Ensure that potential claims are properly vetted and we proceed with cases that are likely to succeed. Train and employ staff with excellent technical skills to increase chance of successful outcome and use specialized counsel. Feedback to sales representatives. Fraud indicators, ongoing dialogue through sales team and garages. Type of Risk: Operational Risk Principal Risk: Weaknesses in IT Systems and Cyber Security. Risk Description: Disruption to operations impeding work and risking damage to reputation and customer relationships. Mitigation: Ongoing, regular extensive reviews and testing from our own IT teams and third party experts, the Group maintaining appropriate levels of insurance to cover this risk. Type of Risk: Operational Risk Principal Risk: Health and Safety Issues. Risk Description: The activities of certain parts of the Group involve a range of Health and Safety risks. Mitigation: All Group subsidiaries operate Health and Safety management systems appropriate to the nature and scale of their risks. The Group regularly conducts a review of the adequacy of current health and safety compliance. Type of Risk: Market Risk Principal Risk: Competition. Risk Description: The Group could face competition from other companies that offer similar products and services in the broader credit hire and PI sector. Any direct competitor offering the same service and scale would have to be a new entrant to the market or a change in existing business model, which would be unlikely given very high set up costs. Mitigation: Monitor the market and continue to offer competitive product. Continue to invest in development of the service and ensure a growing established team of effective lawyers is constantly maintained. Type of Risk: Market Risk Principal Risk: Retention of garages and sources of work. Risk Description: Garages that advertise DAMS services could be enticed by other deals from competitors. Some competitors are offering enhanced deals that are not LASPO compliant, and some lay individuals can be enticed with the offer of extra cash. Mitigation: Nurture garages through education, offer competitive deals, and train them into understanding compliance with LASPO, Code of Conduct, and FCA rules. Type of Risk: Regulatory Risk Principal Risk: Regulatory compliance. Risk Description: Compliance with Code of Conduct, Solicitors Accounts Rules, any applicable FCA rules, GDPR, Statute (LASPO), etc. Failure to comply with these could have significant implications for the business ranging from reputational damage to criminal prosecution and sentencing. Mitigation: Ensuring regulatory compliance is monitored through updated policies, staff training, spot checks, and audits. Conduct risk assessments to identify any areas of weakness or potential breach. Monitor and record any complaints and feedback. Type of Risk: GDPR/Personal Data Risk Principal Risk: Introduction of stringent new laws regarding the treatment of personal data. Risk Description: The Group holds and processes a large volume of sensitive personal data which is inherent in the Group’s day-to-day practices. If breaches of personal data occur, damages can be claimed, and large fines are payable. This has an obvious negative effect on the Group’s financials as well as causing potential reputational damage to the firm. Mitigation: Regular staff training on the GDPR legislation. Random spot checking of processes and staff practices. Regular review of processes."
"Risk assessment on implementation of new processes. Ongoing reviews of systems relating to any complaints. Type of Risk: Litigation Risk Principal Risk: Adverse costs arising from litigation. Risk Description: The Group is a highly litigious firm. Adverse costs arising from litigation will negatively impact the Group’s results as well as cause potential reputational damage from losing cases. Mitigation: This risk is extensively and continuously discussed with management and fee earners to ensure awareness. Management is satisfied that costs will be kept to a minimum through maintaining review levels of adverse costs. Despite the mitigation, the Group recognizes that some adverse costs cannot be avoided in entirety due to clients’ inability to reply fully and in a timely fashion, draconian court orders, and the hostile nature of litigation. Type of Risk: Financial Risk Principal Risk: Bank covenants. Risk Description: Importance of understanding processes and requirements for bank covenants. Covenants may not be properly complied with. Mitigation: Daily, weekly, and monthly checks are carried out by the Group. Staff awareness training is regularly provided. Constant review and reporting to the bank on covenants to ensure that business performance remains within the expected criteria. Type of Risk: Financial Risk Principal Risk: General expenditure increase. Risk Description: If the Group’s costs are not effectively monitored, there could be a general increase in expenditure, with excess costs causing financial difficulty. Mitigation: Costs are closely monitored by the CFO and the Finance team and reviewed monthly. Overview of costs is discussed at each Board meeting. Type of Risk: Financial Risk Principal Risk: Cash spend. Risk Description: The Group must ensure that cash spend is within facilities and that expenditure is monitored, e.g., monitoring of tax liabilities, large project spends, etc. Excess spend would cause the Group financial difficulty and may mean the Group is unable to achieve its objectives. Mitigation: Cash spend and costs are reviewed by the CFO and management regularly to ensure there is a healthy balance between the Group’s vehicle fleet and the conservation of financial resources. New financing options are considered and reviewed where necessary. Review the current case load and need for issuing as case expenditure is front loaded. Type of Risk: Operational Risk Principal Risk: Ongoing economic impact of Covid-19 – health and safety of clients, employees, and third parties. Risk Description: The health and safety of our staff and clients is paramount. The business has made operational adjustments to comply with government guidelines, which are constantly updating. Mitigation: Regular risk assessments are undertaken to ensure that the business is operating within government guidelines and to ensure that staff, clients, and third parties with whom the business engages are protected. It remains unclear how the Covid-19 pandemic will evolve through 2023, and the risks from further waves, new strains, and/or vaccines proving ineffective cannot be ruled out and could result in the reintroduction of, or additional, restrictions placed on local populations. The Group continues to monitor the situation. Type of Risk: Financial Risk Principal Risk: Potential for a significant impact on both new credit hire business and cash collections from the Legal Services team. Risk Description: Continued delays and adjournments in the court system have led, in part, to the operating cash outflows of the Group in 2021. As with many businesses, the Group has faced uncertainty in trading as a result of the impact of the Covid-19 pandemic from both a credit hire and legal services perspective, the latter of which may well impact cash collections and headroom. Mitigation: In the ordinary course of business, the Group monitors the level of new business taken on and the quantum of cash receipts from at-fault insurers on a daily basis, and as such, the Board has been able to manage the financial impact on the Group from both a credit hire and legal services perspective. Whilst the Group saw a sharp fall in new business activity within the credit hire initially post-first lockdown, levels subsequently increased to a level not significantly less than those seen pre-lockdown. Within the Legal Services team, the Group has seen a general reduction in cash receipts against our initial forecast, as we, the defendant law firms, at-fault insurers, and the courts continue to work with COVID adaptations and restrictions in place. Changes to working practices such as home working and remote court hearings inevitably impact efficiencies from all sides."
"The business has taken appropriate steps to keep our staff safe in an office environment, and the necessary COVID adaptations have become a new way of working which, over time, has resulted in a continual improvement in case settlements and cash collections. Richard Pratt Chairman of the Risk and Regulation Committee 9 May 2023 Anexo Group Plc has reported Scope 1 and 2 (and associated Scope 3) greenhouse gas emissions in accordance with the requirements of Streamlined Energy and Carbon Reporting. This includes emissions for the third mandatory reporting year – the 12 months starting 1 January 2022 and ending 31 December 2022. Emissions for the 2020 reporting year – starting 1 January 2020 and ending 31 December 2020 – as well as the 2021 reporting year – starting 1 January 2021 and ending 31 December 2021 – have been included. Responsibilities of Anexo Group Plc and Green Element Anexo Group Plc was responsible for the internal management controls governing the data collection process. Green Element was responsible for the data aggregation, any estimations and/or extrapolations, GHG calculations, and the emissions statements. Emissions were calculated according to the Greenhouse Gas Protocol Corporate Greenhouse Gas Accounting and Reporting Standard. Scope and Subject Matter The report includes sources of environmental impacts under the operational control of Anexo Group Plc. This includes the two active subsidiary companies in 2022, Direct Accident Management Ltd and Bond Turner Ltd. GHG sources included in the process are: Scope 1: Diesel and petrol for travel fuel of owned vehicles and natural gas. Scope 2: Purchased electricity (location-based method for 2020, both location-based and market-based methods for 2021 and 2022). Scope 3: Indirect emissions associated with the production, processing, and delivery of any fuel used. We are here live in Omaha, Nebraska. Good morning, everybody. I am Becky Quick, along with Mike Santoli. In just 30 minutes, Berkshire Hathaway Chairman and CEO Warren Buffett is going to be taking the stage with his Vice Chair Charlie Munger. And losses due to the transmission and distribution of electricity. Types of GHG included, as applicable: CO2, N2O, CH4, HFCs, PFCs, SF6, and NF3. The figures were calculated using DEFRA conversion factors, expressed as tonnes of carbon dioxide equivalent (tCO2e). Energy efficiency action underway/planned (2022/2023): The following measures have been adopted by Anexo Group Plc in 2022, or have been planned for 2023, to enhance energy efficiency within the company: Ensure that when employees return to work within the office, energy-saving activities are adopted, including switching appliances and lights off when not in use. Consider a switch to 100 percent renewable electricity tariffs for some of the office spaces. Investigate the installation of solar panels to generate own electricity. Investigate the installation of motion sensors for lighting in offices. Accelerate the installation of LED bulbs for lighting in offices. Work with freeholders to facilitate building management systems which manage the efficiency of the whole building. Regularly service boilers to ensure they are operating at maximum efficiency. Minimize business travel in company cars by holding meetings and conferences virtually. Continue to grow the proportion of the company car fleet which is powered by electricity. Prioritize energy efficiency when siting new business locations."
"Anexo Group Plc Annual Report 2022 Streamlined Energy and Carbon Reporting (SECR) 2021 mandatory reporting (in tCO2e), as follows: Streamlined Energy and Carbon Reporting (SECR) UK 2022 UK 2021 UK 2020 Energy consumption used: (kWh) Electricity 1,069,374 1,210,865 723,160 Gas 3,447 69,346 3,743 Transport fuel 993,883 1,073,585 750,553 Total consumption 2,066,704 2,353,796 1,477,456 Emissions (tCO2e) Scope 1 emissions from combustion of gas 0.63 12.70 0.69 Emissions from combustion of fuel for transport purposes 227.07 250.05 178.92 Scope 2 emissions from purchased electricity location-based 206.80 257.10 168.6 Emissions from purchased electricity market-based 363.70 475.06 – Scope 1 and 2 total scope 1 and 2 emissions location-based 434.50 519.86 348.2 Total scope 1 and 2 emissions market-based 591.40 737.82 – Scope 3 emissions from business travel in rental cars or employee vehicles where the company is responsible for purchasing the fuel 1.53 – – Emissions from upstream transport and distribution losses and excavation and transport of fuels location-based 135.80 163.58 83.7 Emissions from upstream transport and distribution losses and excavation and transport of fuels market-based 126.42 184.72 – Total emissions location-based 571.83 683.43 431.9 Total emissions market-based 719.35 922.53 – Intensity ratios number of full-time employees within financial year 997 925 698 Intensity ratio tCO2e per FTE location-based 0.574 0.739 0.619 Intensity ratio tCO2e per FTE market-based 0.722 0.997 – Methodology GHG Protocol Corporate Accounting and Reporting Standard Certification and external verification calculated and verified as accurate by Green Element Limited and Compare Your Footprint Limited, UK. Missing energy consumption data was estimated based on a monthly average relative to each facility. Mileage and fuel reimbursements were converted from spend to kilometers based on a rate of £0.45 per mile. Location-based electricity emissions use the average grid fuel mix in the region or country where the electricity was purchased and consumed. For SECR, location-based is mandatory. Market-based electricity emissions use fuel mix that is specific to the purchased electricity’s supplier and tariff. For Anexo, the grid’s residual fuel mix was used in the absence of fuel mix, in accordance with the GHG Protocol. For SECR, market-based is optional and has been calculated for 2021 and 2022 only. The Strategic Report on pages 10 to 30 was approved by the Board of Directors and signed on its behalf by Alan Sellers, Executive Chairman, 9 May 2023. The current Board members of Anexo Group Plc, all of whom served throughout the year, with the exception of Julian Addison who was appointed on 11 May 2022, Michael Branigan who was appointed on 11 May 2022, Mark Fryer who was appointed on 1 August 2022 and resigned on 14 April 2023, Gary Carrington who was appointed on 18 April 2023, Brian Corrway who resigned on 11 May 2022, Elizabeth Sand who resigned on 11 May 2022 and Mark Bringloe who resigned on 1 August 2022, are presented below. Risk and Regulation Committee Committee membership key: Alan Sellers, Executive Chairman. Alan was appointed Executive Chairman of Anexo Group Plc in March 2018 and was one of the founders of the business and has been instrumental in forming the Group as it operates today. Alan was called to the Bar in 1991 at the Gray’s Inn Bar and alongside his duties as Executive Chairman continues to practice as one of Anexo’s in-house team of barristers. Alan is an expert in civil litigation, personal injury and credit hire claims and clinical and professional negligence, and he is recognized as a leading figure in these fields. Gary Carrington, Chief Financial Officer. Gary is a Chartered Accountant and was appointed as a Director on 18 April 2023. Gary spent twenty-two years at major accounting firms, ending as Corporate Tax Partner at RSM. He subsequently spent five years at Fletchers Solicitors Limited, primarily as Chief Financial Officer. Gary joined the Group in July 2020 as Head of Operations. Samantha Moss, Director. Samantha was appointed as a Director of Anexo Group Plc in March 2018 and graduated from the University of Manchester with a degree in law and accountancy in 2003 and was subsequently admitted as a solicitor in 2008. Samantha has worked at Bond Turner since 2004 and is currently Managing Director. Samantha is a specialist in clinical and professional negligence and civil litigation, including personal injury and credit hire claims. Samantha also maintains managerial responsibility for Bond Turner and oversees regulatory compliance, client care, complex claims, staff supervision, account and complaints handling. Samantha is married to Alan Sellers. Dawn O’Brien, Director."
"Dawn was appointed as a Director of Anexo Group Plc in July 2020. After graduating with a law degree from the University of Liverpool in 2004, Dawn was called to the Bar at Middle Temple in 2006. Dawn joined Bond Turner in the same year and she was appointed CEO of Bond Turner Limited in 2009, and later Director in 2018. Dawn specializes in RTA/Credit hire and costs litigation and advocacy. As well as her supervision of fee earning staff, Dawn oversees banking, HR, payroll, compliance and the supervision of finance staff. Dawn is the compliance officer for finance and administration. Christopher Houghton, Senior Non-Executive Director. Christopher joined the Group in May 2018 on listing and is a fellow of the Chartered Institute of Management Accountants. He joined Park Group Plc in 1986 in a finance role rising to Finance Director in 2001. After taking on operational responsibilities he became Chief Executive in 2012 retiring from the Group in 2018. Richard Pratt, Independent Non-Executive Director. Richard was called to the Bar in 1980 and has practiced in Liverpool, specializing in criminal law. He was appointed a QC in 2006 and has been the head of his chambers since 2012 and leader of the Northern Circuit between 2011 and 2013. Richard is also a recorder of the Crown Court and joined the Group in May 2018. Roger Barlow, Independent Non-Executive Director. Roger is a Chartered Accountant and was a partner with KPMG until 2000. Since then he has held a number of directorships and is currently Senior Independent Non-Executive Director and Chair of Audit at a challenger bank, Bank and Clients plc and Chair of Audit of Loughborough Building Society. He was previously the independent member of the Audit Committee at the Information Commissioner’s Office. He has also been CFO and Chairman of two AIM listed companies. Roger joined the Anexo Group Plc Board in June 2018. Saki Riffner, Non-Executive Director. Saki is Chief Investment Officer and Co-Founder of DBAY Advisors Ltd, where he is focusing on small cap investments in the UK and Continental Europe. He previously worked at Laxey Partners and Rothschild. Saki joined the Board of Anexo Group Plc as Non-Executive Director in January 2021. Julian Addison, Non-Executive Director. Julian is Managing Director and Operating Partner of DBAY Advisors Ltd, where he is focusing on small cap investments in the UK and Continental Europe. He previously worked at Movado Group and Rothschild. Julian joined the Board of Anexo Group Plc as Non-Executive Director in May 2022. Michael Branigan, Non-Executive Director. Mike is the Senior Operating Partner at DBAY Advisors. He has over 40 years of experience in developing and implementing strategies that have enhanced the competitive advantage of businesses in the USA and Europe. Before joining DBAY in 2011, he worked in senior positions in Europe with TDG, Levi Strauss and Otis. He started his career with Coopers and Lybrand Management Consultants in the USA, moving to the UK practice in 1986. During his time with Coopers and Lybrand he designed, managed, and implemented supply chain re-engineering and business improvement assignments for more than fifty Fortune 500 companies. The Directors present their Annual Report and the audited financial statements for the year ended 31 December 2022. The Corporate Governance section set out on pages 31 to 50 forms part of this report. Principal activities: The Group is a specialist integrated credit hire and legal services group focused on providing replacement vehicles and associated legal services to impecunious customers who have been involved in a non-fault accident. Corporate status: Anexo Group Plc is a public limited company domiciled in the United Kingdom and was incorporated in England and Wales with company number 11278719 on 27 March 2018. The Company has its registered office at 5th Floor, The Plaza, 100 Old Hall Street, Liverpool, Merseyside, United Kingdom, L3 9QJ. The principal places of business of the Group are its offices in Liverpool, Leeds, Ormskirk, Potters Bar and Bolton. Directors: Details of the Directors of the Company who served or were appointed during the year, their dates of appointment, their titles, roles, and committee memberships and chairmanships are set out in the Remuneration Committee Report on pages 46 to 49 of this Annual Report. The names and biographies of the Directors appear on pages 31 and 32. Directors' interests: In accordance with the Articles of Association, all Directors will retire by rotation and being eligible offer themselves for re-election at the Company’s forthcoming AGM."
"The beneficial interests of the Directors in the Ordinary Shares of the Company on 31 December 2022 are set out below: Director Shares Percentage Alan Sellers 20,106,169 17.04 Samantha Moss 20,578,846 17.44 Dawn O’Brien 485,436 0.41 Whilst Saki Riffner, Julian Addison and Michael Branigan do not hold any shares in their own name, they are partners of DBAY Advisors Limited, a major shareholder of the Company. There were a number of changes in the interests of Directors between 31 December 2022 and the date of this report. The beneficial interests of the Directors in the Ordinary Shares of the Company on 4 May 2023 are set out below: Director Shares Percentage Alan Sellers 20,106,169 17.04 Samantha Moss 20,578,846 17.44 Dawn O’Brien 485,436 0.41 Details of the Directors’ long-term incentive plans are contained in the Remuneration Committee Report on pages 46 to 49. Directors’ indemnities: The Company has agreed to indemnify its Directors against third party claims which may be brought against them and has put in place a Directors’ and officers’ insurance policy. Substantial shareholdings: At 31 December 2022, the Directors have been notified of the following beneficial interests in excess of 3 percent of the issued share capital of the Company: Shareholder Shares Percentage DBAY Advisors Ltd 33,640,001 28.51 Valentina Slater 4,052,994 3.44 AXA 3,550,000 3.01 Gresham House 4,271,015 3.62 Premier Miton 4,000,000 3.39 Charles Stanley and Co 3,785,530 3.21 Dividends: The Board is pleased to propose a final dividend of 1.5p per share, which if approved at the Annual General Meeting to be held on 15 June 2023 will be paid on 23 June 2023 to those shareholders on the register at the close of business on 26 May 2023. The shares will become ex-dividend on 25 May 2023. Risk management objectives and policies: The Board has ultimate responsibility for determining the nature and extent of major risks facing the Group as well as establishing a risk management framework and related objectives and policies. It has delegated the authority for designing and operating processes that ensure the framework’s effective implementation to the Group’s finance function. The Board receives regular reports from the Chief Financial Officer through which it reviews the effectiveness of the processes in place as well as the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. The Risk and Regulation Committee also helps to ensure there are robust processes in place for identifying, managing and monitoring risks to the Group. The Group’s risk register is reviewed at each Risk and Regulation Committee meeting and is updated as changes arise in the nature of risks or the mitigating actions implemented. The Committee will assess the risk profile of the Group and how the risks arising from the Group’s businesses are controlled, monitored and mitigated by management. Risk and Regulation Committee meetings are arranged circumstantially if specific events arise that require the Committee’s attention. The risk register is distributed regularly to all Board members and the Board reviews risks on a frequent basis. The Board has delegated responsibility for reviewing the Company’s internal financial controls to the Audit Committee. The Audit Committee is also responsible for monitoring the integrity of the Group’s financial statements, including Annual and Interim Accounts and results announcements. An internal audit function is not yet considered necessary as day-to-day control is sufficiently exercised by the Company’s Executive Directors. However, the Board will continue to monitor the need for an internal audit function. Further details of the Group’s financial risk management objectives and policies and the Group’s exposure to risk arising from its use of financial instruments are set out in note 26 and 27 of the consolidated financial statements. The key non-financial risks that the Group faces are set out on pages 25 to 28. Related party transactions: Details of the Group’s transactions and year-end balances with related parties are set out in note 25 of the consolidated financial statements. Disabilities and diversity: Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged."
"It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical with that of other employees. The Group is committed to encouraging diversity, promoting a diverse culture where everyone is treated with respect and valued for their individual contribution and creating a work environment free of bullying, harassment, victimization and unlawful discrimination. It is a key objective to ensure that all employees are helped and encouraged to fulfill their potential. Equal opportunities: It is our policy to ensure equal opportunity in recruitment, selection, promotion, employee development, training and reward policies and we have an equal opportunities and diversity policy in place. It is a key objective to ensure that successful candidates for appointment and promotion are selected taking account of individual ability, skills and competencies without regard to age, gender, race, religion, disability or sexual orientation. Employee engagement: The Group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved through presentations and the Company intranet. The Group regularly communicates with employees on a wide range of matters affecting their current and future interests. Further details of employee engagement are included within the s172 statement. Strategic report: The Company has chosen in accordance with the Companies Act 2006, section 414C to set out in the Group’s Strategic Report certain information required to be contained in the Directors’ Report by the Large and Medium-sized Companies and Groups Regulations 2008. It has chosen to do so as to the future development of the Group, engagement of the Group with stakeholders other than employees noted above and Streamlined Energy and Carbon Reporting. Auditor: RSM UK Audit LLP were appointed as auditor for the year ended 31 December 2022 and have indicated their willingness to continue in office. A resolution to reappoint RSM UK Audit LLP as auditor will be put to the forthcoming Annual General Meeting. Disclosure of information to auditor: The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the steps that he ought to have taken as Director to make himself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Annual General Meeting: The Annual General Meeting will be held on. 15 June 2023. The notice convening the meeting and information about the proposed resolutions accompanies this Annual Report and Accounts. By order of the Board, Alan Sellers, Executive Chairman, 9 May 2023. Anexo Group Plc Annual Report 2022. Dear shareholder, I am pleased to present the Corporate Governance Statement of the Board of Directors of Anexo Group Plc for the financial year ended 31 December 2022. As Chairman, it is my responsibility to ensure that Anexo practices sound corporate governance. The company has therefore adopted the Quoted Companies Alliance Corporate Governance Code. The QCA Code is a widely recognised benchmark for corporate governance of smaller quoted companies to which the UK Corporate Governance Code is not considered applicable due to company size. In addition to the requirements of AIM and the QCA Code, shareholders should also be aware that as a business operating predominantly in the legal services market, the Group operates in a highly regulated environment and is subject to regular review by its professional body. The Board considers that Anexo complies with the QCA Code so far as is practicable, having regard to the company’s current stage of evolution. A statement detailing both how the company complies with the QCA Code and an explanation of its areas of non-compliance is outlined below. QCA Principles 1. Establish a strategy and business model which promotes long-term value for shareholders. The Board has concluded that the highest medium and long-term value can be delivered to its shareholders through the Group’s growth strategy. As a specialist integrated credit hire and legal services group, Anexo provides replacement vehicles and associated legal assistance to consumers who have been involved in non-fault motor accidents."
"The Group provides an integrated end-to-end service to impecunious customers including the provision of a credit hire vehicle, upfront settlement of repair and recovery charges through to the management and recovery of costs, and the processing of any associated personal injury claim. The Group comprises four business units under two reporting divisions: Credit Hire and Legal Services. A key proposition for customers is that there is no upfront cost to the customer, including hire and repair charges, with Bond Turner seeking to recover costs from the at-fault insurer, typically through a litigated claims process on behalf of the customer. The Group’s business model is underpinned by legal precedent supporting the ability of impecunious customers to recover higher credit hire rates from at-fault insurers. Anexo intends to deliver long-term value to its shareholders through its growth strategy. The Group’s plans for growth have been centred on increasing the number of solicitors and legal assistants to process the Group’s existing case load and enabling the Group to take on more cases. In addition, the Group is also actively seeking to expand the geographic reach of the Group’s legal operations. Anexo’s strategy also includes increasing the vehicles available for hire and the number of sales staff employed, as well as bringing more barristers in-house. Challenges to delivering the Group’s strategy include changes to legislation that the credit-hire aspect of the Group relies upon, retention of advertisements in key garages, retention of key lawyers and adverse costs arising from litigation. These key challenges, as well as mitigating actions, are outlined in the Risk and Regulation Report section of the Strategic Report on pages 25 to 28. 2. Seek to understand and meet shareholder needs and expectations. Anexo places a great deal of importance on communication with its stakeholders and is committed to the development and maintenance of constructive relationships with current and potential investors to develop an understanding of their views. The Group is open to receiving feedback from key stakeholders and will take action where appropriate, recognising its wider stakeholder and social responsibilities and their implications for long-term success. The Group seeks to provide effective communication through Interim and Annual Reports, Regulatory News Service announcements and information on the Group website. Shareholders can also sign up to the Group’s investor alert service to ensure that they receive all press releases, financial results and other key shareholder messages directly from the Group as soon as they become available. The Group’s Annual General Meeting provides an opportunity to meet, listen and present to shareholders, and shareholders are encouraged to contact the company to express their views on the company’s business activities and performance. The Chairman of the Board, each of the Committee Chairmen and Directors will be available to respond to any shareholder questions regarding Board or Committee activities. All 2022 AGM resolutions were passed comfortably. The results of voting at AGMs are disclosed on the Group’s website. Shareholders were given the opportunity to attend the 2022 AGM following Covid-19 restrictions in place in both 2020 and 2021. The Chairman’s Statement on Corporate Governance. 3. Take into account wider stakeholder and social responsibilities and their implications for long-term success. The Board recognises that the long-term success of the Group is reliant upon the efforts of employees, regulators and other key stakeholders. The Board has put in place a range of processes and systems to ensure that there is close oversight and contact with its key resources and relationships. The Group prepares an annual strategic plan and detailed budget which takes into account a wide range of key resources including solicitors, sales staff and barristers. All employees within the Group are valued members of the team, and the Group seeks to implement provisions to retain and incentivise its employees. The Group offers equal opportunities regardless of race, gender, gender identity or reassignment, age, disability, religion or sexual orientation. The Board recognises the importance of ensuring that the management of the Group are effectively motivated, and their interests are aligned with those of the Group. The Group ensures that employees are given ample opportunity to provide feedback and reviews of the company atmosphere and support through platforms such as Glassdoor and Trustpilot. Feedback received from employees is taken into account to ensure that the Group can provide an optimum working environment for its employees. As a specialist integrated credit hire and legal services group, the maintenance of the highest ethical standards is core to our business and the services we provide to our clients."
"Where regulations have been introduced, we have taken appropriate steps for having policies relating to Modern Slavery and Whistle Blowing in order to discourage unethical business conduct, thus ensuring its employees are protected. Our annual Modern Slavery Act Statement is published on our website. Anexo believes that it has little significant environmental or community impact due to the nature of the Group’s operations, but will continue to monitor and will take action if this changes in the future. 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation. The Board recognises the need for an effective and well-defined risk management process and it oversees and regularly reviews the current risk management and internal control mechanisms. Principal risks and uncertainties are outlined in the Risk and Regulation Committee Report section on pages 25 to 28. The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the risk management objectives and policies to the Group’s finance function. By identifying and managing existing and emerging risks, the Board can focus on long-term business opportunities. The Board receives regular reports from the Chief Financial Officer through which it reviews the effectiveness of the processes and policies put in place and the appropriateness of the objectives it sets. The overall objective of the Board is to set policies that reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. Anexo also has a Risk and Regulation Committee to ensure that there is a robust process in place for identifying, managing and monitoring risks to the Group. The Risk Committee continually assesses the risk profile of the Group and how the risks arising from the Group’s businesses are controlled, monitored and mitigated by management. Furthermore, the Group’s Audit Committee has also delegated responsibility to review the Group’s internal financial controls and monitor the integrity of the financial statements of the company and the Group. The Group maintains a full risk assessment matrix and categorises all its key risks and outlines the mitigating actions that are in place. This matrix is updated as changes arise in the nature of risks or the mitigating actions are implemented or amended. The matrix is distributed regularly to all Board members and the Board reviews risks on a frequent basis. An internal audit function is not yet considered necessary as day-to-day control is sufficiently exercised by the Group’s Executive Directors. However, the Board will continue to monitor the need for an internal audit function as the company and Group grows and evolves. 5. Maintain the Board as a well-functioning, balanced team led by the Chair. The Board comprises four Executive Directors, Alan Sellers, Gary Carrington, Samantha Moss and Dawn O’Brien, three Independent Non-Executives, Christopher Houghton, Richard Pratt, Roger Barlow, and three Non-Executive Directors, Saki Riffner, Dr Julian Addison and Michael Branigan. Julian and Michael were appointed on 11 May 2022 and Mark was appointed on 1 August 2022. Alan Sellers is the Group’s Chair. Alan Sellers is not considered Independent due to his Executive position; however, the Board considers Alan’s role to be appropriate as he has driven, and continues to drive, the strategy of the Group. In light of this, a Senior Independent Non-Executive Director, Christopher Houghton, has been appointed to deal with matters including third party shareholder communication and situations where the Chairman is deemed to be conflicted. The SID, alongside the other Independent Non-Executives, also plays an important role in challenging and scrutinising the Executive Board. Saki Riffner, Julian Addison and Michael Branigan are not considered to be independent, having been appointed as representatives of DBAY Advisors Limited, a major shareholder of the company pursuant to DBAY’s agreed authority to appoint three Non-Executive Directors to the Board. Overall, the Directors feel that Anexo has a diverse Board with Directors that bring varied experience gained from working within a range of sectors. Board meetings are open and constructive, with every Director participating fully. Senior management can also be invited to meetings, providing the Board with a thorough overview of the Group. The Board aims to meet at least six times in the year and a calendar of meetings and principal matters to be discussed is agreed at the beginning of each year. In order to be efficient, the Directors meet formally and informally both in person and by telephone."
"Board document authors are made aware of proposed monthly deadlines through the calendar of meetings assembled at the beginning of the year. Board papers are collated, compiled into a Board Pack, and circulated with sufficient time before meetings, allowing time for full consideration and necessary clarifications before the meetings. Christopher Houghton, in his function as SID, assists the Chair, particularly in relation to dealing with shareholder-related matters. During the financial year ended 31 December 2022, the Board met on five occasions. 6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities. The Non-Executive Directors have a breadth and depth of skills and experience across many different sectors, from logistics to finance and from private to public companies, enabling them to provide the necessary guidance, oversight and advice for the Board to operate effectively. The Group believes that the current balance of skills in the Board as a whole reflects a very broad range of personal, commercial and professional skills, providing the ability to deliver the Group’s strategy for the benefit of shareholders over the medium and long-term. The Board is not dominated by any person or group of people. The Non-Executive Directors meet without the presence of the Executive Directors during the year and also maintain ongoing communication with Executives between formal Board meetings. Biographical details of the Directors can be found on pages 31 and 32 of this Annual Report. Anexo’s Company Secretary, ONE Advisory Limited, assists with ensuring that Board procedures are followed and that the company complies with all applicable rules, regulations and obligations governing its operation, as well as helping the Chairman maintain excellent standards of corporate governance. ONE Advisory also provides support and assistance with MAR compliance and shareholder meetings. If required, the Directors are entitled to take independent legal advice and if the Board is informed in advance, the cost of the advice will be reimbursed by the Group. In addition to their general Board responsibilities, Non-Executive Directors are encouraged to be involved in specific workshops or meetings, in line with their individual areas of expertise. The Board shall review annually the appropriateness and opportunity for continuing professional development, whether formal or informal. Directors are encouraged to undertake any ongoing training they feel they require to assist with the commission of their role on the Board. Relevant regulatory and compliance updates are provided at Board and Committee meetings by ONE Advisory Limited. The Remuneration Committee is responsible for reviewing the composition of the Board while evaluating the skills, knowledge and experience of Board members. The Committee will seek to take into account any Board imbalances for future nominations. 7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement. The Remuneration Committee is responsible for reviewing the structure, size and composition, including the skills, knowledge and experience of the Board and giving full consideration to succession planning. It also has responsibility for recommending new appointments to the Board. The Chairman annually assesses the individual contributions of each of the members of the team to ensure that their contribution is relevant and effective, that they are committed, and where relevant, they have maintained their independence. The Group conducts annual, in-depth reviews and evaluations of the performance of the team as a unit to ensure that the members of the Board collectively function in an efficient manner, as well as reviewing the effectiveness of each Committee. The areas covered are structure and skills, operating effectiveness and efficiency, quality of information and ongoing development. The outcomes of the 2022 Board evaluation were overwhelmingly positive but highlighted areas for improvement with regards to design of long-term strategy, review of the need for an internal audit function, reviewing diversity on the Board with the intention to increase the gender balance of the Non-Executive Directors and the request for written reports from Executive Directors to be included in the Board pack for meetings. 8. Promote a corporate culture that is based on ethical values and behaviours. The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Group as a whole and that this will impact the performance of the Group. The Board is aware that the tone and culture set by the Board will greatly impact all aspects of the Group as a whole and the way that employees behave."
"The corporate governance arrangements that the Board has adopted are designed to ensure that the Group delivers long-term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Group in a manner that encourages open dialogue with the Board. A large part of the Group’s activities are centred upon an open and respectful dialogue with employees, consumers and other key stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Group to successfully achieve its corporate objectives. The Board places great emphasis on these values. The importance of this aspect of corporate life seeks to ensure that this flows through all that the Group does. The Directors consider that at present the Group has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge. An example of this is the Group’s Whistle Blowing Policy, aimed at preventing illegal activity and unethical business conduct by encouraging Directors, officers, and employees to report any wrongdoing or suspected violations. The Group also has an Anti-Bribery Policy in place to ensure the highest standards of personal and professional ethical behavior are adhered to. Moreover, Bond Turner, the Group’s legal services division, promotes nine core values which shape the firm’s corporate culture, approach to client service, and professional standards. The values are entrenched and are considered at every stage of the employee lifecycle, from recruitment to training. The Group has also adopted a Share Dealing Policy regulating trading and confidentiality of inside information for the Directors and other persons discharging managerial responsibilities, which contains provisions appropriate for a company whose shares are admitted to trading on AIM, particularly relating to dealing during closed periods in line with the Market Abuse Regulation, which was transposed into UK law following Brexit. The Group will take all reasonable steps to ensure compliance by the Directors and any relevant employees with the terms of that Share Dealing Policy. The Board is committed to, and ultimately responsible for, high standards of corporate governance and has chosen to adopt the QCA Code. The Board reviews the Group’s corporate governance arrangements regularly and expects to evolve these over time, in line with the Group’s growth. The Board delegates responsibilities to Committees and individuals as it sees fit. The Chairman’s principal responsibilities are to ensure that the Group and its Board are acting in the best interests of shareholders. His leadership of the Board is undertaken in a manner that ensures the Board retains integrity and effectiveness, creates the right Board dynamic, and ensures that all important matters, particularly strategic decisions, receive adequate time and attention at Board meetings. In Alan Sellers’ capacity as Chairman, he has, through powers delegated by the Board, the responsibility for leadership of the management team in the development and execution of the Group’s strategies and policies. The day-to-day management of the Group’s two key divisions is carried out by the management board, which reports to the Anexo Board. The Independent Non-Executives are tasked with constructively challenging the decisions of executive management and satisfying themselves that the systems of business risk management and internal financial controls are robust. All Directors participate in the key areas of decision-making, including the following matters: review, formulate, and approve the Group’s strategy; review, formulate, and approve the Group’s budgets; review, formulate, and approve the Group’s corporate actions; and oversee the Group’s progress towards its goals. The Board delegates authority to three Committees to assist in meeting its business objectives while ensuring a sound system of internal control and risk management. The Committees meet independently of Board meetings. The Audit Committee has four members: Roger Barlow (Chair), Christopher Houghton, Julian Addison, and Richard Pratt. The Audit Committee is responsible for ensuring that the financial performance of the Group is properly reported on and reviewed, monitoring the integrity of the financial statements of the Group, reviewing internal control and risk management systems, reviewing any changes to accounting policies, reviewing and monitoring the extent of the non-audit services undertaken by external auditors, and advising on the appointment of external auditors. The Audit Committee is expected to meet formally at least two times a year and otherwise as required. Other Board members attend Audit Committee meetings by invitation. The Risk and Regulation Committee has four members: Richard Pratt (Chair), Christopher Houghton, Roger Barlow, and Michael Branigan."
"The Risk and Regulation Committee is responsible for ensuring that there is a robust process in place for identifying, managing, and monitoring risks to the Group, assessing the risk profile of the Group and how the risks arising from the Group’s businesses are controlled, monitored, and mitigated by management, and ensuring that the business of the Group is regulated by the SRA. The Committee is assisted by Dawn O’Brien in ensuring regulatory compliance. The Risk and Regulation Committee is expected to meet formally at least once a year and otherwise as required. Other Board members attend Committee meetings by invitation. The Remuneration Committee has three members: Christopher Houghton (Chair), Richard Pratt, and Roger Barlow. The Remuneration Committee is responsible for determining the Group’s policy on the remuneration packages of the Group’s Chairman, the Executive Directors, senior managers, and other designated senior executives, reviewing the structure, size, and composition of the Board, and recommending new appointments to the Board. The Remuneration Committee is expected to meet at least once in each financial year and otherwise as required. Other Board members attend the Committee meetings by invitation. The Board has elected not to establish a Nominations Committee, preferring instead that the Board itself should deal with such matters, with the assistance of the Remuneration Committee, including succession planning and the balance of the Board. The Chair and the Board continue to monitor and evolve the Group’s corporate governance structures and processes, maintaining that these will evolve over time, in line with the Group’s growth and development. The Board is committed to maintaining effective communication and having constructive dialogue with its shareholders, consumers, and other relevant stakeholders. The Group intends to have ongoing relationships with both its private and institutional shareholders through meetings and presentations, as well as shareholder analysts, and for them to have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Group’s Annual General Meeting. The Board already discloses the result of general meetings by way of announcement and discloses the proxy voting numbers to those attending the meetings. To improve transparency, the Board has published proxy voting results from its inaugural Annual General Meeting on its website and will continue to do so in the future. The Board maintains that if there is a resolution passed at a general meeting with 20% votes against, the Group will seek to understand the reason for the result and, where appropriate, take suitable action. The proxy votes received in respect of all resolutions were released via RNS and are available on the Group’s website. Information on the Investor Relations section of the Group’s website is kept updated and contains details of relevant developments, press and corporate news, and presentations. Shareholders can also sign up to receive investor alerts to ensure that they receive all press releases, financial results, and other key shareholder messages directly from the Group as soon as they become available. As Chairman of Anexo’s Audit Committee, I present my Audit Committee Report for the year ended 31 December 2022. The Committee is responsible for reviewing and reporting on the Group’s financial performance, monitoring the integrity of the Company and Group financial statements, reviewing internal control and risk management, and reviewing and monitoring the performance, independence, and effectiveness of the external auditors. Since the date of my last report, the Committee’s primary activities comprised meeting with the external auditors, considering the audit approach, scope, and timetable, and reviewing the key audit matters for the 2022 audit. In addition to the Committee’s ongoing duties, in the coming year the Committee plans to regularly review the need for an internal audit function, review and record approval of any analyst briefings and investor presentations, carry out a self-assessment of the Committee, and review the effectiveness of the external audit. Anexo’s Audit Committee is chaired by me, Roger Barlow, and its other members are Christopher Houghton, Richard Pratt, and Julian Addison, who joined during the year. Both Christopher and I are considered to be independent Non-Executive Directors. The Board and the Audit Committee continue to be satisfied that I have sufficient and relevant financial experience to fulfill my duties as Committee Chair, given that I am a chartered accountant with extensive experience and numerous Board positions outside of Anexo. The Committee is required by its Terms of Reference to meet at least twice in each financial year and otherwise as required by the Committee Chairman to properly fulfill its duties."
"The Audit Committee met twice during the year, and both meetings were attended by all members. All other Directors attended both meetings. The external auditors also attended both Committee meetings at the invitation of the Committee Chairman. The Audit Committee’s main responsibilities can be summarized as follows: to report on and review the Group’s financial performance; to monitor the integrity of the Company and Group’s financial statements and any formal announcements relating to the Group’s financial performance; to review the Group’s internal financial controls and risk management systems; to review any changes to accounting policies; to make recommendations to the Board in relation to the appointment of the external auditors; to make recommendations to the Board concerning the approval of the remuneration and terms of engagement of the external auditors; to review and monitor the extent of the non-audit services undertaken by external auditors; to review and monitor the external auditors’ independence and objectivity; and to consider any matter specifically referred to the Committee by the Board. The Terms of Reference are reviewed annually and are available on the Company’s website. The Committee conducted an assessment of its effectiveness in October 2022. More information can be found in the Corporate Governance report. The Committee concluded that the Annual Report and Financial Statements, taken as a whole, were fair, balanced, and understandable and provided the information necessary for shareholders to assess the Group’s business model, strategy, and performance. The Committee considered the budgets for 2023 and 2024 and the debt financing arrangements at year-end and concluded that the going concern basis is appropriate. In addition, the Committee reviewed the full-year and half-year results announcement, Annual Report, and Financial Statements and considered reports from the external auditors identifying accounting or judgmental issues requiring its attention. The Committee also reviewed the Strategic Report and concluded that it presented a useful and fair, balanced, and understandable review of the business. The Committee has continued its monitoring of the financial reporting process and its integrity, risk management systems, and assurance. The Committee will assess the external auditor’s performance and effectiveness for the current year through a questionnaire to be completed by Audit Committee members and the Group’s senior finance team. The output from the process will be reviewed and discussed by the Audit Committee and with the external auditor in 2023. The Committee will meet with the auditor at least twice a year, once at the planning stage, where the nature and scope of the audit will be considered, and once post-audit at the reporting stage. The Committee is responsible for reviewing and approving the annual audit plan with the auditor and ensuring that it is consistent with the scope of the audit engagement and the effectiveness of the audit. In addition, the Committee is responsible for reviewing the findings of the audit with the external auditor, which shall include but not be limited to discussing major issues that arose on the audit, any accounting and audit judgments, levels of errors identified during the audit, and the effectiveness of the audit. The Audit Committee will meet with the auditor at least once per year without management being present to discuss its remit and any issues arising from the audit. RSM UK Audit LLP were appointed as external auditors in 2018 following an audit tender process carried out in 2017. The Company will continue to comply with the relevant tendering and auditor rotation requirements applicable under UK regulations, which require the next external audit tender to occur by 2028. The Committee will engage in discussions with the auditor regarding fees, internal controls, and such issues as compliance with accounting standards and any proposals which the external auditor has made regarding the Company’s internal auditing standards. The Committee shall keep under review the adequacy and effectiveness of the Company’s internal financial controls and risk management systems, including monitoring the proper implementation of such controls and will review and approve the statements to be included in the Annual Report concerning internal controls and risk management. The Committee will also consider annually whether there is a need for an internal audit function and make a recommendation to the Board. At present, the function is not yet considered necessary as day-to-day control is sufficiently exercised by the Company’s Executive Directors. Further details on the Company’s risk management and internal controls can be found in the relevant sections of the Annual Report."
"The Committee also has a responsibility to review the adequacy of the Company’s arrangements for its employees and contractors to confidentially raise any concerns about possible wrongdoings regarding financial reporting or other matters. The Audit Committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow-up action. In addition, the Committee shall review the Company’s procedures for detecting fraud and the Company’s systems and controls for the prevention of bribery and market abuse as well as receive reports on non-compliance. The Committee will also monitor and ensure the Company’s adherence to its AIM Rules compliance policy. During the year, the Committee and Management considered what the significant risks and issues were in relation to the financial statements and how these would be addressed. The External Auditor’s view on the significant risks aligned with that of the Committee. In relation to the 2022 Group financial statements, significant risks have been identified, which are outlined as follows: revenue recognition and accrued income; debtor recoverability and provisioning; management overrides of internal controls; going concern; and emission class action case fees and expenses. In the coming year, in addition to the Committee’s ongoing duties, the Committee will further review relationships and agree terms with all external professionals, conduct a full review of internal systems and the finance function to ensure that the recent restructuring continues to show efficiencies and improvement in our monthly and annual reporting environment, and assess the need for an internal audit function, having regard to the Company’s strategy, growth, and resources. The Committee approves the external auditor’s terms of engagement, scope of work, the process for the interim review, and the annual audit. It also reviews and discusses with the auditor the written reports submitted and the findings of their work. It has primary responsibility for making recommendations to the Board for it to put to the shareholders for their approval at a general meeting in relation to the appointment, re-appointment, and removal of the external auditor. The Committee is also responsible for reviewing and monitoring the external auditor’s independence and objectivity as well as their qualifications, expertise, and resources and the effectiveness of the audit process, taking into consideration relevant UK and other relevant professional and regulatory requirements. The Group has considered the auditor’s independence and continues to believe that RSM is independent within the meaning of all UK regulatory and professional requirements and the objectivity of the audit engagement partner and audit staff are not impaired. As such, the Audit Committee recommended the re-appointment of RSM as auditor for the financial year to 2024. Roger Barlow Chairman of the Audit Committee 9 May 2023 I present my Remuneration Committee Report for the year ended 31 December 2022, which has been prepared by the Remuneration Committee and approved by the Board. The Group’s remuneration policy is formulated to attract and retain high-caliber executives and motivate them to develop and implement the Group’s business strategy in order to optimize long-term shareholder value. It is the intention that this policy should conform to best practice standards and that it will continue to apply for 2023 and subsequent years, subject to ongoing review as appropriate. The policy is framed around the following key principles: total rewards will be set at levels that are sufficiently competitive to enable the recruitment and retention of high-caliber executives; total incentive-based rewards will be earned through the achievement of performance conditions consistent with shareholder interests; the design of long-term incentives will be prudent and will not expose shareholders to unreasonable financial risk; in considering the market positioning of reward elements, account will be taken for the performance of the Group and of each individual Executive Director; and reward practice will conform to best practice standards as far as reasonably practicable. When formulating the scale and structure of remuneration, the Remuneration Committee takes account of a number of different factors including market practice and external market data of the level of remuneration offered to Directors of similar type and seniority in other companies whose activities and size are similar. In addition, the pay and employment conditions of employees are also considered when determining Directors’ remuneration. The Remuneration Committee may also seek advice from external consultants where appropriate. No Director was involved in deciding the level and composition of their own remuneration. There were no material changes to Non-Executive Director fees."
"The Executive Directors receive an amount of fixed pay made up of a base salary and benefits, and in some cases a pension contribution. Short-term performance for senior executives is incentivized using an annual bonus scheme based on the achievement of profitability targets. Long-term performance is incentivized by way of a long-term management incentive plan based on the achievement of performance goals aligned to the Company’s business strategy and measured over a three-year period. These various schemes provide the Board with tools to help it to continue to strengthen the alignment of employee and shareholder interests. Anexo’s Remuneration Committee is chaired by me, Christopher Houghton, and its other members are Richard Pratt and Roger Barlow. Roger Barlow joined the Remuneration Committee during the year, following Elizabeth Sands’ departure from the Company on 11 May 2022. All members of the Remuneration Committee are considered to be independent Non-Executive Directors. The Board and Remuneration Committee continue to consider that I have sufficient, relevant financial experience to chair the Remuneration Committee, given that I am a chartered accountant with extensive experience and numerous Board positions outside of Anexo. The Remuneration Committee members have regard to the recommendations put forward in the QCA Code and, where appropriate, the QCA Remuneration Committee Guide. The Committee is required by its Terms of Reference to meet at least once in each financial year and otherwise as required by the Committee Chairman to properly fulfill its duties. The Remuneration Committee met two times during the year; details of Director attendance are disclosed on page 46 of this Annual Report. The Company’s external advisors are invited to attend Committee meetings at the invitation of the Committee Chairman as and when required. Responsibilities The Committee’s principal responsibilities include: - Determining and agreeing with the Board the framework or broad policy for the remuneration of Executive Management. - Reviewing and having regard to pay and employment conditions across the Company when setting remuneration policy for Executive Management, especially when determining salary increases. - Approving the design of and determining targets for any performance-related pay schemes operated by the Company. - Overseeing the design and application of share options and any other such reward plan in conjunction with the Board. - Determining the policy for and scope of pension arrangements for Executive Management. The Non-Executive Directors, whose remuneration is determined by the Board as a whole, receive fees in connection with their services provided to the Group, to the Board, and to Board Committees. Certain senior staff and Executive Directors receive basic salaries, annual bonuses according to performance against defined targets, and certain benefits in kind. Significant issues considered by the Committee during the year The main activities undertaken by the Committee during the year included: - Determining bonus parameters for the 2022 Executive Directors bonus payments. - Considering the implementation of a new Long Term Incentive Plan to incentivize participants and promote the future growth of the Company. Basic salary Executive Directors’ salaries are reviewed annually; any movement will be determined by the Remuneration Committee. Executive Directors’ contracts of service, which include details of their remuneration, will be available for inspection at the Annual General Meeting. In addition to their basic salary, Executive Directors receive certain benefits comprising a car and fuel card or cash allowances in lieu, private medical, life, critical illness, and permanent health insurances, and pension contributions or cash in lieu of such contributions. Annual bonus payments The Executive Directors are entitled to participate in the annual bonus scheme. The annual bonus is intended to align reward outcomes with the achievement of key annual goals. The bonuses are payable subject to the achievement of challenging targets which, for the current year, were based on achieving the forecast profit before taxation for 2022. The maximum bonus potential for meeting all of the targets is between 50% and 100% of salary depending on the contractual terms agreed at the time of listing, but the Remuneration Committee has discretion if the target is not met. Share-based incentives On Admission, a number of participants, including Dawn O’Brien, were able to subscribe for C ordinary shares in Edge Vehicles Rentals Group Limited, the intermediate holding company of the Group."
"Upon the satisfaction of applicable performance targets, which included the achievement of the Group’s profit targets for each of 2018, 2019, and 2020, or at the discretion of the Board if failure to achieve such targets was due to unforeseen circumstances, these C shares may be exchanged for cash or shares in Anexo Group Plc determined by the Company. The value of the shares on vesting will increase or decrease by reference to the value of the Ordinary Shares in Anexo at such time. The aggregated value of the Share Entitlement on listing was £2,200,000, of which £500,000 related to Dawn O’Brien and £500,000 to Mark Bringloe, Nil to both Alan Sellers and Samantha Moss. Having achieved all the performance targets set, the applicable C shares held were exchanged on 6 April 2022 for 1,990,294 shares in Anexo Group Plc. 485,436 of these shares were issued to Dawn O’Brien, 485,436 to Mark Bringloe, and Nil to both Alan Sellers and Samantha Moss. It is intended that a new scheme will be developed to incentivize selected senior management to deliver enhanced shareholder value in future years. Pension arrangements Three of the Executive Directors receive company contributions to personal pension schemes of up to 3% of their basic salaries. Directors’ contracts In accordance with general practice and the Company’s policy, Executive Directors have contracts with an indefinite term and a notice period of six months. The contracts of Alan Sellers, Samantha Moss, and Dawn O’Brien were entered into on 12 June 2018 and Mark Fryer on 1 August 2022. The Executive Directors’ contracts have no express provision for the payment of compensation in the event of early termination. In the event of termination of an Executive Director’s service contract, when determining the compensation payable to the Executive Director, it is the policy of the Committee to take account of the principles of mitigation of loss. All Non-Executive Directors have specific terms of engagement and are appointed subject to periodic re-election. Their fees are disclosed in the table below and are set by the Board as a whole. Non-Executive Directors cannot participate in any of the Company’s share incentive schemes."
"Dates of the current Non-Executive Directors’ original letters of appointment are set out below: Director: Christopher Houghton, Date of appointment: 22 May 2018, Contract end date: 21 May 2024 Director: Roger Barlow, Date of appointment: 14 June 2018, Contract end date: 13 June 2024 Director: Richard Pratt, Date of appointment: 22 May 2018, Contract end date: 21 May 2024 Director: Saki Riffner, Date of appointment: 22 January 2021, Contract end date: 21 January 2025 Director: Julian Addison, Date of appointment: 11 May 2022, Contract end date: 10 May 2024 Director: Michael Branigan, Date of appointment: 11 May 2022, Contract end date: 10 May 2024 Total Directors’ Remuneration for 2022 Director: Alan Sellers, Salaries and fees: £375, Annual bonus: £375, Aggregate amounts receivable under LTIP: £0, Other benefits: £3, Pension contributions: £1, Total: £754 Director: Samantha Moss, Salaries and fees: £315, Annual bonus: £120, Aggregate amounts receivable under LTIP: £0, Other benefits: £18, Pension contributions: £1, Total: £454 Director: Mark Bringloe, Salaries and fees: £130, Annual bonus: £100, Aggregate amounts receivable under LTIP: £665, Other benefits: £19, Pension contributions: £0, Total: £1,085 Director: Mark Fryer, Salaries and fees: £121, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £121 Director: Dawn O’Brien, Salaries and fees: £228, Annual bonus: £100, Aggregate amounts receivable under LTIP: £665, Other benefits: £16, Pension contributions: £1, Total: £1,010 Director: Christopher Houghton, Salaries and fees: £40, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £40 Director: Roger Barlow, Salaries and fees: £40, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £40 Director: Elizabeth Sands, Salaries and fees: £321, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £21 Director: Richard Pratt, Salaries and fees: £40, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £40 Director: Saki Riffner, Salaries and fees: £0, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £0 Director: Brian Corrway, Salaries and fees: £412, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £12 Director: Julian Addison, Salaries and fees: £0, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £0 Director: Michael Branigan, Salaries and fees: £0, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £0 Total: £1,493, £695, £1,330, £56, £3, Total: £3,577 Note: In 2022, the LTIP represents the market value of shares issued to Mark Bringloe (£665,000) and Dawn O’Brien (£665,000). Both Directors received 485,436 shares; the mid-market price on the date of issue was £1.37 per share. Total Directors’ Remuneration for 2021 Director: Alan Sellers, Salaries and fees: £375, Annual bonus: £375, Aggregate amounts receivable under LTIP: £0, Other benefits: £2, Pension contributions: £1, Total: £753 Director: Samantha Moss, Salaries and fees: £324, Annual bonus: £120, Aggregate amounts receivable under LTIP: £0, Other benefits: £32, Pension contributions: £1, Total: £477 Director: Mark Bringloe, Salaries and fees: £200, Annual bonus: £100, Aggregate amounts receivable under LTIP: £0, Other benefits: £20, Pension contributions: £6, Total: £326 Director: Dawn O’Brien, Salaries and fees: £218, Annual bonus: £100, Aggregate amounts receivable under LTIP: £0, Other benefits: £32, Pension contributions: £1, Total: £351 Director: Christopher Houghton, Salaries and fees: £40, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £40 Director: Roger Barlow, Salaries and fees: £40, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £40 Director: Elizabeth Sands, Salaries and fees: £35, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £35 Director: Richard Pratt, Salaries and fees: £40, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £40 Director: Saki Riffner, Salaries and fees: £0, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £0 Director: Brian Corrway, Salaries and fees: £0, Annual bonus: £0, Aggregate amounts receivable under LTIP: £0, Other benefits: £0, Pension contributions: £0, Total: £0 Total: £1,272, £695, £0, £86, £9, Total: £2,062 Remuneration Committee Report continued Remuneration policy for 2023 and future years The Group remuneration policy is designed to support strategy and promote long-term sustainable success."
"It is committed to complying with the principles of good corporate governance in relation to the design of the Group’s remuneration policy. As such, our policy takes account of the QCA Corporate Governance Code, against which the Company formally reports compliance. The Committee also considers other best practice guidance such as the QCA Remuneration Committee Guide and the Investment Association’s Principles of Remuneration, as far as is appropriate to the Group’s management structure, size, and listing. Future salary awards and increases will be set in line with relevant market levels, economic changes, and to retain and attract high-quality executives. Performance elements of remuneration will have clearly defined and challenging targets that link rewards to business performance in the short and medium term. All variable elements of remuneration are subject to clawback or repayment in the event of serious financial misstatement or misconduct. Consideration of shareholder views The Remuneration Committee considers feedback received from shareholders during any meetings or otherwise from time to time when undertaking the Group’s annual review of its Policy. In addition, the Chairman of the Remuneration Committee will seek to engage directly with institutional shareholders and their representative bodies should any material changes be made to the Policy. Consideration of employment conditions elsewhere in the Group The Remuneration Committee considers any general basic salary increase for the broader employee population when determining the annual salary increases for the Executive Directors. The Remuneration Committee did not consult with other employees regarding the remuneration of the Executive Directors. By order of the Board Christopher Houghton Chairman of the Remuneration Committee 9 May 2023 Anexo Group Plc Annual Report 2022 Statement of Directors’ Responsibilities The Directors are responsible for preparing the Strategic Report, the Directors’ Report, and the financial statements in accordance with applicable law and regulations. The Directors are responsible for preparing the Strategic Report, the Directors’ Report, and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors have elected under company law and are required by the AIM rules of the London Stock Exchange to prepare Group financial statements in accordance with UK-adopted International Accounting Standards and have elected under company law to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice. The Group financial statements are required by law and UK-adopted International Accounting Standards to present fairly the financial position and performance of the Group. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group. In preparing each of the Group and Company financial statements, the Directors are required to: - Select suitable accounting policies and then apply them consistently. - Make judgements and accounting estimates that are reasonable and prudent. - For the Group financial statements, state whether they have been prepared in accordance with UK-adopted International Accounting Standards. - For the Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the company financial statements. - Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Anexo website."
"Independent auditor’s report to the members of Anexo Group Plc Opinion We have audited the financial statements of Anexo Group Plc, the parent company, and its subsidiaries, the group, for the year ended 31 December 2022, which comprise the consolidated statement of total comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows, the company statement of financial position, the company statement of changes in equity, and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK-adopted International Accounting Standards. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland. In our opinion: - The financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2022 and of the group’s profit for the year then ended. - The group financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards. - The parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice. - The financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Summary of our audit approach Key audit matters Group - Revenue recognition and accrued income - Valuation of trade receivables No key audit matters are identified in respect of the parent company. Materiality Group - Overall materiality: £1,540,000 - Performance materiality: £1,100,000 Parent Company - Overall materiality: £1,075,000 - Performance materiality: £806,000 Scope Our audit procedures covered 93% of Revenue, 94% of net assets, and 89% of profit before tax. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group financial statements of the current period and include the most significant assessed risks of material misstatement, whether or not due to fraud, we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the group and parent company financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Independent auditor’s report to the members of Anexo Group Plc continued Key audit matters continued Revenue recognition and accrued income Key audit matter description Appropriate and accurate income recognition is required to be applied by the Directors to ensure that revenue is fairly stated in the financial statements. There is a risk that revenue is recognized inappropriately due to fraud or error and that estimates do not fully reflect current trading conditions. For credit hire, there is a risk that revenue is recognized inappropriately and not at a supportable percentage of the hire rate for the vehicle. The settlement rates applied rely on estimates and management judgement. For legal services, there is a risk that accrued income does not reflect the stage of the case and the costs to be recovered. The group released a trading statement on 4 April 2023 which reported an unaudited range of profits which were expected to be between £24.0 million and £26.0 million. The effect of this gave rise to critical consideration of the impact of any audit misstatements identified, as there was a heightened potential for management bias in considering our findings."
"The effect of these matters is that, as part of our risk assessment, we determined that determining the settlement rates has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than multiples of materiality for the financial statements as a whole, and, as a result, was determined to be a key audit matter. How the matter was addressed in the audit We reviewed and understood the group’s accounting policy and how this satisfied the requirements of IFRS 15, Revenue from contracts with customers. The basis of key judgements and estimates in the recognition of revenue were scrutinized. In addition, substantive analytical review has been performed on revenue and accrued income. Substantive tests of detail were performed on a sample of revenue items recognized in the period to determine the existence, accuracy, and appropriate cut-off of the items selected. We reviewed the related disclosures to assess whether these sufficiently explained the level of estimation uncertainty. Key observations We identified a number of misstatements through our work which individually and in aggregate were not material. These items were reported to those charged with governance. Key audit matter description Refer to accounting policy on page 65 regarding trade receivables and disbursements, the accounting policy in note 3 on page 69 regarding recoverability of trade receivables, note 16 regarding trade and other receivables, and the credit risk and impairment section of note 27 regarding financial risk management and impairment of financial assets. The group has a significant number of aged trade receivables due to the time required to settle legal claims and recover costs of credit hire and legal services. Management’s assessment of the recoverability of debts with their customers is inherently judgmental. There is a risk that the net trade receivables will be recovered at amounts materially different from the value recognized. The group released a trading statement on 4 April 2023 which reported an unaudited range of profits expected to be between £24.0 million and £26.0 million. The effect of this gave rise to critical consideration of the impact of any audit misstatements identified, as there was a heightened potential for management bias in considering our findings. The effect of these matters is that, as part of our risk assessment, we determined that determining the valuation of trade receivables has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than multiples of materiality for the financial statements as a whole, and, as a result, was determined to be a key audit matter. How the matter was addressed in the audit The methodology utilized by management to calculate the provision was reviewed, including the treatment of older claims. The impairment provision was considered through a combination of substantive analytical review and tests of detail, considering the adequacy of the provision by reference to the aging and composition of underlying trade receivable balances. Management’s estimate of the impairment provision was recalculated and the reliability of the aging of balances was verified in substantive tests of detail. The key recovery assumptions were compared against historical settlement information. The associated disclosures were reviewed to consider their sufficiency and accuracy. We reviewed the related disclosures to assess whether these sufficiently explained the level of estimation uncertainty. Key observations In concluding our audit, we identified misstatements in excess of the trivial threshold relating to trade receivable impairment. Where misstatements were identified, we reported these to those charged with governance. While management recorded certain adjustments, the remaining unadjusted misstatement relating to trade receivable impairment represented a high proportion of our overall materiality and would serve to reduce reported profit. The combination of this with other accumulated unadjusted misstatements was below our overall materiality. Anexo Group Plc Annual Report 2022 Independent auditor’s report to the members of Anexo Group Plc continued Our application of materiality When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing, and extent of our audit procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole, could reasonably influence the economic decisions of the users, we take into account the qualitative nature and the size of the misstatements. Based on our professional judgment, we determined materiality as follows: Group Parent company Overall materiality £1,540,000 £1,075,000 Basis for determining overall materiality 5.5% of profit before tax adjusted for the add back of VW and Mercedes marketing costs. 1% of total assets restricted for group purposes."
"Rationale for benchmark applied We have chosen adjusted profit before tax as the benchmark for the Anexo Group as we consider this to be the most stable benchmark of activity and trading performance of the group. As this is a non-trading holding company, total assets is considered the key benchmark as it is reflective of the parent company’s investments in its subsidiaries. Performance materiality £1,100,000 £806,000 Basis for determining performance materiality 70% of overall materiality 75% of overall materiality Reporting of misstatements to the Audit Committee Misstatements in excess of £79,000 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds. Misstatements in excess of £53,700 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds. An overview of the scope of our audit The group consists of 6 components, all of which are based in the UK with the exception of Edge Vehicle Rentals which is located in Jersey. The coverage achieved by our audit procedures was: Revenue Net assets Profit before tax Full scope audits were performed for 3 components and analytical procedures at group level for the remaining 3 components. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included reviewing management’s going concern assessment and forecast model, performing checks to confirm its internal consistency and mathematical accuracy, consideration of reasonable sensitivities, covenant compliance and securing waivers where appropriate, and challenging the key assumptions and estimates within. The appropriateness of disclosures concerning the going concern basis was also considered. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s or the parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorized for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report."
"We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 50, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The extent to which the audit was considered capable of detecting irregularities, including fraud Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements, to perform audit procedures to help identify instances of non-compliance with other laws and regulations that may have a material effect on the financial statements, and to respond appropriately to identified or suspected non-compliance with laws and regulations identified during the audit. In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified during the audit. However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity’s operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud. In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit engagement team: obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks that the group and parent company operate in and how the group and parent company are complying with the legal and regulatory frameworks; inquired of management, and those charged with governance, about their own identification and assessment of the risks of irregularities, including any known actual, suspected or alleged instances of fraud; discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and where the financial statements may be susceptible to fraud. The most significant laws and regulations were determined as follows: Legislation Regulation Additional audit procedures performed by the Group audit engagement team included: IFRS UK-adopted IAS, FRS101 and Companies Act 2006 Review of the financial statement disclosures and testing to supporting documentation; Completion of disclosure checklists to identify areas of non-compliance."
"The areas that we identified as being susceptible to material misstatement due to fraud were: Risk Audit procedures performed by the audit engagement team: Revenue recognition and accrued income This is considered to be a Key Audit Matter and our procedures are described above. Debtors recoverability and provisioning This is considered to be a Key Audit Matter and our procedures are described above. Management override of controls Testing the appropriateness of journal entries and other adjustments; Assessing whether the judgments made in making accounting estimates are indicative of a potential bias; and Evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website. This description forms part of our auditor’s report. Use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Ian Wall Senior Statutory Auditor For and on behalf of RSM UK Audit LLP, Statutory Auditor Chartered Accountants 9th Floor 3 Hardman Street Manchester M3 3HF 9 May 2023 Anexo Group Plc Annual Report 2022 Note 2022 £000s 2021 £000s Revenue 4 138329 118237 Cost of sales 32553 26756 Gross profit 105776 91481 Depreciation and profit loss on disposal 7 10436 8504 Amortisation 7 117 137 Administrative expenses before share based payments 6 64982 55112 Operating profit before share based payments 7 30241 27728 Share based payment credit charge 19 175 378 Operating profit 7 30416 27350 Finance costs 8 6323 3604 Profit before tax 24093 23746 Taxation 11 4616 4598 Profit and total comprehensive income for the year attributable to the owners of the company 19477 19148 Earnings per share Basic earnings per share pence 12 16.6 16.5 Diluted earnings per share pence 12 16.6 16.2 The above results were derived from continuing operations. The notes on pages 62 to 85 are an integral part of these consolidated financial statements. Consolidated Statement of Total Comprehensive Income for year ended 31 December 2022 Disbursements. Disbursements paid in support of an ongoing claim are reported within trade receivables. A provision for the expected irrecoverability of disbursement balances is made by reference to the duration since the last transaction posted to the individual ledgers, plus any other necessary provision for balances considering post period end information. Provisions for disbursements written off are charged to administration expenses in profit or loss. Taxation. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income. The current tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Group operates and generates taxable income. Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements and on unused tax losses or tax credits available to the Group. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date. The carrying amounts of deferred tax assets are reviewed at each reporting date and a valuation allowance is set up against deferred tax assets so that the net carrying amount equals the highest amount that is more likely than not to be recovered based on current or future taxable profit. Anexo Group Plc Annual Report 2022. Accounting Policies continued. Property, plant, and equipment. Property, plant, and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The cost of property, plant, and equipment includes directly attributable incremental costs incurred in its acquisition and installation."
"At each reporting date, the Group reviews the carrying amounts of its property, plant, and equipment assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss if any. Depreciation. Depreciation is charged so as to write off the cost of assets over their estimated useful lives, as follows: Asset class, Depreciation method and rate. Property improvements, 10% straight line. Office equipment, 20% to 33% straight line. Fixtures, fittings, and equipment, 20% straight line or reducing balance. Right of use assets, over the life of the associated lease, straight line or useful life if earlier. Intangible assets. Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their estimated useful lives on the following bases: Software licences, 33% straight line. Financial instruments. The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability, or an equity instrument in accordance with the substance of the underlying contractual arrangement. Financial instruments are recognised on the date when the Group becomes a party to the contractual provisions of the instrument. Financial instruments are initially recognised at fair value. Financial instruments cease to be recognised at the date when the Group ceases to be a party to the contractual provisions of the instrument. Financial assets are included on the Statement of financial position as trade and other receivables or cash and cash equivalents. Cash and cash equivalents. Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Trade payables. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if the Group does not have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least twelve months after the reporting date. If there is an unconditional right to defer settlement for at least twelve months after the reporting date, they are presented as non-current liabilities. Trade payables are initially recognized at fair value including transaction costs and subsequently carried at amortized cost. Borrowings are initially recorded at the amount of proceeds received, net of transaction costs. Borrowings are subsequently carried at amortized cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognized as a charge to profit and loss over the period of the relevant borrowing. Interest expense is recognized on the basis of the effective interest method and is included in finance costs. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract is a lease, the Group assesses whether the contract involves the use of an identified asset, the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use, and the Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred."
"The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant, and equipment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise the contracted fixed payments. The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate or if the Group changes its assessment of whether it will exercise an extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group has elected to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of twelve months or less and contain no option to purchase, and leases of low-value assets where that lease is associated with an element of the vehicle fleet. Where the lease does not relate to the vehicle fleet, the Group has elected to not recognize leases of low-value assets which the Group considers to be any lease where the fair value of the asset new is less than five thousand pounds. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The settlement of lease liabilities is included in the statement of cash flows within financing activities for the repayment of principal and within operating activities for interest paid. Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis. Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group. Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves. Dividends are recognized as a liability and deducted from equity at the time they are declared. Otherwise, dividends are disclosed if they have been proposed or declared after the year end and before the relevant financial statements are approved. Contributions to defined contribution plans are recognized as an expense in the period in which the related service is provided. Prepaid contributions are recognized as an asset to the extent that the prepayment will lead to a reduction in future payments or a cash refund. When contributions are not expected to be settled wholly within twelve months of the end of the reporting date in which the employees render the related service, the liability is measured on a discounted present value basis. The unwinding of the discount is recognized as a finance cost in profit or loss in the period in which it arises. In the application of the Group’s accounting policies, management is required to make judgments, estimates, and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant."
"Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and prior periods if the revision affects both current and prior periods. Due to the nature of the business, there are high levels of trade receivables and accrued income at the year end, and therefore a risk that some of these balances may be impaired or irrecoverable. The Group applies its policy for accounting for impairment of these trade receivables as well as expected credit losses whereby debts are assessed and provided against when the recoverability of these balances is considered to be uncertain. This requires the use of estimates based on historical claim and settlement information. Revenue is accrued on a daily basis, after adjustment on a portfolio basis for an estimation of the recovery of credit hire charges based on historical settlement rates. While historical settlement rates form the basis, these are then considered in light of expected settlement activity. It has been assumed that there will be continued improvement in settlement rates as courts increasingly return to normal business. The assumption of improved settlement rate is a significant judgment. This policy also assumes that claims which have settled historically are representative of the trade receivables and accrued income in the balance sheet. This assumption represents a significant judgment. The overall settlement adjustment is made to ensure that revenue is only recognized to the extent that it is highly probable that a significant reversal of revenue will not occur upon settlement of a customer’s claim. Revenue recognized is updated on settlement once the amount of the claim recovered is known. Due to the factors described above, determining the settlement adjustment to revenue, accrued income, and trade receivables involves a high degree of estimation uncertainty which could result in a range of values of adjustment which vary by multiples of materiality. The settlement percentages are sensitive to these estimates. If the settlement percentages applied in calculating revenue were reduced by one percent, it would reduce credit hire revenue and trade receivables and accrued income by two point seven million pounds. The Board considers that these estimates are subject to variation which may vary from between one percent and six percent. A six percent reduction is an approximation that is consistent with the period over the pandemic where settlements were lower due to courts being closed. This is considered to be a cautious downside based on more recent settlement experience and operational changes to the business to facilitate improvements in settlement rates and period. The Group carries an element of accrued income for legal costs, the valuation of which reflects the estimated level of recovery on successful settlement by reference to the lowest level of fees payable by reference to the stage of completion of those credit hire cases. Where there has not been an admission of liability, no value is attributed to those case files. Accrued income is also recognized in respect of serious injury and housing disrepair claims, only where there has been an admission of liability and by reference to the work undertaken in pursuing a settlement for clients, taking into account the risk associated with the individual claim and expected future value of fees from those claims on a claim-by-claim basis. For both credit hire and legal services, the historical settlement rates used in determining the carrying value may differ from the rates at which claims ultimately settle. This represents an area of key estimation uncertainty for the Group. The Group’s principal activities, separated by reportable segments, are described below. Credit hire involves providing vehicle hire for individuals who have had a non-fault accident. Revenue is recognized over time based on the days of hire provided to the customer. Revenue recognition is limited under the variable consideration guidance using an estimate of the recovery of credit hire charges based on historical settlement rates. Legal services revenue comprises a number of obligations including legal services in relation to accident claims, medical and engineer consultations, and arrangement of after-the-event insurance contracts. Revenue from the rendering of legal services to customers is recognized upon delivery of the service to the customer. Due to the No Win No Fee nature of these legal contracts, revenue recognition is constrained to the minimum fee until the amount of settlement is known."
"The Group’s revenue for the year from continuing operations is disaggregated into the following segments: Credit hire, seventy-four thousand six hundred eighty-one pounds; Legal services, sixty-three thousand six hundred forty-eight pounds; Total, one hundred thirty-eight thousand three hundred twenty-nine pounds. The collection of cash for performance of the Group’s obligations does not occur until after settlement of the related claim. This causes a timing difference between the performance and receipt of cash resulting in the Group recognizing the following contract related balances: Net trade receivables, one hundred sixty-five thousand three hundred sixty-eight pounds; Accrued income, fifty-four thousand seven hundred seventy-eight pounds; Total, two hundred twenty thousand one hundred forty-six pounds. The accrued income contract assets primarily relate to the Group’s consideration for on-hire vehicles and legal services for work completed where the case is still outstanding. These balances are transferred to trade receivables once a vehicle becomes off-hire or a legal claim settlement is agreed. The Group’s reportable segments are as follows: the provision of credit hire vehicles to individuals who have had a non-fault accident and associated legal services in support of the individual provided with a vehicle by the Group and other legal service activities. Management monitors the operating results of business segments separately for the purpose of making decisions about resources to be allocated and of assessing performance. The Group’s expenses by nature include staff costs and other costs of sales. Administrative expenses are comprised of staff costs and other administrative expenses. Operating profit is arrived at after charging depreciation on owned assets, depreciation on right of use assets, and amortization. Share based payment credit charge 175 378 Gain on disposal of property, plant and equipment 295 188 There were no non-recurring costs in the year ended 31 December 2022 or 2021. Included in the above are the costs associated with the following services provided by the Company’s auditor: 2022 £000s 2021 £000s Audit services Audit of the Company and the consolidated financial statements 70 50 Audit of the Company’s subsidiaries 170 120 Total audit fees 240 170 All other services – – Total fees payable to the Company’s auditor 240 170 Finance Costs All financing costs arise from financial liabilities measured at amortised cost. 2022 £000s 2021 £000s Finance costs Interest on lease liabilities 1,100 1,014 Interest expense on other financing liabilities 5,200 2,590 Other interest payable 23 – Total finance costs 6,323 3,604 Notes to the Consolidated Financial Statements continued for year ended 31 December 2022 Overview Strategic Report Governance Financial Statements Staff Costs The aggregate payroll costs including Directors’ remuneration were as follows: 2022 £000s 2021 £000s Wages and salaries 35,643 30,689 Social security costs 3,756 3,030 Pension costs defined contribution scheme 591 569 39,990 34,288 Split as follows: Cost of sales 3,839 2,957 Administrative costs 36,151 31,331 39,990 34,288 The average number of persons employed by the Group including Directors during the year analysed by category was as follows: 2022 No 2021 No Distribution staff 101 103 Administrative staff 896 823 997 926 Directors and Key Management Personnel Remuneration Key management personnel are those persons having authority and responsibility for planning directing and controlling the activities of the Group including the Directors of the Group. The Directors’ remuneration is disclosed in the Remuneration Committee Report on pages 46 to 49. The key management remuneration for the year was as follows: 2022 £000s 2021 £000s Wages and salaries 3,288 3,066 Social security costs 438 381 Pension costs defined contribution scheme 11 19 Share based payments 43 275 Total employee benefits 3,694 3,741 In respect of the highest paid Director: 2022 £000s 2021 £000s Remuneration 1,085 752 Pension contributions – Anexo Group Plc Annual Report 2022 Corporation Tax Tax charged to profit or loss is as follows: 2022 £000s 2021 £000s Current taxation UK corporation tax 4,616 4,653 UK corporation tax adjustment to prior periods – 55 4,616 4,598 Deferred taxation Arising from the origination and reversal of temporary differences – – 4,616 4,598 The actual tax charge is higher than the standard rate of corporation tax in the UK applied to the profit before tax 2021 higher."
"The differences are reconciled below: 2022 £000s 2021 £000s Profit before tax 24,093 23,746 Corporation tax at standard rate 19% 4,560 4,512 Effect of expenses not deductible for tax purposes 65 96 Effect of capital allowances and depreciation 9 45 Over under provision of tax charge in prior year – 55 Total tax charge 4,616 4,598 Earnings Per Share Number of shares: 2022 No 2021 No Weighted number of ordinary shares outstanding 117,492,721 116,000,000 Effect of dilutive options – 2,200,000 Weighted number of ordinary shares outstanding diluted 117,492,721 118,200,000 Earnings £000s £000s Profit basic and diluted 19,477 19,148 Profit adjusted and diluted 19,302 19,526 Earnings per share Pence Pence Basic earnings per share 16.6 16.5 Adjusted earnings per share 16.5 16.8 Diluted earnings per share 16.6 16.2 Adjusted diluted earnings per share 16.5 16.5 The adjusted profit after tax for 2022 and adjusted earnings per share are shown before share based payment credit of £0.2 million 2021 Charge of £0.4 million. The Directors believe that the adjusted profit after tax and the adjusted earnings per share measures provide additional useful information for shareholders on the underlying performance of the business. These measures are consistent with how underlying business performance is measured internally. The adjusted profit after tax measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. Notes to the Consolidated Financial Statements continued for year ended 31 December 2022 Dividends Dividends reported in 2022 totalled £1.18 million and in 2021 totalled £1.74 million. The Group did not pay an interim dividend in relation to 2022 2021 nil per share. The Board is pleased to propose a final dividend of 1.5p per share £1.8 million which if approved at the Annual General Meeting to be held on 15 June 2023 will be paid on 23 June 2023 to those shareholders on the register at the close of business on 26 May 2023. The shares will become ex-dividend on 25 May 2023 2021 total dividend 1.5p per share £1.8 million. The aggregate amount expected to be paid but not recognised as a liability at the reporting date is £1.8 million 2021 £1.18 million. Property Plant and Equipment Right of use assets £000s Property improvements £000s Fixtures fittings and Equipment £000s Office equipment £000s Total £000s Cost At 1 January 2021 24,693 492 2,675 878 28,738 Additions 12,607 2 450 85 13,144 Disposals 7,656 – – 334 7,990 At 31 December 2021 29,644 494 3,125 629 33,892 Additions 7,026 143 319 289 7,777 Disposals 8,684 – – – 8,684 At 31 December 2022 27,986 637 3,444 918 32,985 Depreciation At 1 January 2021 11,612 297 859 702 13,470 Charge for year 8,039 25 559 69 8,692 Eliminated on disposal 6,903 – – 334 7,237 At 31 December 2021 12,748 322 1,418 437 14,925 Charge for the year 9,981 35 596 119 10,731 Eliminated on disposal 7,400 – – – 7,400 At 31 December 2022 15,329 357 2,014 556 18,256 Carrying amount At 31 December 2022 12,657 280 1,430 362 14,729 At 31 December 2021 16,896 172 1,707 192 18,967 Motor vehicles are all financed and as such are included in the right of use assets column above. Property plant and equipment includes right of use assets with carrying amounts as follows: Land and Buildings £000 Motor vehicles £000 Total £000 Right of use assets At 1 January 2021 5,100 7,981 13,081 Depreciation charge for the year 950 7,089 8,039 Additions to right of use assets – 12,607 12,607 Disposals of right of use assets – 753 753 At 31 December 2021 4,150 12,746 16,896 Depreciation charge for the year 820 9,161 9,981 Additions to right of use assets – 7,026 7,026 Disposals of right of use assets – 1,284 1,284 At 31 December 2022 3,330 9,327 12,657 Anexo Group Plc Annual Report 2022 Intangibles Intangible assets Software licences £000s Cost At 1 January 2021 361 Additions 91 At 31 December 2021 452 Additions – At 31 December 2022 452 Amortisation At 1 January 2021 127 Charge for year 137 At 31 December 2021 264 Charge for the year 117 At 31 December 2022 381 Carrying amount At 31 December 2022 71 At 31 December 2021 188 Software licence assets relate to investments made in third party software packages and directly attributable external personnel costs in implementing those platforms. The amortisation charge is recognised in administration costs in the income statement."
"Trade and Other Receivables 2022 £000s 2021 £000s Gross claim value 393,560 325,260 Settlement adjustment on initial recognition 203,518 151,507 Trade receivables before impairment provision 190,042 173,753 Provision for impairment of trade receivables 24,674 27,360 Net trade receivables 165,368 146,393 Accrued income 54,778 39,431 Prepayments 1,603 1,849 Other debtors 523 461 222,272 188,134 The Group’s exposure to credit and market risks including impairments and allowances for credit losses relating to trade and other receivables is disclosed in the financial risk management and impairment of financial assets note. Whilst credit risk is considered to be low the market risks inherent in the business pertaining to the nature of legal and court cases and ageing thereof is a significant factor in the valuation of trade receivables. Average gross debtor days calculated on a count back basis were 464 at 31 December 2022 and 432 at 31 December 2021. Notes to the Consolidated Financial Statements continued for year ended 31 December 2022 Age of net trade receivables 2022 £000s 2021 £000s Within 1 year 92,497 83,166 1 to 2 years 39,606 34,931 2 to 3 years 18,259 19,716 3 to 4 years 12,251 7,524 Over 4 years 2,755 1,056 165,368 146,393 Average age days 464 432 The provision for impairment of trade receivables is the difference between the carrying value and the present value of the expected proceeds. The Directors consider that the fair value of trade and other receivables is not materially different from the carrying value. Movement in provision for impairment of trade receivables 2022 £000s 2021 £000s Opening balance 27,360 21,016 Increase in provision 5,422 10,635 Utilised in the year 8,108 4,291 24,674 27,360 Cash and Cash Equivalents 2022 £000s 2021 £000s Cash at bank 9,049 7,562 9,049 7,562 Share Capital and Reserves 2022 £000s 2021 £000s Share capital allotted called up and fully paid 118 million ordinary shares of 0.05 pence each 2021 116 million ordinary shares of 0.05 pence each 59 58 Share premium 16,161 16,161 Anexo Group Plc Annual Report 2022 Share Capital and Reserves continued Share capital On 20 June 2018 the Company was admitted to trading on AIM. On this date the Company issued 10 million ordinary shares of 0.05 pence each with a nominal value of £5,000. Prior to this date the Company had issued 100 million ordinary shares of 0.05 pence each with a nominal value of £50,000 in relation to the incorporation of the Company and the purchase of its subsidiaries Edge Vehicles Rentals Group Limited Bond Turner Limited Direct Accident Management Limited IGCA 2013 Limited Professional and Legal Services Limited and AMS Legal Services Limited. As a result of these transactions the issued share capital at 31 December 2018 and 2019 comprised 110 million ordinary shares of 0.05 pence each with a nominal value of £55,000. On 20 May 2020 the Company issued a further 6.0 million ordinary shares of 0.05 pence each at a price of 125 pence per share generating £6.9 million of funds after expenses. On 6 April 2022 the Company issued 1,990,294 ordinary shares of 0.05 pence each exchanging these for C shares in Edge Vehicles Rentals Group Limited in settlement of the MIP see note 19. Share premium The share premium reserve contains the premium arising on the issue of equity shares net of issue expenses incurred by the Company. The 10 million ordinary shares of 0.05 pence each with a nominal value of £5,000 were issued at a price of 100 pence per share on 20 June 2018 giving rise to share premium of £10.0 million against which expenses of £765,000 were written off giving rise to a balance of £9,235,000 net of expenses. The 6.0 million ordinary shares of 0.05 pence each with a nominal value of £3,000 were issued at a price of 125 pence per share on 20 May 2020 giving rise to share premium of £7.5 million against which expenses of £574,000 were written off giving rise to a balance of £6,926,000 net of expenses. Share based payment reserve Share based payment reserve represents the cumulative share based payment expense for the Group’s share option schemes. Retained earnings The movement on retained earnings is as set out in the statement of changes in equity. Retained earnings represent cumulative profits or losses net of dividends and other adjustments."
"Share Based Payments The movement in awards during the year was: 2022 £000s 2021 £000s Opening balance 2,077 1,699 Credit charge arising during the year 175 378 Transfer of share based payment reserve 1,902 Closing balance – 2,077 Executive Growth Share Plan MIP The Company through its subsidiary Edge Vehicles Rentals Group Limited EVRGL granted MIP awards on 20 June 2018 to key employees MIP Participants. Under the scheme MIP Participants have been granted C ordinary shares in the EVRGL which can be exchanged for Anexo Group Plc shares or disposed of for cash if the Group achieves set profit after tax targets as evidenced in the Group’s audited results as follows: £9.9 million for 31 December 2018 £11.9 million for 31 December 2019 and £13.9 million for 31 December 2020. Assuming performance targets are met MIP Participants may receive 50% of their award during the Accounting Year ended 31 December 2021 and the remaining 50% in subsequent accounting periods. MIP Participants may receive 100% of their MIP award in the Accounting Period ended 31 December 2024 to the extent not previously received. Management intend to settle the scheme in Anexo Group Plc shares. As at 31 December 2022 there were £Nil MIP awards outstanding 2021 2.2 million. Notes to the Consolidated Financial Statements continued for year ended 31 December 2022 The MIP awards were valued using the Black Scholes model. Expected volatility was determined by management using comparator volatility as a basis. The expected life of the award was determined based on management’s best estimate. The expected dividend yield was based on the anticipated dividend policy of the Company over the expected life of the awards. The risk free rate of return input into the model was a zero coupon government bond with a life in line with the expected life of the options. The inputs to the model based on the awards being equity settled were as follows: Award MIP Vest 1 MIP Vest 2 Settlement Equity settled Equity settled Valuation date 20 June 2018 20 June 2018 Award date 20 June 2018 20 June 2018 Expected vesting date 1 March 2021 1 January 2022 Expected settlement date 1 March 2021 1 January 2022 Expected term 2.7 3.5 Model used for valuation Black Scholes Black Scholes Share price at valuation date 1.00 1.00 Exercise price N/A N/A Risk free rate 0.82% 0.89% Dividend yield 1.59% 1.59% Expected volatility 24.75% 23.48% Fair value of one share £0.96 £0.95 The Group recognised a total credit of £175,000 during the year 2021 charge of £378,000 relating to equity settled share based payments. Borrowings 2022 £000s 2021 £000s Non current loans and borrowings Lease liabilities 7,176 8,430 Revolving credit facility 10,000 10,000 Other borrowings 15,000 3,814 32,176 22,244 Current loans and borrowings Lease liabilities 6,403 8,833 Invoice discounting facility 30,562 29,258 Other borrowings 13,032 9,241 49,997 47,332 Direct Accident Management Limited uses an invoice discounting facility which is secured on the trade receivables of that company. Security held in relation to the facility includes a debenture over all assets of Direct Accident Management Limited dated 11 October 2016, extended to cover the assets of Anexo Group Plc and Edge Vehicles Rentals Group Limited from 20 June 2018 and 28 June 2018 respectively, as well as a cross corporate guarantee with Professional and Legal Services Limited dated 21 February 2018. At the end of December 2022, Direct Accident Management Limited has availability within the invoice discounting facility of 0.9 million pounds (2021: 1.3 million pounds). In July 2020, Direct Accident Management Limited secured a 5.0 million pounds loan facility from Secure Trust Bank Plc, under the Government’s CLBILS scheme. The loan was secured on a repayment basis over a three year period, with a three month capital repayment holiday. Direct Accident Management Limited is also party to a number of leases which are secured over the respective assets funded. Anexo Group Plc Annual Report 2022. Borrowings continued. The revolving credit facility is secured by way of a fixed charge dated 26 September 2019, over all present and future property, assets and rights including uncalled capital of Bond Turner Limited, with a cross company guarantee provided by Anexo Group Plc. The loan is structured as a revolving credit facility which is committed for a three year period, until 13 October 2024, with no associated repayments due before that date. Interest is charged at 3.25% over the respective rate. The facility was fully drawn down as at 31 December 2022 and 2021."
"In July 2020, Anexo Group Plc secured a loan of 2.1 million pounds from a specialist litigation funder to support the investment in marketing costs associated with the VW Emissions Class Action. The terms of the loan are that interest accrues at the rate of 10% per annum, with maturity three years from the date of receipt of funding with an option to repay early without charge. In addition to the interest charges, the loan attracts a share of the proceeds to be determined by reference to the level of fees generated for the Group. In November 2021, a further 3.0 million pounds loan was sourced from certain of the principal shareholders and Directors of the Group to support the investment in 2022 of the Mercedes Benz emissions claim. The terms of the loan are that interest accrues at the rate of 10% per annum, with maturity two years from the date of receipt of funding with an option to repay early without charge. In addition to the interest charges, the loan attracts a share of the proceeds to be determined by reference to the level of fees generated for the Group. There has been no adjustment to increase the liability for either of these loans for the share of proceeds as no settlement has yet been reached. In March 2022, the Group secured a loan of 7.5 million pounds from Blazehill Capital Finance Limited, with an additional 7.5 million pounds drawn in September 2022, the total balance drawn at 31 December 2022 was 15.0 million pounds. The loan is non amortising and committed for a three year period. Interest is charged and paid monthly at 13% above the central bank rate. The facility is secured by way of a fixed charge dated 29 March 2022, over all present and future property, assets and rights including uncalled capital of Direct Accident Management Limited, with a cross company guarantee provided by Anexo Group Plc. In October 2022, the Group secured a loan of 4.7 million pounds from Premium Credit, the loan is unsecured and amortising over a 12 month period. The loans and borrowings are classified as financial instruments and are disclosed in the financial instruments note. The Group’s exposure to market and liquidity risk, including maturity analysis, in respect of loans and borrowings is disclosed in the financial risk management and impairment of financial assets note. The Group’s banking arrangements provided by Secure Trust Bank Plc, HSBC Bank Plc and Blazehill Capital Limited are subject to monitoring through financial performance measures or covenants. The Secure Trust facility includes the following covenants, all of which are tested monthly: a number of individual measures focused on the relationship between cash collections and funding levels, settlement rates, hire periods, disbursement spending, vehicle numbers and utilisation. The Blazehill facility includes the following covenants, all of which are tested monthly: Group EBITDA to be not less than 80% of forecast, cash collections to be not less than 80% of forecast, investment in Group capex to not exceed 120% of forecast testing over a rolling three months, minimum Group liquidity to exceed 2.8 million pounds at any time. The HSBC facility includes the following covenants, which are tested quarterly for a rolling 12 month period on the results for Bond Turner Limited: interest cover to exceed four times, leverage to exceed two times. Notes to the Consolidated Financial Statements continued for year ended 31 December 2022. Overview Strategic Report Governance Financial Statements. During the year, certain of the measures and covenants within the Secure Trust facility came under pressure and required action by the Group which included a regular dialogue between all parties to ensure that the reasons behind the breaches were fully understood, agreed and ultimately waived, certain of which varied during the year based on our discussions with Secure Trust. All the required waivers were fully in place post year end. A facility from Secure Trust of 40.0 million pounds at 31 December 2022 was already classified as repayable on demand so was not impacted. There were no such breaches within either of the Blazehill or HSBC facilities, all such covenants being met during the year. Changes in liabilities arising from financing activities. Invoice discounting facility, lease liabilities, other borrowings. Balance at 1 January 2021 16,341, 13,698, 18,634. Cash flows. Proceeds from new loans 12,917, repayment of borrowings, lease payments, non-cash changes. Balance at 31 December 2021 29,258, 17,263, 23,055. Cash flows. Proceeds from new loans 1,304, repayment of borrowings, lease payments, non-cash changes."
"Balance at 31 December 2022 30,562, 13,579, 38,032. Deferred Tax. The following is an analysis of the deferred tax liabilities, net of deferred tax assets: 2022, 2021. Total balance brought forward 80, credit or charge to profit or loss, total deferred tax asset or liability at end of period 80. The deferred tax included in the statement of financial position is as follows: 2022, 2021. Included in non-current assets 112, included in non-current liabilities 32, credit or charge to profit or loss. There is no unrecognised deferred tax in the current period for the Group. Deferred taxes at 31 December 2022 and 31 December 2021 have been measured using the enacted tax rates at that date and are reflected in these financial statements on that basis. Following the March 2021 Budget, the tax rate effective from 1 April 2023 increases from the current 19% to 25%. Anexo Group Plc Annual Report 2022. Leases. Lease liabilities. The Group leases a number of office and other premises as well as the motor vehicle fleet under non-cancellable lease agreements. The total future value of minimum lease payments is as follows: 2022, 2021. Total lease liabilities not later than 1 year 6,403, later than 1 and not later than 5 years 5,413, over 5 years 1,763. The carrying value of those assets reported as right of use are reported in note 14. The following relates to lease liabilities: 2022, 2021. Total lease liabilities depreciation charge 9,981, interest expense 1,100, total cash outflows capital and interest 11,375. Pension and Other Schemes. The Group operates a defined contribution pension scheme which is available to all employees. The assets of the scheme are held separately from those of the Group in independently administered funds. The pension cost charge for the year represents contributions payable by the Group to the scheme and amounted to 591,000 pounds (2021: 569,000 pounds). Trade and Other Payables. 2022, 2021. Trade payables 3,266, accruals and deferred income 4,358, social security and other taxes 3,305, other creditors 2,296. The fair value of the trade and other payables classified as financial instruments are disclosed in the financial instruments note. The Directors consider that the fair value of trade and other payables is not materially different from the carrying value. The Group’s exposure to market and liquidity risks related to trade and other payables is disclosed in the financial risk management and impairment of financial assets note. The Group pays its trade payables on terms that vary by supplier and as such trade payables are not yet due at the reporting date. Notes to the Consolidated Financial Statements continued for year ended 31 December 2022. Related Party Disclosures. The following related party transactions were undertaken during the period: The Group has entered into formal leases and occupies premises owned by a Director. Rent and service charges of 115,000 pounds (2021: 51,000 pounds) were charged under these arrangements. At the reporting date the amounts due under these lease arrangements to the Director were nil (2021: nil). At the reporting date nil in loan liabilities were due to a company connected through common directorship (2021: 150,000 pounds), the balance remains outstanding but is no longer a related party balance. The loan is unsecured and interest is accruing at the rate of 10% per annum. At the reporting date 1,250,000 pounds in loan liabilities were due to certain Directors of the Company (2021: 1,750,000 pounds), in addition a further 1,250,000 pounds in loan liabilities were due to a company connected through common directorships (2021: 1,250,000 pounds). The loans are unsecured and interest is payable quarterly at the rate of 10% per annum. Further details are included in note 20. Including accrued interest the total amounts outstanding at 31 December 2022 totalled 2.8 million pounds (2021: 3.0 million pounds). No repayments were made during the year (2021: nil). During the year the Group recharged the lease of a vehicle to Directors and close family members of Directors to the value of 10,240 pounds (2021: 10,240 pounds). All amounts were received in the period and nil amount outstanding at the year end. This transaction is deemed to have been at arm’s length. During the year the Group incurred consulting costs from a company connected through common directorships to the value of 50,000 pounds (2021: nil). All amounts were paid in the period and nil amount outstanding at the year end. This transaction is deemed to have been at arm’s length. Financial Instruments."
"In common with other businesses, the Group is exposed to risks that arise from its use of financial instruments. Note 27 describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. The significant accounting policies regarding financial instruments are disclosed in note 2. There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous years unless otherwise stated in note 27. The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows: Loans and receivables held at amortised cost. 2022, 2021. Cash and cash equivalents 9,049, trade and other receivables 165,891, accrued income 54,778. Financial liabilities held at amortised cost. 2022, 2021. Trade and other payables 9,920, borrowings 82,173. There is no significant difference between the fair value and carrying value of financial instruments. The 2021 amounts have been restated so as to correctly exclude social security and other taxes and include accruals. Financial Risk Management and Impairment of Financial Assets. General objectives, policies and processes. The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, while retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Board receives regular reports from the Finance Director through which it reviews the effectiveness of processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below: Credit risk and impairment. Credit risk arises principally from the Group’s trade and other receivables. It is the risk that the counterparty fails to discharge its obligation in respect of the instrument. The maximum exposure to credit risk equals the carrying value of these items in the financial statements. Credit risk with cash and cash equivalents is reduced by placing funds with banks with high credit ratings. A financial asset is in default when the counterparty fails to pay its contractual obligations. The Group is not significantly exposed to credit risk due to the nature of the counterparties from which it collects its trade receivables and contract assets; cash is primarily collected from insurance providers after settlement of a customer’s accident claim. The Group monitors its exposure to credit risk by reviewing outstanding debtors by insurance provider. The majority of the collection risk for trade receivables and contracts assets arises from the uncertainty of settlement for each claim, which is considered as part of the revenue accounting, rather than in the expected credit loss assessment. Based on past history management does not have a significant history of writing off receivables due to default. Liquidity risk. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The Board receives cash flow projections on a regular basis which are monitored regularly. The Board will not commit to material expenditure in respect of its ongoing development programme prior to being satisfied that sufficient funding is available to the Group to finance the planned programmes or from headroom within its existing facilities. The following table sets out the undiscounted contractual maturities of financial liabilities and the associated interest incorporated: At 31 December 2022. Up to 12 months, 9,920. Loans and borrowings 36,061, 52,203, 2,134. Total 45,981, 52,203, 2,134. At 31 December 2021 (as restated). Up to 12 months, 10,764. Loans and borrowings 49,950, 21,664, 2,169. Total 60,714, 21,664, 2,169. The comparative figures have been adjusted to include the impact of contractual interest. Capital risk management. The Group considers its capital to comprise its ordinary share capital and retained profits as its equity capital. In managing its capital, the Group’s primary objective is to provide return for its equity shareholders through capital growth and future dividend income. The Group’s policy is to seek to maintain a gearing ratio that balances risks and returns at an acceptable level and also to maintain a sufficient funding base to enable the Group to meet its working capital and strategic investment needs."
"In making decisions to adjust its capital structure to achieve these aims, either through new share issues or the issue of debt, the Group considers not only its short-term position but also its long-term operational and strategic objectives. Details of the Group’s capital are disclosed in the Statement of Changes in Equity. There have been no other significant changes to the Group’s management objectives, policies and procedures in the year nor has there been any change in what the Group considers to be capital. Currency risk. The Group is not exposed to any significant currency risk. The Group also manages its currency exposure by retaining its cash balances in Sterling. Post Balance Sheet Events. On 8 March 2023, the High Court handed down a judgment granting a Group Litigation Order. The application, brought by Leigh Day and Pogust Goodhead, sought permission to launch a class action lawsuit against Mercedes Benz for alleged subversion of key air pollution tests by using special software to reduce emissions of nitrous oxides under test conditions. Following the success of this application, on 14 April 2023 the Board confirmed that the Group intends to pursue litigation against Mercedes and has already secured over 12,000 claims through internal resources and via social media. Proceedings have been issued against Mercedes and its affiliates in the High Court, alongside more than. 12,000 other claimants. The claim will be formally served on the defendants in early summer 2023. The judge at the hearing set out a timetable for the progress of the claim. The order setting out these measures needs to be confirmed by the president of the High Court King's Bench Division, an event expected in spring 2023. A steering committee has now been formed to represent the best interests of all claimants and Bond Turner is a member of the claimant solicitors' committee. The board remains confident that these cases have the potential to be of significant value to both the claimants and the group. On 14 April 2023, Mark Fryer resigned with immediate effect as chief financial officer and as a director and left the group. Gary Carrington was appointed to the position of interim chief financial officer on the same day and on 18 April 2023 was appointed a director of the group. Anexo Group Plc Annual Report 2022 86 Assets Note 2022 £000s 2021 £000s Non-current assets Investments in subsidiaries 4 91,902 92,077 91,902 92,077 Current assets Trade and other receivables 5 20,459 25,141 Corporation tax recoverable 606 Cash and cash equivalents 4,816 61 25,881 25,202 Total assets 117,783 117,279 Equity and liabilities Equity Share capital 8 59 58 Share premium 8 16,196 16,196 Merger reserve 8 89,924 89,924 Share based payment reserve 8 2,077 Retained earnings 1,362 3,143 Equity attributable to the owners of the company 107,541 111,398 Non-current liabilities Borrowings 7 3,000 Current liabilities Borrowings 7 9,858 2,471 Trade and other payables 6 384 410 Corporation tax liability 10,242 2,881 Total liabilities 10,242 5,881 Total equity and liabilities 117,783 117,279 The company's result for the year ended 31 December 2022 was a loss of £2.5 million 2021: Loss of £0.1 million. The notes on pages 88 to 92 form an integral part of these financial statements. The financial statements were approved by the board of directors and authorised for issue on 9 May 2023. They were signed on its behalf by Gary Carrington Chief Financial Officer 9 May 2023 Company Number 11278719 Company Statement of Financial Position as at 31 December 2022 87 Overview Strategic Report Governance Financial Statements Share Capital £000s Share Premium £000s Merger Reserve £000s Share Based Payments Reserve £000s Retained Earnings £000s Total £000s At 1 January 2021 58 16,196 89,924 1,699 4,965 112,842 Issue of share capital Increase in share premium Loss for the year and total comprehensive income 82 Dividends 1,740 Share based payment charge 378 At 31 December 2021 58 16,196 89,924 2,077 3,143 111,398 Issue of share capital 1 Loss for the year and total comprehensive income 2,503 Share based payment credit 175 Transfer of share based payment reserve 1,902 Dividends 1,180 At 31 December 2022 59 16,196 89,924 1,362 107,541 Company Statement of Changes in Equity for the year ended 31 December 2022 Anexo Group Plc Annual Report 2022 88 1. Significant Accounting Policies Basis of preparation The separate financial statements of the company are presented as required by the Companies Act 2006. As permitted by that act, the separate financial statements have been presented in accordance with FRS 101: Reduced Disclosure Framework."
"The company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual Statement of Total Comprehensive Income and related notes that form part of these approved financial statements. The financial statements have been prepared on a historical cost basis. The principal accounting policies adopted are the same as those set out in note 1 and 2 to the consolidated financial statements except that investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment. Impairment of amounts due from subsidiaries Amounts due from subsidiaries are considered to have low credit risk, and the loss allowance recognised during the period is therefore limited to 12 months expected credit losses. Management consider low credit risk to be when they have a low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term. No expected credit loss has been recognised as the amount is considered to be immaterial. Reduced disclosures The figures presented in relation to the company's financial statements have been prepared in accordance with FRS 101: Reduced Disclosure Framework. In accordance with FRS 101 the following exemptions from the requirements of IFRS have been applied in the preparation of the company financial statements and, where relevant, equivalent disclosures have been made in the consolidated financial statements of the company: presentation of a company cash flow statement and related notes; disclosure of the objectives, policies and processes for managing capital; disclosure of the categories of financial instruments and nature and extent of risks arising on these financial instruments; disclosure of key management compensation; related party disclosures in respect of transactions with the company and wholly owned members of the group; and disclosure of the future impact of new International Financial Reporting Standards in issue but not yet effective at the reporting date. The financial statements of the company are consolidated within these financial statements which will be publicly available from Companies House, Crown Way, Cardiff, CF14 3UZ following their approval by shareholders. 2. Operating Profits The auditor's remuneration for audit services to the company was £70,000 2021: £50,000. 3. Staff Costs The aggregate payroll costs including directors' remuneration were as follows: 2022 £000s Restated 2021 £000s Wages and salaries 2,401 2,165 Social security costs 344 278 Pension costs, defined contribution scheme 9 9 2,754 2,452 Notes to the Company Financial Statements for year ended 31 December 2022 89 Overview Strategic Report Governance Financial Statements The average number of persons employed by the company including directors during the year, analysed by category was as follows: 2022 No 2021 No Administrative staff 7 10 7 10 In respect of the highest paid director: 2022 £000s 2021 £000s Remuneration 1,085 752 Pension contributions 1 1,085 753 Further details of the costs of the directors of the company and the highest paid directors are included in the Remuneration Committee Report on pages 46 to 49. Note the remuneration of the highest paid director in 2022 includes £665,000 relating to the issue of shares under the MIP 2021: £Nil. 4. Details of Related Undertakings All of the subsidiaries have been included in the consolidated financial statements. The subsidiaries held during the year are set out below: Subsidiary Principal Activity Registered Office Country of Incorporation % shares Edge Vehicles Rentals Group Limited Intermediate holding company Maurant Governance Services Jersey 100% Bond Turner Limited Legal practice The Plaza, Liverpool UK 100% Direct Accident Management Limited Credit hire business Ormskirk UK 100% Professional and Legal Services Limited Medico legal business Ormskirk UK 100% IGCA 2013 Limited Administrators for ATE insurers The Plaza, Liverpool UK 100% AMS Legal Services Limited Dormant The Plaza, Liverpool UK 100% All shares held by the company are ordinary equity shares, the percentage holding representing voting rights. The ownership of Edge Vehicles Rentals Group Limited and Bond Turner Limited by Anexo Group Plc is direct, ownership of the other subsidiary companies is indirect. Professional and Legal Services Limited and IGCA 2013 Limited have taken the subsidiary exemption from audit in respect of the year ended 31 December 2022 and 2021 under section 479A of the Companies Act 2006. Anexo Group Plc Annual Report 2022 904."
"Details of Related Undertakings continued Investments in subsidiaries during the year was as follows: £000s Cost At 1 January 2021 101,699 Additions 378 At 31 December 2021 102,077 Reversal of share based payment charge contribution 175 At 31 December 2022 101,902 Impairment At 1 January 2021 10,000 Impairment in the year 10,000 At 31 December 2021 10,000 Impairment in the year 10,000 At 31 December 2022 10,000 Net Book Value At 31 December 2022 91,902 At 31 December 2021 92,077 5. Trade and Other Receivables 2022 £000s 2021 £000s Amounts due from subsidiary undertakings 20,231 25,050 Other debtors 228 91 20,459 25,141 6. Trade and Other Payables 2022 £000s 2021 £000s Trade payables 77 130 Other tax and social security 30 75 Accruals 277 205 384 410 7. Borrowings In July 2020 Anexo Group Plc secured a loan of £2.1 million from a specialist litigation funder to support the investment in marketing costs associated with the VW emissions class action. The terms of the loan are that interest accrues at the rate of 10% per annum, with maturity three years from the date of receipt of funding with an option to repay early without charge, the total balance outstanding at 31 December 2022, including accrued interest being £2.8 million. In addition to the interest charges the loan attracts a share of the proceeds to be determined by reference to the level of fees generated for the group. In November 2021 a further £3.0 million loan was sourced from certain of the principal shareholders and directors of the group to support the investment in 2022 of the Mercedes Benz emissions claim. The terms of the loan are that interest accrues at the rate of 10% per annum, with maturity two years from the date of receipt of funding with an option to repay early without charge. In addition to the interest charges the loan attracts a share of the proceeds to be determined by reference to the level of fees generated for the group. At 31 December 2022 the loan balance was £3.4 million including accrued interest. Notes to the Company Financial Statements continued for year ended 31 December 2022 91 Overview Strategic Report Governance Financial Statements In October 2022, the group secured a loan of £4.7 million from Premium Credit, the loan is unsecured and amortising over a 12 month period. At 31 December 2022 the amount outstanding was £3.7 million. 8. Share Capital and Reserves 2022 £000s 2021 £000s Share capital allotted, called up and fully paid 118 million ordinary shares of 0.05 pence each 59 58 Share premium 16,196 16,196 Share capital On 20 June 2018 the company was admitted to trading on AIM. On this date the company issued 10 million ordinary shares of 0.05 pence each with a nominal value of £5,000. Prior to this date the company had issued 100 million ordinary shares of 0.05 pence each with a nominal value of £50,000 in relation to the incorporation of the company and the purchase of its subsidiaries, Edge Vehicles Rentals Group Limited, Bond Turner Limited, Direct Accident Management Limited, IGCA 2013 Limited, Professional and Legal Services Limited and AMS Legal Services Limited. As a result of these transactions the issued share capital at 31 December 2019 comprised 110 million ordinary shares of 0.05 pence each with a nominal value of £55,000. On 20 May 2020, the company issued a further 6.0 million ordinary shares of 0.05 pence each at a price of 125 pence per share generating £7.0 million of funds after expenses. On 6 April 2022, the company issued 1,990,294 ordinary shares of 0.05 pence each exchanging these for C shares in Edge Vehicles Rentals Group Limited in settlement of the MIP. Share premium The share premium reserve contains the premium arising on the issue of equity shares, net of issue expenses incurred by the company. The 10 million ordinary shares of 0.05 pence each with a nominal value of £5,000 were issued at a price of 100 pence per share on 20 June 2018 giving rise to share premium of £9,270,000 net of expenses. The 6.0 million ordinary shares of 0.05 pence each with a nominal value of £3,000 were issued at a price of 125 pence per share on 20 May 2020 giving rise to share premium of £7.5 million against which expenses of £574,000 were written off giving rise to a balance of £6,926,000 net of expenses."
"Merger reserve The merger reserve arose on the purchase of the subsidiaries, Edge Vehicles Rentals Group Limited, Bond Turner Limited, Direct Accident Management Limited, IGCA 2013 Limited, Professional and Legal Services Limited and AMS Legal Services Limited. The merger reserve represents the difference between the cost value of the shares acquired less the cost value of the shares issued for the purchase of each company and the stamp duty payable in respect of these transactions. Share-based payment reserve Share-based payment reserve represents the cumulative share-based payment expense for the group's share option schemes. Details of the share-based payment schemes and associated charges are set out in note 19 of the group financial statements. Retained earnings The movement on retained earnings is as set out in the statement of changes in equity. Retained earnings represent cumulative profits or losses, net of dividends and other adjustments. Subsequent to the year end, the company received dividend income from a subsidiary undertaking of £10.0 million which created distributable reserves for onward distribution. Anexo Group Plc Annual Report 2022 929. Related Party Transactions Details of the company's interests in subsidiaries, who are regarded as related parties, are provided in note 4. Transactions during the year with subsidiaries are summarised below: Management charges £000s Interest charges £000s Charges to the company from subsidiaries £000s 2022 1,800 2021 1,800 At the reporting date £1,250,000 in loan liabilities were due to certain directors of the company 2021: £1,750,000, in addition a further £1,250,000 in loan liabilities were due to a company connected through common directorships 2021: £1,250,000. The loans are unsecured and interest is payable quarterly at the rate of 10% per annum. Further details are included in note 20 to the consolidated financial statements. Amounts due from subsidiaries at 31 December 2022 and 31 December 2021 are included in note 6. Amounts owed by group undertakings are unsecured, interest free, have no fixed date of repayment and are repayable on demand. 10. Ultimate Controlling Party The ultimate controlling party is Alexander Maria Paiusco by virtue of his shareholding, which is held through DBAY Advisors Limited. 11. Contingent Liability The company has provided security through a cross company guarantee to support the loan drawn by Bond Turner Limited, a subsidiary. The value of the loan at the year-end was £10.0 million 2021: £10.0 million. The company has also provided security through a cross company guarantee to support the amount drawn by Direct Accident Management Limited and Professional and Legal Services Limited under the Secure Trust Bank plc invoice discounting facility. The amounts drawn under this agreement totalled £30.6 million at the year-end 2021: £29.3 million. The company has also provided security through a cross company guarantee to support the amount drawn by Direct Accident Management Limited under the Blazehill Capital facility. The amounts drawn under this agreement totalled £15.0 million at the year-end 2021: £Nil. 12. Post Balance Sheet Events On 8 March 2023, the High Court handed down a judgment granting a Group Litigation Order. The application, brought by Leigh Day and Pogust Goodhead, sought permission to launch a class action lawsuit against Mercedes Benz for alleged subversion of key air pollution tests by using special software to reduce emissions of nitrous oxides under test conditions. Following the success of this application, on 14 April 2023 the board confirmed that the group intends to pursue litigation against Mercedes and has already secured over 12,000 claims through internal resources and via social media. Proceedings have been issued against Mercedes and its affiliates in the High Court, alongside more than 12,000 other claimants. The claim will be formally served on the defendants in early summer 2023. The judge at the hearing set out a timetable for the progress of the claim. The order setting out these measures needs to be confirmed by the president of the High Court King's Bench Division, an event expected in spring 2023. A steering committee has now been formed to represent the best interests of all claimants and Bond Turner is a Member of the Claimant Solicitors Committee. The Board remains confident that these cases have the potential to be of significant value to both the Claimants and the Group. On 14 April 2023, Mark Fryer resigned with immediate effect as Chief Financial Officer and as a Director and left the Group. Gary Carrington was appointed to the position of Interim Chief Financial Officer on the same day and on 18 April 2023 was appointed a Director of the Group."
"Notes to the Company Financial Statements continued for year ended 31 December 2022. Overview Strategic Report Governance Financial Statements Directors: Alan Sellers, Gary Carrington (appointed 18 April 2023), Samantha Moss, Dawn O’Brien, Christopher Houghton, Roger Barlow, Richard Pratt, Saki Riffner, Julian Addison (appointed 11 May 2022), Michael Branigan (appointed 11 May 2022). Assistant Company Secretary: ONE Advisory Limited, 201 Temple Chambers, 3-7 Temple Avenue, London, EC4Y 0DT. Company Number: 11278719. Registered Office: 5th Floor, The Plaza, 100 Old Hall Street, Liverpool, Merseyside, United Kingdom, L3 9QJ. Nominated Advisor: WH Ireland Limited, 24 Martin Lane, London, EC4R 0DR. Joint Brokers: WH Ireland Limited, 24 Martin Lane, London, EC4R 0DR, Zeus Capital Limited, 125 Old Broad Street, London, EC2N 1AR. Bankers: Royal Bank of Scotland plc, St Ann’s Square, St Ann’s Street, Manchester, M2 7PW. Solicitors: King & Spalding International LLP, 125 Old Broad Street, London, EC2N 1AR. Independent Auditor: RSM UK Audit LLP, Chartered Accountants, 9th Floor, 3 Hardman Street, Manchester, M3 3HF. Registrars: Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA. Website: www.anexo-group.com. Company Information: Anexo Group Plc, 5th Floor, The Plaza, 100 Old Hall Street, Liverpool, Merseyside, United Kingdom, L3 9QJ. Anexo Group Plc Annual Report 2022. Alliance Pharma plc Annual Report and Accounts 2021. Achieving more together. An alliance of people, partners, and brands, working together to achieve more. Contents: Company Overview, 2021 Financial Highlights, At a Glance, Our Values, Strategic Report, Chief Executive’s Review, Our Markets, Our Business Model, Our Strategy, Key Performance Indicators, Sustainability Overview, Sustainability Performance, Developing our Environmental Sustainability Strategy, Stakeholder Engagement, Financial Review, Principal Risks and Uncertainties. Governance: Chairman’s Introduction, Board of Directors, Governance, Nomination Committee Report, Audit and Risk Committee Report, Remuneration Committee Report, ESG Committee Report, Task Force on Climate-related Financial Disclosures (TCFD), Directors’ Report. Financial Statements: Independent Auditor’s Report, Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated and Company Cash Flow Statements, Notes to the Financial Statements. Additional Information: Unaudited Information, Five Year Summary, Advisers and Key Service Providers, Cautionary Statement, Glossary. For more information visit alliancepharmaceuticals.com. Alliance Pharma plc – Annual Report and Accounts 2021. The Group delivered a strong operational and financial performance in 2021, leaving it well placed to take advantage of further growth opportunities in 2022. 2021 Financial Highlights: Non-IFRS alternative performance measures. See-through revenue includes all sales from Nizoral as if they had been invoiced by Alliance as principal. For statutory accounting purposes, the product margin relating to Nizoral sales made on an agency basis is included within Revenue, in line with IFRS 15. Strong overall revenue growth driven by Consumer Healthcare, underpinned by continued market penetration via e-commerce activity, which now represents around 25% of Group sales. Consumer Healthcare see-through revenue up 31% to £121.8m (2020: £93.0m) and up 36% at constant exchange rates with excellent performance from Kelo-cote and the inclusion of Amberen, acquired in December 2020. Robust Prescription Medicines performance with revenues up 8% to £47.8m (2020: £44.5m), with strong H2 recovery as the effects of COVID-19 receded. Strong Free Cash Flow driving down Group leverage to 1.7x at 31 December 2021 (2.4x at December 2020). Amberen fully integrated into the Group. Successfully implemented Group-wide ERP system, enhancing visibility across the business. US operating capabilities expanded to provide a platform for future growth. Strengthened European management team and expanded the Board to increase consumer brand experience. Dedicated Innovation and Development team now in place to underpin Consumer Healthcare organic growth. Roll-out of strategic brand plan for Nizoral now well underway. Committed to carbon neutral Scope 1 and 2 emissions from 2021. Certified as a Great Place To Work again in the UK and China, and now in Singapore with a Trust Index rating of 76%. Overview: Underlying Profit Before Tax £42.2m, +26% (2020: £33.5m). Free Cash Flow £30.2m, -12% (2020: £34.1m). Net Debt £87.0m, -20% (2020: £109.4m). Underlying Basic EPS 6.39p, +25% (2020: 5.11p). Reported Profit Before Tax £18.2m, +40% (2020: £13.0m). Reported Basic EPS 1.37p, -9% (2020: 1.51p). See-through Revenue £169.6m, +23% (2020: £137.5m). Statutory Revenue £163.2m, +26% (2020: £129.8m). Alliance Pharma plc – Annual Report and Accounts 2021. Governance Company Overview Strategic Report Additional Information Financial Statements. At a Glance: We are Alliance, a growing international healthcare group. Our core business is Consumer Healthcare. This accounts for more than 70% of our revenues and is what drives our growth."
"We also have a well-established Prescription Medicines business, which operates from the same regulatory platform. In total, we hold marketing rights to around 80 brands. Our commercial operations extend across EMEA, AMER, and APAC, with revenues generated from a mix of direct, distributor, and e-commerce sales. By outsourcing all our manufacturing and logistics activities, we remain asset-light and focused on maximizing the value of our brands. Who we are: We are Alliance, a growing international healthcare group. A business founded on the principle that by working together, we can achieve more. What we do: Our purpose is to improve the lives of consumers and patients through making available a range of clinically valuable healthcare products. How we do it: Every day, we work with our partners and colleagues around the globe, to maximize the value of our brands. Confident in the knowledge that in doing so, we can make a real difference to people’s lives. Headquartered in the UK, we employ around 250 people based in locations across Europe, North America, and the Asia Pacific region. Our Vision: To be a leading international healthcare business, built around products that are clinically valuable to patients. We will be both the partner and employer of choice. Our Purpose: To improve the lives of consumers and patients through making available a range of clinically valuable healthcare products. Our Strategy: There are two main strands to our strategy: Delivering solid organic growth from our key brands and supplementing this growth with selective, complementary acquisitions in the consumer healthcare space. Underpinned by a focus on investing in people and sustainability. Our Values: Performance, Realism, Accountability, Integrity, Skill, Entrepreneurship. Our Business Model: Leveraging the global platform we’ve created and the capabilities, expertise, and relationships that support this enables us to maximize the value of our existing brands and integrate acquired brands with ease. Our culture reflects the spirit of collaboration embedded in our business – the tacit belief that through working together, both internally and with external partners, we can achieve more for our stakeholders and for society as a whole. Our Values: Acting in accordance with our values, we maintain our strong culture of working together to achieve more. We set stretching goals and targets which we believe are achievable. Our high-performing people continually drive business success. Undeterred by the challenges of remote working imposed by the global pandemic, in April 2021, members of our global brand marketing team went above and beyond to deliver a very successful Alliance brand week and marketing excellence program virtually. This enabled the brand leads to showcase the plans they’d created for each of the 13 brands prioritized as part of this program, building wider awareness and understanding of our brand marketing priorities across the business. We take responsibility and deliver what we promise. From developing new Key Opinion Leaders’ endorsements for our products to delivering new or improved processes, many great demonstrations of our values in practice involve our employees taking individual or collective responsibility to ensure that delivery expectations are met at all levels in the organization. One of the best examples of Accountability in 2021 came from our UK Facilities team, who successfully managed the transformation of our UK headquarters and the challenge of undertaking works to a listed building, against the backdrop of ever-changing COVID-19 restrictions. When we learned that the manufacturer of one of the lead products in our Vamousse headlice prevention and treatment range was unable to continue manufacturing it, some quick thinking was needed to avoid a potential out of stock situation in the peak back-to-school season in the US. By working together and adopting a creative, can-do approach, a cross-functional team, with participants from the US and UK, managed to come up with a solution which, with limited compromises and last-minute adjustments, they then successfully implemented to resolve what had originally looked like a very challenging situation. Integrity: We build trust in all our relationships. Trust is a key element in all our relationships, both internal and external – creating successful partnerships and business relationships depends on it. In April 2021, after a lengthy process, members of our medical and regulatory teams successfully obtained a new indication for one of our established Prescription Medicines in the UK and 10 other territories across the EU. To do this, they had to overcome multiple challenges – from dealing with several complex information requests from the assessors to translation issues and rigorous challenges from our safety partners."
"Through exercising a high degree of skill and integrity, showing sensitivity to others’ perspectives, and persevering with their endeavors, the team successfully delivered a great outcome, both for Alliance and for patients. Many of our PRAISE awards recognized the utilization of skills developed over the course of an employee’s journey with Alliance – we see many great examples of employees taking on and successfully delivering projects that lie outside their current experience and skill sets. Our values, and the culture that underpins them, are at the heart of how we operate as a business. Each month, we take time to celebrate outstanding demonstrations of our values in practice. In 2021, more than 50 colleagues received special recognition through the values-based PRAISE awards scheme, with more than £2,500 donated to charities of their choice. Tired of the daily frustration of trying to locate the right brand assets, our marketing team came together and decided to take the initiative to create a digital asset management system to better manage our growing portfolio of digital assets. The Alliance Asset Hub, an enterprising solution conceived and actualized by a member of our global marketing team, now sits at the heart of our marketing ecosystem, providing a single source of truth for all our digital brand assets. Accessible by teams around the globe and with the ability to make direct updates to our brand websites, whilst controlling access and usage rights, the system is expected to deliver real business benefits as our focus on marketing excellence continues. For example, in 2021 a member of our customer services team took on the challenge of consolidating the business activities going through our two UK wholesalers – the first project of this size and cross-functional nature they had led. Through effective leadership and strong project management skills, they were able to bring the project to a successful conclusion and enable the associated cost savings to be realized. Entrepreneurship: Our people think of the business as if it was their own. Skill: We recruit highly skilled people and develop their talents to the full. Strategic Report Chief Executive’s Review. See-through Revenue £169.6m, +23% (2020: £137.5m). Statutory Revenue £163.2m, +26% (2020: £129.8m). Continuing on our growth trajectory: I’m delighted with the strong performance of the Group in 2021. Kelo-cote enjoyed another excellent year, helping us to deliver double-digit organic revenue growth, and Amberen is now fully integrated into our enlarged US operations. TRADING PERFORMANCE Overview: The Group delivered strong growth in the year, with see-through revenue up 23% to £169.6m (2020: £137.5m), despite the impact of currency headwinds and continuing lockdowns, particularly in the APAC region; at constant exchange rates, revenue growth was 27%. Like-for-like revenue, excluding revenues attributable to Amberen, which was acquired by the Group at the end of 2020, grew 9% (12% CER). On a statutory reported basis, Group revenues were up 26% to £163.2m (2020: £129.8m) and up 30% CER and up 11% to £144.0m (2020: £129.8m) on a like-for-like basis, excluding Amberen (14% CER). Gross profit increased by 32% to £109.5m (2020: £82.8m), the increase outstripping revenue growth due to favorable changes in product mix, resulting from the inclusion of Amberen and the significant growth in Kelo-cote sales. This was balanced by an expected increase in operating costs, primarily reflecting the inclusion of the Amberen cost base, the resumption of discretionary spend deferred from the early stages of the pandemic, and higher levels of investment in the business to support growth. Coupled with a small increase in depreciation and amortization charges, as we brought our new ERP system into service, underlying profit before tax increased 26% to £42.2m (2020: £33.5m), with the profit before tax margin increasing by 50 basis points to 24.9% (2020: 24.2%). Non-cash amortization and impairment charges, together with a provision in relation to the Competition and Markets Authority decision and restructuring costs, resulted in reported profit increasing by 39% to £18.2m (2020: £13.0m). Consumer Healthcare: Our Consumer Healthcare business continued to perform well through 2021, with increased e-commerce activity and the integration of Amberen helping to drive year-on-year see-through revenue growth of 31% (36% CER), to £121.8m (2020: £93.0m). On a statutory basis, reported revenues were £115.4m, up 35% from the previous year (2020: £85.3m) and up 41% CER. Excluding the impact of Amberen, like-for-like Consumer Healthcare see-through revenue increased by 10% (14% CER) to £102.6m whilst reported revenue increased by 13% (16% CER) to £96.1m."
"Kelo-cote – scar prevention and treatment: Kelo-cote delivered another excellent performance, particularly in the APAC region, generating revenues of £48.8m, up 41% on the prior year (2020: £34.7m). CER revenues were up 47% due to continued strong demand from China, reflecting the growth of both domestic sales and significant cross-border e-commerce sales. Kelo-cote is very well established in China, with high brand awareness and usage. The growth in domestic and CBEC revenues reflects the increasing trend for consumers in China and elsewhere to migrate more to online purchasing, both of the brand itself and healthcare products generally – a trend accelerated by the pandemic. In 2021, we entered into a new CBEC distribution agreement for Kelo-cote, to move Alliance closer to the customer and provide greater control of our distribution chain. This decision was taken in response to the success of CBEC in facilitating export sales from the EU to consumers in China, and in recognition of the significant opportunity that China offers for this key brand. As a result, we expect further top-line growth in China over the medium term. Performance across the rest of the APAC region was more mixed, as many countries continued to be impacted by the pandemic, although both Hong Kong and South Korea recorded strong growth. A similar trend was evident across South America and much of EMEA; with strong performances from a number of European territories including France (domestic and export sales), and the UK. is included within revenue, in line with IFRS 15. Governance additional information financial statements. Alliance Pharma plc – Annual report and accounts 2021. Company overview strategic report. Chief executive’s review continued. Amberen – vitamin mineral supplement for the relief of menopause symptoms. Amberen made an encouraging start during its first year of trading under the Group’s ownership, generating net revenues of 26.5 million dollars in the year, with second half 2021 revenues up 12 percent on second half 2020. Full year revenue growth was up 3 percent, with the brand’s Amazon sales in particular experiencing strong year-on-year growth, compensating for more challenging trading conditions for the category as a whole in the bricks and mortar retail sector. We expect to see Amberen revenue growth accelerate in 2022, with a weighting towards the second half, as we look to leverage the expanded operating platform we have put in place in the US, increase our focus on brand positioning and execute a new integrated marketing campaign for the brand. We are focused on developing an innovation pipeline to underpin the growth of the brand in the longer term. Nizoral – medicated anti-dandruff shampoo. Nizoral had a challenging start to the year due to a combination of distributor order phasing, manufacturing delays, and the ongoing impacts of COVID-19 on demand, particularly in India. We experienced some delay to the transitioning of regulatory approvals in Vietnam and the Philippines, whilst growth in key pharmacy chain listings for the new Triatop combi product in China was also slower than planned. However, revenues started to recover in the second half of the year, with see-through revenue of 11.6 million pounds in the second half of 2021, as the challenging regional trading conditions affecting both supply and demand eased. Triatop combi product pharmacy listings in China also improved in the last few weeks of the year, which should help support further sales momentum in 2022. Consequently, see-through revenues for the year of 20.6 million pounds were up 1 percent, with a statutory reported basis, revenues were up 7 percent, at 14.2 million pounds. We expect to see further improvement in 2022, as the pandemic recedes and we take full control of the supply chain following the end of the transition period with Johnson and Johnson. The roll-out of our strategic brand plan for Nizoral is now well underway, with consumer activation campaigns ongoing or planned across a number of key territories, including Australia, South Korea and Taiwan. These activities are being carried out in partnership with our local distribution partners as part of a growth strategy centered around consumer and healthcare professional activation, e-commerce, and innovation and development. Other consumer healthcare brands. We continued to see a mixed performance across our other consumer healthcare brands, particularly for those products sold principally through international distributors."
"MacuShield, an eye health supplement, was an early beneficiary of a recovery in UK retail sales post COVID-19, whilst Vamousse, for the prevention and treatment of head lice, continued to be impacted by COVID-19 challenges as school closures and social distancing requirements led to significantly reduced incidence of head lice, particularly in the US, the product’s primary market. With distributor stocking patterns contributing to declines in Oxyplastine and Aloclair, revenues in other consumer healthcare brands fell 9 percent. As we progress through 2022, and global trading patterns and consumer behaviors start to normalize post COVID-19, we expect to see sales of Vamousse, Aloclair, Oxyplastine and a number of our other smaller consumer brands start to pick up again. Further revenue detail on these brands is available in note 3. Prescription medicines. The prescription medicines business delivered robust revenues of 47.8 million pounds, up 8 percent on the prior year, reflecting a partial return to the delivery of routine treatments and normalization of daily life compared with the early stages of the pandemic in 2020. Key drivers of revenue growth included the Opus range of stoma care products, Forceval, a nutritional supplement, Hydromol, an emollient for the treatment of eczema, and Flammazine, for the prevention of infection of burns and wounds. We continue to actively manage this part of our portfolio, periodically discontinuing or disposing of smaller products that deliver very low sales and margins. However, the cash generation from these assets remains good and, coupled with their limited requirement for promotional investment, this business will continue to play an important part in our overall product portfolio. Governance additional information financial statements. Alliance Pharma plc – Annual report and accounts 2021. Company overview strategic report. Chief executive’s review continued. Regional performance. EMEA, Europe, UK, Middle East and Africa. EMEA regional revenues of 89.2 million pounds were down 5 percent versus those for the prior year, primarily due to a mid-year change in the distributor for Kelo-cote CBEC, which is now located in APAC, and hence sales are now included in APAC revenues, whereas previously they were included in EMEA. This change in revenue classification was partially offset by the uplift in prescription medicines revenues, with this region accounting for 95 percent of all prescription medicines sales in the year, coupled with the growth in MacuShield sales, which originate primarily in EMEA. APAC, Asia Pacific and China. APAC regional see-through revenues rose 47 percent versus the prior year at 54.4 million pounds, with statutory revenues up 64 percent to 48.0 million pounds. Revenues in this region are dominated by Kelo-cote and Nizoral, which collectively account for 90 percent of APAC sales in 2021. Regional revenues in 2021 benefited from the change in distribution arrangements for Kelo-cote CBEC sales, with revenue recognized as part of APAC, rather than EMEA, from the middle of the year. The uplift in sales also reflects underlying growth in Kelo-cote sales, both in China and across the wider APAC region, coupled with the slight decline in Nizoral sales. AMER, the Americas. Revenues in the AMER region increased by 19.3 million pounds to 26.0 million pounds, reflecting the acquisition of Amberen, which contributed 19.2 million pounds to sales in the year. On a like-for-like basis, sales were in line with those for the prior year at 6.8 million pounds, with a decline in Vamousse sales in the US, due to the continued impacts of the pandemic, offset by increased sales of Kelo-cote in South America. This region now accounts for more than 20 percent of our consumer healthcare revenues. Following a period of investment to expand its local operating capabilities, the US business now has an enhanced platform from which to generate strong growth in Amberen and other existing brands and to scale up further when suitable acquisitions are identified. Current trading and outlook. 2022 has started well, and we remain confident in our ability to deliver financial performance in line with market expectations. We now have a clear focus on our core consumer healthcare business, supported by a well-defined value maximization strategy and a scalable platform across EMEA, APAC and the US, to drive future growth. The new distribution agreement we put in place in 2021 will enable us to deliver further growth for Kelo-cote through our CBEC business and gives us the opportunity to extend the range of products made available through this channel, potentially accelerating the growth of a number of our other consumer brands."
"Through 2022, we expect to see increased growth from Nizoral as we accelerate the roll-out of our strategic plan for the brand and as the impact of the pandemic recedes. With Amberen now fully integrated into our enlarged US operations, we expect to see revenues increasing as we begin to realize the benefits of additional revenue opportunities that the brand has brought into the Group. We now have a more balanced consumer portfolio around the globe and, as our net debt and leverage continue to reduce, we are increasingly well placed to participate in complementary acquisitions in the consumer healthcare space and to leverage the operating platform we have built across EMEA, APAC and the US. Coupled with a proven ability to extract value from our key consumer brands, we remain confident in our ability to realize our mid-term growth ambitions. Developing our regional platform. Rounding out our operational capabilities across the three geographic regions in which we operate, EMEA, APAC and AMER, has been a major focus for us in recent years. The platform we have created across these three regions, underpinned by our global support functions, enables us to create value through both driving the growth of our existing brands and acquiring and integrating new assets with ease, as demonstrated most recently with Amberen. Governance additional information financial statements. Alliance Pharma plc – Annual report and accounts 2021. Company overview strategic report. Chief executive’s review continued. Operational developments. We recognize the need to invest in our business to maintain strong organic revenue growth. We recently implemented a new innovation and development process and in 2021 we created new dedicated roles and a central I&D budget to deliver new products, claims and packaging ideas. We expect to see a number of these innovations come to market in 2022 as we refresh existing products to maintain consumer appeal. We have also commenced the roll-out of our new digital excellence training program to our global marketing teams to ensure our staff have the necessary skills and knowledge to drive sustainable long-term value. Our ERP system went live in the first half of 2021, and we have already realized benefits to the business through the standardization of processes. Our significant pre-launch preparation ensured a virtually seamless changeover; work continues on refining some of the reporting requirements and rolling the system out to a few remaining smaller entities, but we expect this to complete in the next 12 months. During the year we secured new, larger offices in Cary, North Carolina, to accommodate our growing US team, closed our office in Los Angeles and streamlined our European footprint through the closure of our Milan office, incurring associated restructuring costs of 2.4 million pounds, which have been presented as non-underlying. We also completed further substantial upgrade and refurbishment works at our UK headquarters, improving the building’s environmental credentials whilst also reconfiguring space to better accommodate post-pandemic working arrangements. All employees have now returned to the office on a hybrid basis, both in the UK and in our regional offices around the globe, as pandemic restrictions allow. Increasing our focus on sustainability. We have continued to focus on developing our sustainable business strategy during the year, under the direction of the ESG Board Committee, and informed by feedback from a number of our key investors plus external gap analysis. This work has resulted in the development of our sustainability framework; we now have greater clarity regarding our specific areas of focus and the key activities which underpin these. We have initiated a program of work to drive improvements to the sustainability of our product packaging and are also in the early stages of developing our broader environmental strategy, including our response to climate change. In 2021, we quantified our Scope 3 greenhouse gas emissions for the first time and are using the results to help inform the development of our carbon action plan, with a view to setting carbon reduction targets and our path to net zero in the near future. Given the nature of our business, and our use of third-party distributors, contract manufacturers and logistics service providers, the majority of our greenhouse gas emissions are classified as Scope 3. In 2022, we plan to reach out to our larger contract manufacturers and logistics service providers to better understand where they are on their respective emissions reduction journeys and to obtain their Scope 1 and 2 data to help improve the methodology used for our Scope 3 calculations."
"We will also continue to reduce our own Scope 1 and 2 emissions, which were 90 tons of CO2 equivalent for our UK operations in 2021, and will achieve carbon neutrality for these retrospectively in 2022 through the use of sequestration schemes. With the foundations now in place, we will be looking to raise the profile of sustainability within the business more widely in 2022, as we continue our journey to become a more sustainable business. We remain a responsible corporate citizen, committed to minimizing the negative impacts of our operations on the environment, whilst making a positive contribution to society. Further coverage on the progress we have made with our sustainable business strategy can be found in this report. Minimizing our environmental impact. In 2021, we completed a program of upgrading and refurbishment works at our UK headquarters, further improving the building’s environmental credentials. We continue to actively look for ways to reduce our direct emissions as part of the drive towards net zero and intend to achieve carbon neutrality for our Scope 1 and 2 UK emissions for 2021 retrospectively in 2022, through the use of sequestration schemes. Governance additional information financial statements. Alliance Pharma plc – Annual report and accounts 2021. Company overview strategic report. Chief executive’s review continued. People. On behalf of the Board, I would like to take this opportunity to express my sincere thanks to all those who have helped to make 2021 such a successful year for Alliance. We currently employ around 250 people in 10 locations around the globe. In 2021, we created around 20 new roles, spread across all our main geographic locations, as we looked to meet our evolving business needs. This included the creation of a new dedicated I&D team to underpin the growth of our consumer healthcare brands. We recognize the need to develop appropriate in-house expertise in specific skill sets, using a blend of external subject matter experts and internal training to ensure our platform remains scalable as we grow. We anticipate continued investment in our global team in 2022. In 2021, we once again participated in the Great Place to Work survey, as we further progressed our employee engagement journey. We were very pleased to have received an overall Trust Index rating of 76 percent and to have been recertified as a Great Place to Work in the UK and China whilst gaining an additional certification in Singapore, with 81 percent of participants globally saying that Alliance was a Great Place to Work. Further coverage on this and other aspects of our people strategy can be found in this report. Supporting early-stage career development. 2021 saw two of our employees successfully complete their apprenticeship training and move on to new permanent roles within the business, demonstrating the continued success of Alliance’s apprenticeship program in fostering early-stage skills development. We have since taken on an additional apprentice in our finance team and have recently launched both a graduate scheme and an industry placement scheme, furthering our commitment to supporting those at the start of their careers. During the second half of the year, we rolled out and refined our new ways of working to provide flexibility over office and home working for our employees around the globe, based on individual role, activities, and the location of other colleagues with whom they interact regularly. The majority of employees now spend 2 or 3 days a week in the office, subject to local government guidance, allowing them to combine the benefits of individual focus time with the increased connection and collaboration opportunities that come from being physically present with colleagues in the office. This increased flexibility has been very positively received across the business and is working well for us. We recognize that great people, and the successful partnerships that they build both within the business and externally, are key to the delivery of great results. Board changes. As previously announced, Kristof Neirynck, a highly experienced consumer brands executive, took up his position as an independent non-executive director of the Group on 1 December 2021, bringing with him almost 20 years of international consumer brand experience, including complex omnichannel business models, direct-to-consumer strategies and sales into China. His experience will be invaluable as we look to further develop and grow our business, in particular our activities, over the coming years. Looking forward to 2022. 2022 has got off to an encouraging start."
"We remain confident in our ability to further capitalize on identified organic growth opportunities within the business and to deliver financial performance in line with market expectations. Operationally, the priorities for the Group in 2022 are to continue to invest behind our larger consumer healthcare brands, in order to drive further growth, supported by our increasing focus on e-commerce and innovation and development activities; to continue to progress our sustainable business agenda, including the creation of our carbon action plan and the setting of emissions reduction targets; to continue to look for opportunities to participate in complementary acquisitions in the consumer healthcare space, to leverage the operating platform we have built across EMEA, APAC and the US, and balance the scale of our business operations across these regions. Peter Butterfield, Chief Executive Officer, 30 March 2022. Governance additional information financial statements. Alliance Pharma plc – Annual report and accounts 2021. Company overview strategic report. Our markets. The long-term trends in consumer healthcare remain unchanged, although the COVID-19 pandemic has caused significant short-term impacts. Sustainability is also emerging as a key consideration for both manufacturers and brand owners. 59 percent take over-the-counter products to manage acute health conditions. 67 percent tend to take an over-the-counter product before making a doctor's appointment. One in 20 Google searches relate to health. Macro trends in consumer healthcare include increasing life expectancy, increasing prosperity, self-care, and the wellness movement, digital healthcare and the empowerment of patients and consumers, and the growth of e-commerce. Methods have led consumers to embrace the convenience of online purchasing. Governance additional information financial statements. Alliance Pharma plc – Annual report and accounts 2021. Company overview strategic report. The e-commerce market is worth 4.9 trillion worldwide, of which consumer healthcare is growing in China and the US in 2021, with growth rates of 30% and 23% respectively. Our markets continued accelerated shifts towards digital healthcare. Impacts of the COVID-19 global pandemic include fluctuating demand, as consumers and retailers stocked up in the early stages of the pandemic, causing a subsequent reduction in demand and orders, impacting sales. Demand and supply patterns only normalize once inventory has sold through. Strained supply chains have resulted from production and logistics being heavily impacted by workers being unable to work due to illness or self-isolation requirements, and reduced capacity as a result of compliance with social distancing restrictions. New healthcare habits have emerged, as consumers learned to manage their minor ailments with home remedies or went without treatments, for example in the mouth ulcer category. Brands will need to re-engage with consumers about the benefits of treating, now that access to treatment is available again. E-commerce has seen consumers switch to purchasing through online retailers, with global e-commerce sales increasing 26.4% in 2020 and a further 16.3% in 2021. E-commerce now represents 19% of total retail sales, driven by the continued impact of the COVID-19 pandemic shifting consumer purchase patterns from traditional brick-and-mortar stores to online marketplaces like Amazon and retailer websites. Consumers are expected to continue to shop this way. Self-diagnosis has become common, as consumers turned to the internet to diagnose their health issues and find recommended solutions, relying less on healthcare professionals, who were often difficult to access. Emerging trends in sustainability show that consumers, retailers, and healthcare providers are increasingly choosing goods and services that promote a lower carbon footprint compared to alternatives. As a result, organizations, consumer healthcare brands, and their wider supplier network will need to demonstrate their commitment to the environmental agenda consistently and proactively in order to retain and grow their market positions. Relevance of the online channel per consumer healthcare product category includes vitamins and supplements, pain killers, wound care, gastrointestinal, eye care, heart health, cold remedies, cough relief, feminine hygiene, allergy, ear care, and sedatives or sleeping aids. The opportunity for Alliance is significant. Alliance is well-placed to meet the growing need for over-the-counter and self-selection healthcare products and services, with over 70% of revenues now generated from consumer healthcare products. With our established global operating platform, strong distributor and retailer relationships, and an increasing focus on product innovation and sustainability, we are positioned for growth. In 2021, approximately 25% of sales were through e-commerce. Our brand prioritization framework ensures investment and innovation are focused on the biggest perceived opportunities. In 2021, our key brand, Kelo-cote, delivered growth of more than 40%, driven by favorable category dynamics and the growing e-commerce channel, which now represents around 25% of group sales."
"We have implemented brand strategies needed to accelerate growth of Nizoral and Amberen in 2022. To support the growth of our e-commerce sales, we set up a dedicated team to lead our cross-border e-commerce activities and develop effective strategies to win in domestic e-commerce channels. We introduced new innovation processes, tools, and capabilities in 2021, resulting in a rapid expansion of our consumer healthcare innovation pipeline. This will be further enhanced in 2022 by creating a dedicated team and a meaningful increase in the development budget, designed to deliver breakthrough new product extensions and claims for our key brands globally. The acceleration in digital healthcare provision and e-commerce has cemented the increasing importance of healthcare brands having an effective digital strategy. In 2021, we launched a new digital excellence training program for our commercial teams, with plans to expand in 2022. We continue to strengthen our marketing investment to grow awareness of our key brands and build engagement to secure lifetime value. Our pharma heritage provides a strong foundation, leaving us well-placed to deal with the challenge of increased regulation impacting consumer healthcare products, such as medical devices facing increased regulation in Europe under the Medical Device Regulations. We continue to upskill our medical and regulatory capabilities to provide necessary support. As part of our wider sustainability initiatives, we recently kicked off a series of workstreams to help us reduce the carbon footprint of our packaging and will factor this thinking into all future innovation projects as well as apply best practices to our current packaging estate. E-commerce capability includes dedicated in-house resources with external domain expertise supporting interface with key online retailers such as Tmall, Alibaba, JD.com, and Amazon, supported by brand protection activities. Our business model works together to leverage our platform and maximize the value of our brands. Global marketing ensures consistency of promotion for each of our lead brands, with a global strategy and local implementation. Through our marketing excellence program, all our marketers are trained to deliver insight-led campaigns with tailored messaging to key customer groups. The platform we have created across EMEA, APAC, and AMER enables us to drive the growth of our existing brands and acquire and integrate new assets with ease. This is how we create value and execute our growth strategy. Key capabilities, expertise, and relationships that enable us to drive value creation are centered around our commercial activities and the brand-specific support functions that underpin these. Approximately 35% of our consumer healthcare revenues are now derived from e-commerce. Our commercial activities include a distributor network with relationships with an extensive network of distributors around the world, sales specialists located in key territories managing key accounts and partnering with distributors on e-commerce initiatives, and regulatory expertise with global capability and deep domain expertise across all categories of licensed medicinal products. Innovation and development capability includes dedicated in-house resources and a newly created team supporting key brands in the development of new line extensions. Medical and claims expertise is key to supporting our focus on clinically valuable products and essential to supporting our licensed medicines. Data generation supports core claims in key markets and the development of new claims while horizon scanning the evolving regulatory landscape. Supply chain management includes global sourcing and supply chain capability built up over 20 years with a mix of local and centralized resources and excellent relationships with around 60 contract manufacturing organizations, effective performance management, and ongoing programs to drive efficiency through cost of goods reduction. Our strategy enables us to progress towards our vision of becoming a leading international healthcare business and being both the partner and employer of choice. There are two core elements to our strategy: delivering organic growth from our key brands and engaging in selective, complementary acquisitions that can leverage our established infrastructure to enhance this growth. Underpinning these are our investment in people and sustainable business strategy. Our strategy enables us to deliver sustainable business growth through maximizing the value of our core consumer healthcare business, thereby increasing the number of people who can potentially benefit from our products. The primary driver of organic growth is our consumer healthcare portfolio. Our key brands, Kelo-cote, Amberen, and Nizoral, are well-established in their respective core markets, with strong claim sets and good clinical utility, enabling them to deliver real value to users. All target growing demographics, making them well-suited to digital marketing and e-commerce, and all offer good innovation opportunities too."
"Progress in 2021 included delivering a 430 basis point improvement in gross margin, including the first full year of Amberen, allowing for increased investment in marketing and innovation and development to accelerate future organic growth. We implemented a new cross-border e-commerce distribution agreement for Kelo-cote, enabling us to move closer to the customer and gain further control of our distribution chain. We rolled out a new innovation and development process, supported by a dedicated team, to develop and deliver an innovation pipeline for our key consumer brands. Priorities for 2022 include continuing our focus on innovation and development, with the first new products arising from this process expected to launch in 2022, extending our cross-border e-commerce platform in China to include additional brands through the creation of an Alliance multi-brand store, and realizing the growth potential from Amberen through increasing our focus on brand positioning, executing a new integrated marketing campaign, and starting to build an innovation pipeline for the brand to underpin its longer-term growth. Innovation and development at Alliance encompasses a broad range of activities aimed at creating value through new product development, new thinking, new therapeutic indications, and refreshing existing products to maintain consumer appeal. Our strategy is to acquire new products that meet our selective acquisition criteria and integrate these into the business efficiently to enhance our growth. The platform we have created across EMEA, APAC, and more recently the US, enables us to acquire and integrate new assets with ease. We continue to evaluate opportunities that meet our selective acquisition criteria to further develop our business, typically reviewing around 80 to 100 opportunities a year. Progress in 2021 included completing the Amberen integration, helping to increase our presence and develop our operating platform in the US, reviewing around 80 acquisition opportunities, of which three progressed to full evaluation, and reducing net debt by £22.4 million, with leverage falling from 2.43 times following the acquisition of Amberen in December 2020 to 1.73 times at 31 December 2021. Priorities for 2022 include continuing to identify, evaluate, and progress new opportunities that will deliver value to shareholders and help us achieve our growth ambitions, and maintaining the strength of our pipeline and funding capabilities in both debt and equity. E-commerce growth in the personal care category, which includes healthcare products, grew 18.4% in 2021 to reach $260 billion. This presents a significant opportunity for us to drive enhanced revenue growth. In 2021, we continued to take advantage of the change in consumer behavior by embracing e-commerce opportunities both locally and cross-border, with a particular focus on Kelo-cote in China. In August 2021, we entered into a new cross-border e-commerce distribution agreement for Kelo-cote, bringing us closer to the customer and giving us increased control of our distribution chain. Working with our partner, we launched Kelo-cote flagship stores on the China cross-border e-commerce marketplaces, Tmall and JD.com, to further accelerate top-line growth in this key market. The initial response has been very encouraging. In 2021, around 25% of group sales were e-commerce related, representing around one third of our total consumer healthcare sales. In addition to cross-border e-commerce sales, which remain a key focus, this also included sales in the UK and US through platforms like Amazon, Walgreens.com, and Boots.com. In 2022, in addition to optimizing our existing e-commerce sales channels, we plan to make a number of our other brands available to Chinese consumers through e-commerce platforms and expand our geographical presence on marketplace platforms in Southeast Asia, a region with high e-commerce growth. Global retail e-commerce revenues reached $4.9 trillion in 2021, with COVID-19 driving growth of 16.3%. Retail e-commerce sales now represent 19% of total retail sales, up from 17.9% in 2020. The development of our business in the US, the largest and one of the fastest-growing consumer healthcare markets in the world, has been a key strategic focus for us in recent years. Initiated with the acquisition of Vamousse in 2017, the Amberen acquisition in late 2020 brought pivotal growth. Throughout 2021, in parallel with the integration of Amberen, we have been strengthening our operating capabilities by redesigning our organization structure, bringing in new people, and upskilling existing colleagues to create a team who can both commercialize new products and manage growth. We have also migrated our US headquarters to new, larger premises to accommodate our growing team. Our aim in 2022 and beyond is to further exploit the platform we have established in the US through the inclusion of additional over-the-counter products."
"We expect to launch a number of new products and line extensions in the US over the next 12 to 18 months and continue to actively look for US acquisition opportunities to build on our strengths in this market. In 2021, we continued to strengthen our employee engagement by actioning findings from the 2020 Great Place to Work survey and ensuring that the employee base stayed connected, particularly through extended periods of remote working. We developed and implemented new, more flexible working arrangements based on insights gained from the Ways of Working survey, which we continued to run regularly throughout 2021 to check in on how employees were feeling, identify any issues or requirements for additional support, and inform our future plans. We ensured the effective integration of new employees joining our US business following the Amberen acquisition and put in place a global employee assistance program as an additional benefit for employees. We continued to develop and refine our recruitment and orientation processes and succession planning. Priorities for 2022 include actioning findings from the 2021 Great Place to Work survey, with five priority areas identified and local focus groups used to gain additional insight, continuing to test and refine our new ways of working to ensure this works successfully both at a business and individual level, continuing to bring new people into the business to ensure our resource capability continues to support our growth ambitions for 2022 and beyond, and progressing with the implementation of our new HR system, with scoping and planning already underway in 2021. We were delighted to achieve Great Place to Work certifications in the UK and in China again this year and also to be Great Place to Work certified for the first time in Singapore. Total headcount, including non-executives and fixed-term contractors, is 256, up from 246 in 2020. People are a key element of the Alliance mix. Our vision is to be the employer of choice. To achieve this, it is crucial that we continue to invest in our employees and recognize the changes and challenges to working patterns that have come about in response to the pandemic and respond accordingly. Our overriding objective is to ensure that our resourcing adequately supports the business's medium-term growth ambitions. Collaborative and inclusive culture, and the people who form part of it, continue to thrive. Employees by gender: Board and Senior Leadership Team (n=10), Senior managers (n=27), All employees (n=245). Male 80%, Female 20%. Male 74%, Female 26%. Male 42%, Female 58%. As at 31 December 2021. Defined as those running major divisions or departments, but not part of the executive team. Governance Additional Information Financial Statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview Strategic Report Key Performance Indicators. We set out here our key financial performance measures. These are the primary measures used by management to monitor business performance, both against short-term budgets and forecasts and longer-term strategic plans. Financial KPIs: £169.6 million, £137.5 million, £144.3 million, £124.0 million. 2021, 2020, 2019, 2018. See-through Revenue: £169.6 million, +23% (2020: £137.5 million). Underlying Profit Before Tax: £42.2 million, +26% (2020: £33.5 million). Free Cash Flow: £30.2 million, -12% (2020: £34.1 million). Underlying Basic EPS: 6.39 pence, +25% (2020: 5.11 pence). Leverage: 1.73x (2020: 2.43x). Dividend Per Share: 1.691 pence, +5% (2020: 1.610 pence). Net Debt: £87.0 million, -20% (2020: £109.4 million). These measures constitute Alternative Performance Measures, as defined in note 34 to the Financial Statements. Leverage is defined as: Adjusted net debt/enlarged Group EBITDA, calculated using pro forma EBITDA on a trailing 12-month basis for acquired entities, in line with our banking covenants. Underlying EBIT/Operating profit: £45.6 million, +24% (2020: £36.8 million). Underlying EBITDA: £48.6 million, +26% (2020: £38.6 million). Governance Additional Information Financial Statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview Strategic Report Key Performance Indicators continued. In addition to the financial KPIs detailed overleaf, we employ a number of other internal performance measures to enable the effective management of our business. Other internal performance measures: Other measures. We also employ a broad range of other measures to help us manage business performance, including but not limited to: Brand revenues, margins and contribution, by management region and having regard to brand prioritization for marketing investment and innovation. Measures around the level and nature of acquisition opportunities. Post-acquisition performance evaluation measures. On-time in-full delivery, out-of-stocks to ensure continuity of product supply."
"Inventory levels, provisioning and aging profile; trade receivables and payables levels and aging profiles (working capital management). We do not disclose the related metrics associated with these measures, on the basis that they are commercially sensitive and/or intended for internal use only. Revenue: Consumer Healthcare £121.8 million, +31% (2020: £93.0 million). Revenue: Consumer Healthcare as a percentage of total 72%, +4% (2020: 68%). Total GM%: 64.5%, +430 basis points (2020: 60.2%). Total headcount: 256, +0 (2020: 246). Defined as total number of employees on payroll as at 31 December. Sustainability: Further detail on our key sustainability metrics can be found on pages 22 to 33. Employee engagement: GPTW Trust Index rating: 76% (2020: 79%). Working capital management: Supplier payment days: 46 (2020: 52). Calculated as the month-end value of trade creditors relative to the trailing 12 months cost of goods, expressed as a days equivalent, averaged over the year. Governance Additional Information Financial Statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview Strategic Report Sustainability Overview. Sustainability working together to deliver sustainable business growth. Our approach. During 2021, we refined and formalized our approach to sustainability, under the direction of the newly established ESG Committee, creating our sustainability framework, developing actionable plans for each material area, and increasing our focus on environmental considerations, including climate change, metrics, and reporting. Our sustainability framework identifies the eight areas material to our business that we need to concentrate our efforts on to assure the long-term future of the business and to deliver on our Purpose – to improve the lives of consumers and patients through making available a range of clinically valuable healthcare products. We refer to these as our Areas of Focus. Environmental impacts – supply chain and logistics. People and human capital management. Packaging lifecycle management. Ethical sales practices. Product environmental health and safety. Supply chain management. Business ethics. Our contribution to the United Nations Sustainable Development Goals. The UNSDGs to which our business activities contribute are set out below. We believe we can contribute most value to Sustainable Development Goal 3 (Good Health and Wellbeing: Ensure healthy lives and promote well-being for all at all ages), as this aligns directly with our Purpose – to improve the lives of consumers and patients through making available a range of clinically valuable healthcare products. Further detail around how Alliance contributes to the UNSDGs can be found on our website. Delivering sustainable business growth. Product quality and safety. Governance Additional Information Financial Statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview Strategic Report Sustainability Overview continued. Overview of progress in 2021: Over the course of the year, we have formalized our approach to sustainability and strengthened our governance processes through the creation of a Board-level ESG Committee in February 2021. The committee works with the Senior Leadership Team and the corporate sustainability lead in the development and implementation of our sustainability strategy. Developed our sustainability framework; identifying then reporting against the key metrics underpinning this. We also mapped our sustainability disclosures and accounting metrics to the relevant elements of the Sustainability Accounting Standards Board standards for the first time, and will look to publish the results on our website in 2022. Published our Business Principles, together with our Anti-Bribery and Corruption Policy, Whistleblowing Policy, Anti-Modern Slavery Policy and Diversity, Equality, and Inclusion Policy. Concluded the implementation of our Know Your Supplier programme, with the improvements in supplier management now embedded as part of our business-as-usual processes. Engaged with our institutional investors, to better understand their requirements as regards ESG factors and sustainability, and the metrics and disclosures in which they are most interested to help shape our sustainability framework and strategy development. Worked with external consultants to quantify our Scope 1, 2 and 3 carbon emissions, as a precursor to the development of our carbon action plan and the setting of targets for carbon emissions reduction for both our direct and indirect emissions. Kicked off a sustainable packaging programme in Q4 2021 to develop and implement a fit for purpose strategy for packaging lifecycle management across our portfolio. Established a Sustainability Forum in Q4 2021, comprising a group of employees who will work with the corporate sustainability lead to identify and deliver small-scale sustainable change initiatives across the business. This has initially been focused on our UK operations, with wider regional participation planned for 2022. Evolved our corporate website to include a dedicated section on sustainability to act as a repository for our sustainability content going forwards."
"Our priorities for 2022: We have made good progress with our sustainability initiatives in 2021, however we recognize that this is a journey and there is still much to do – particularly as the reporting and assurance requirements around ESG, and related sustainability considerations, continue to evolve. Sustainable packaging. Awareness of environmental issues is becoming more widespread, with consumers and retailers increasingly choosing products that support a lower carbon footprint. We recognize that single-use plastics and packaging recyclability are an increasing concern for consumers. In 2022 we will be undertaking an extensive review of all our packaging componentry, across our portfolio and supply chain, to inform the development and focus of our sustainable packaging strategy with a view to establishing and communicating clear targets in this area. Unlike some consumer goods categories, where packaging changes can be implemented relatively quickly with limited hurdles, in the healthcare market, particularly with regards to pharmaceutical products, any change in packaging materials cannot be made without a variation to the product license, which in the case of changes to primary packaging, requires the generation, submission and approval of supporting stability data. With this in mind, in 2021, we created a Sustainable Packaging programme team, to work towards the reduction of single-use plastics and increasing the use of Post-Consumer Recycled materials across our portfolio. Going forwards, all new product developments will require full consideration and review of packaging components to ensure the final presentation is aligned with the sustainability targets we set. Governance Additional Information Financial Statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview Strategic Report Sustainability Overview continued. In 2022, our focus will be on: Continuing to develop our environmental strategy and our response to climate change. We have committed to achieve carbon neutrality for our 2021 Scope 1 and 2 emissions in the UK in 2022 through the use of sequestration schemes. We will also be increasing our levels of engagement with our contract manufacturing organizations and logistics partners to better understand their carbon footprints and emissions reduction strategies and the implications these have on our end-to-end carbon footprint; actively looking for opportunities to reduce the Scope 3 carbon emissions in our supply chain as part of our overall carbon reduction plan. Developing and implementing a sustainable packaging strategy, together with appropriate targets and delivery plan. Continuing to evolve our data collation and reporting capabilities – particularly around the composition of our product packaging and to support the quantification of our Scope 3 emissions. Developing suitable performance metrics and targets for those areas of our Framework where none exist currently, which we can use as a basis for measuring our progress in future years. This will include carbon reduction targets aligned with the Science Based Targets Initiative and targets around the sustainability of our product packaging. We intend to publish emissions reductions targets in late 2022 for Scopes 1 and 2 and are aiming to set Scope 3 targets in 2023. Progressing towards full disclosures in line with the Task Force on Climate-related Financial Disclosures recommendations for 2022. Continuing to improve the assurance framework around our ethical business practices, to ensure that both our suppliers and distributors continue to operate their businesses ethically and in line with all relevant regulatory requirements. Continuing to develop the sustainable business content held on our website, the transparency of our disclosures around how we operate as a business, and where we are focusing our efforts to ensure we remain sustainable over the longer term. Progressing ideas generated through the Sustainability Forum and other small-scale initiatives, both in the UK and across our regional offices. Our approach to each of the Areas of Focus identified in our Sustainability Framework, together with key metrics, our progress and achievements in 2021, and our priorities and focus for the coming year, are set out on pages 28 to 31. What has become increasingly evident to us, particularly in the context of our response to wider societal challenges such as climate change, is the importance of working collaboratively – both within our own business and with our suppliers, logistics partners, distributors, and other stakeholders, if we are to make meaningful progress. This is particularly true for carbon emissions, given that a significant majority of our Scope 3 emissions originate within our supply chain and logistics activities, where our ability to directly control emissions is limited. More information can be found on our website. Environmental considerations."
"Working together with our suppliers, logistics partners, distributors and other stakeholders will be key to the delivery of our environmental strategy, as we all seek to address common challenges around climate change. Governance Additional Information Financial Statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview Strategic Report Sustainability Performance. Product quality and safety. Ethical sales practices. Business ethics. What it covers. Why it is important. Focus for 2022. 2021 Overview. Ensuring we have robust quality assurance systems in place to ensure the quality and safety of our products and to mitigate the supply of counterfeit product. Ensuring the claims made by our products can be properly substantiated and that we maintain ethical business practices in the marketing, advertising, and selling of our products. Modern slavery, bribery and corruption, ethical considerations around our interactions with healthcare professionals and the pursuance of other ethical business practices. Maintaining consumers and patients trust in the quality and safety of our products is essential to the maintenance of our corporate reputation and our ability to successfully market our products. Ensuring the accuracy and appropriateness of promotional materials and the claims made by our products is key to maintaining consumers and patients trust in our brands. We are committed to operating our business in an ethical and responsible way, ensuring that we have appropriate policies in place, that employees are properly trained on them and that appropriate escalation routes exist for non-compliance. Continuing to assure the quality and safety of our products through our rolling, risk-based programme of supplier quality audits. Continuing to ensure that the systems and processes we have in place to ensure the accuracy and appropriateness of promotional materials remain fit for purpose and that our internal control systems continue to operate effectively in order to minimize the risk of non-compliance. Obtaining written confirmations from our contract manufacturers and suppliers that they comply with our ethical standards. Supplier audits carried out: 9. Representing 67% coverage of our supplier base on a rolling 3-year average basis. Number of external regulatory inspections Alliance operating companies have been subject to: 7. No enforcement actions were taken by Competent Authorities in response to non-compliance with appropriate manufacturing and regulated standards in 2021. Routine internal audit assessments carried out: 22. Internal audit assessments are carried out on a periodic basis to ensure the robustness of our promotional review procedures. Coverage is targeted at a constant 10% of total promotional pieces approved per annum. Actual coverage in 2021 was 4.5%, down from 9.4% in 2020. No upheld complaints were made to the ABPI, PAGB, FTC, NAD, or other Codes of Practice bodies regarding promotion of Alliance products, where Alliance is directly responsible for promotion in 2021. Online course completions: 1,407. We now have approved escalation procedures in place to work with any supplier who does not meet our ethical standards, with defined timelines for remediation and provision for eventual termination of the relationship, where issues are not satisfactorily resolved. In 2021, the total amount of monetary losses we incurred as a result of legal proceedings associated with bribery, corruption and other unethical business practices was nil. Calculated as the total number of suppliers audited over the 3 years from 2019 to 2021, divided by the number of active suppliers as at 31 December 2021. Vinciworks is a suite of online training modules covering anti-bribery, anti-money laundering, competition law, GDPR, market abuse, Modern Slavery Act, sanctions and the prevention of tax evasion. Governance Additional Information Financial Statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview Strategic Report. What it covers. Why it is important. Focus for 2022. 2021 Overview. Ensuring our products are made with environmentally friendly ingredients; identifying and eliminating substances of very high concern from our products – and ensuring we have a robust process in place to identify and manage emerging materials and chemicals of concern. Reducing the environmental impact of our product packaging, through reducing packaging volume and weight, increasing the use of recycled materials, and ensuring that as much of our packaging as possible is made from materials that can be recycled, reused and/or composted. We are committed to operating our business in a way which minimizes the impact on the natural environment – this means ensuring that our products are made with environmentally friendly ingredients and do not contain materials and chemicals of concern."
"We are committed to operating our business in a way which minimizes the impact on the natural environment – reducing the environmental impacts of our product packaging is one way of achieving this. Reducing packaging volume and weight will also reduce the environmental impact of transporting products to consumers. Continuing to ensure that our processes for identifying and managing emerging materials of concern remain fit for purpose and that any REACH SVHCs are eliminated from our products on a timely basis. Progress the creation and implementation of a sustainable packaging strategy, including the creation of a roadmap for the associated workstreams which feed into this and the setting of targets and defining our level of ambition. Packaging sustainability will now be factored into all Innovation and Development projects at the design stage, and we will be looking to embed this thinking into brand strategies more widely going forwards. We have established environmental scanning processes to identify and manage emerging materials and chemicals of concern as soon as we become aware of these, reformulating products where necessary, in order to ensure that we are able to stay compliant with new regulations as they emerge. In Q4 2021, we set up our Sustainable Packaging programme to develop and implement a fit for purpose strategy for packaging lifecycle management. This will enable us to address usage and waste across our packaging estate at a holistic level, reducing or removing unnecessary elements of our packaging, changing its composition, replacing less sustainable materials, such as single-use plastics, with more sustainable alternatives, increasing the use of recycled content and/or making packaging easier to recycle or biodegradable. Sustainability Performance continued. Product environmental health and safety packaging lifecycle management. REACH stands for Registration, Evaluation, Authorisation and Restriction of Chemicals. Governance Additional Information Financial Statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview Strategic Report. People and human capital management. This covers a wide range of social factors, including diversity and inclusion, culture and employee engagement, working conditions, reward structures, training and development, and opportunities for progression. Investing in People is one of the core elements of Alliance’s strategy. As such, the recruitment and retention of high-quality and highly motivated employees is what lies at the heart of our business success. Analyzing and actioning key findings from the Great Place To Work survey, with focus groups planned for H1 2022. Continuing to invest in our capability development and the recruitment and onboarding processes which support this, including the roll-out of a new graduate training scheme. Continuing to refine our ways of working to ensure our new hybrid model is working effectively across all areas of our business. Additional information on how we invest in our people is provided on page 22 and on our website. Non-underlying items in the year principally comprise amortization charges for prescription medicines and certain other brand assets, impairment charges identified as a result of the annual impairment review, a provision of £7.9 million in relation to the Competition and Markets Authority decision, and restructuring costs relating to the closure of our offices in Milan and Los Angeles. For the prior year, non-underlying items comprised amortization and impairment charges, together with costs relating to the Amberen acquisition. Further detail on non-underlying items is provided in note 5. Reconciliation of underlying to reported profit before tax for the year ended 31 December 2021 shows underlying profit before taxation of £42.2 million compared to £33.5 million in 2020. Non-underlying items include amortization of acquired intangibles of £7.2 million, impairment of intangible assets and goodwill of £6.2 million, CMA provision of £7.9 million, restructuring costs of £2.4 million, and other costs of £0.4 million. Acquisitions costs for Biogix Inc. (Amberen) were not applicable in 2021 compared to £1.3 million in 2020. The total non-underlying items amounted to £24.1 million compared to £20.5 million in 2020. Reported profit before taxation was £18.2 million compared to £13.0 million in 2020. The underlying tax charge for the year was £8.0 million compared to £6.4 million in 2020, which equates to an effective tax rate of 19.0%, the same as in 2020. The total tax charge for the year was £10.8 million compared to £5.0 million in 2020, equating to an effective tax rate on reported profits of 41.6% compared to 38.3% in 2020, and includes a £5.0 million charge following the increase in the UK tax rate from 19% to 25%. This charge relates primarily to an increase in the deferred tax balances on intangible assets."
"Underlying basic earnings per share, the measure used by the Board in assessing earnings performance, was 6.39 pence, an increase of 25% on the prior year compared to 5.11 pence in 2020, reflecting the increase in the Group’s underlying profit after tax offset by a modest increase in the number of shares in issue. Reported basic earnings per share decreased by 9% to 1.37 pence compared to 1.51 pence in 2020 due to the greater impact that non-underlying items had on reported earnings in the year versus the prior year. The Board is pleased to announce that it is proposing a final dividend payment of 1.128 pence per share for 2021, an increase of 5% on the final dividend payment for 2020, taking the total dividend payment for the year to 1.691 pence compared to 1.610 pence in 2020. The Board will continue to assess the level of future cash distributions having regard to overall business performance and future outlook. The final dividend for 2021, subject to approval at the Company’s AGM on 18 May 2022, will be paid on 7 July 2022 to shareholders on the register on 10 June 2022. Intangible assets increased by £0.8 million in the year to £413.7 million compared to £412.9 million on 31 December 2020. Following the successful deployment of Microsoft Dynamics D365 into the business in mid-2021, we conducted a review of the associated capitalized project costs, and as a result have transferred these capitalized costs, amounting to £15.0 million, from property, plant, and equipment to intangible assets in line with the deployment of the live system into the business. These additions have effectively been offset by underlying amortization charges of £1.4 million, non-underlying amortization charges of £7.2 million, and non-underlying impairment charges of £6.2 million; the remaining balance being due to exchange rate movements and a £0.2 million true-up for working capital relating to the Amberen acquisition. Net working capital at 31 December 2021 was £22.0 million, an increase of £2.7 million on that at the start of the year compared to £19.3 million on 31 December 2020, primarily reflecting movements in payables and receivables balances. Inventories, net of provisions, reduced £1.8 million to £21.1 million at 31 December 2021 compared to £22.9 million on 31 December 2020. This reduction was caused by the partial unwinding in the first half of 2021 of the higher inventory levels built up during 2020 in order to mitigate against any disruption to our supply chain following the UK’s departure from the EU, and to ensure continuity of supply through the pandemic. Receivables increased by £5.7 million, reflecting both the increase in revenues and the timing of sales and cash receipts in the second half of the year versus the equivalent period in 2020. Payables increased by £1.2 million, reflecting the phasing of invoices and payments around the year end, with a £2.8 million reduction in trade payables being more than offset by a £3.8 million increase in accruals and deferred income. In the year, the Group created provisions totaling £9.5 million as at 31 December 2021 compared to £Nil on 31 December 2020, £7.9 million of which relates to the CMA decision, the remainder, £1.6 million, being a provision for restructuring costs. Free cash flow for the year remained strong at £30.2 million compared to £34.1 million in 2020, with second half cash flows being significantly stronger than first half cash flows, reflecting both the reversal of the favorable movements in net working capital seen at the end of 2020 during the first half of the year, and the timing of sales in the second half. Cash generated from operations decreased by 3% to £44.9 million compared to £46.4 million in 2020. As a result, net debt reduced by £22.4 million to £87.0 million at 31 December 2021 compared to £109.4 million on 31 December 2020, with Group leverage reducing to 1.73 times compared to 2.43 times on 31 December 2020. We expect our cash generation to remain strong in 2022, and for leverage to reduce below 1.5 times by the end of the year, in the absence of further acquisitions. The Group’s operations are financed by retained earnings and bank borrowings, with additional equity being raised on a periodic basis to part-fund larger acquisitions. Borrowings are denominated in Sterling, Euro, and US Dollars. Group risk management policy is to hedge up to 75% of estimated future foreign currency EBITDA exposure for up to the next 18 months at any point in time."
"The Group uses forward foreign exchange contracts to implement this policy, which are generally designated as cash flow hedges. The Group benefits from a £165 million Revolving Credit Facility and a £50 million Accordion Facility, expiring in July 2024. This facility provides flexibility for the Group to pursue its acquisition strategy over the next couple of years to complement future organic growth. £48 million of this RCF, together with the whole of the accordion facility, remained unutilized as at 31 December 2021. The cash generated from our trading operations is applied as follows: in reinvesting in our current portfolio of brands, with investment being primarily targeted at our larger Consumer Healthcare brands; in acquiring new Consumer Healthcare brands to complement our existing portfolio and leverage our operating platform; in paying down debt; and in paying dividends to our shareholders. We are already starting to see the business benefits from our ERP system, which went live in the first half of 2021, representing the culmination of a significant period of investment and cross-functional team effort in scoping, design, development, and implementation activities. Used by our operations and finance teams around the world, the system has enabled us to simplify, standardize, and automate business processes across the Group. Due to the high level of preparation work undertaken pre-implementation, the changeover from old to new systems was virtually seamless. During the year, the Board reviewed the principal risks and uncertainties facing the Group and continues to focus on those which could threaten the sustainability of our business model, our reputation, future performance expectations, or in extreme cases, the solvency or liquidity of our business. The links between our principal risks and uncertainties and our strategy are set out in the table on pages 40 to 45. Principal risks are assessed on a residual basis according to our current view of their potential severity, being the combination of impact and likelihood, and assuming that existing plans for mitigation are, and remain, effective. The current positioning of each of our principal risks, based on our assessment of their residual impact and likelihood, is shown in the graph to the right. The identified risks are not intended to be an exhaustive list of all the risks the Group faces but are the principal risks and uncertainties which the Directors believe include all known material risks in relation to the Group and the markets and industry within which we operate. The environment in which we operate is constantly evolving and can be affected by events that are outside of our control and which may impact on us both operationally and financially. New risks may emerge, the potential impact of known risks, including how quickly they escalate, and/or our assessment of these risks may need to change. For 2021, we have recognized a new emerging risk in relation to climate change. In addition to the matters set out in the coming pages, and as announced by the Group on 3 February 2022, the UK’s Competition and Markets Authority announced its finding that four companies, including Alliance, had infringed competition law in relation to the sale of prescription prochlorperazine. The Directors fundamentally disagree with the CMA’s finding. The Group believes that it has a strong case and will be appealing the CMA’s decision and the proposed fine of £7.9 million at the Competition Appeal Tribunal, which is expected to be heard in late 2022 or early 2023. The Group continues to engage with its expert external legal team to prepare a robust and effective appeal against these allegations. Risk description and relevance include organic growth, innovation and competition, inorganic growth through acquisitions, product safety, supply disruption, business systems, cybersecurity, people, supply chain management, product regulations, legal and compliance, foreign exchange, and pandemic, geopolitical and worldwide risks. Devices, food supplements, and cosmetics have inherent risks that some of these products could cause adverse reactions. Products may have to be withdrawn from sale, and we may have legal liability to those injured by the product, potentially damaging our reputation and compromising our future performance. In an extreme scenario, this could impact our liquidity position or even solvency. We have a dedicated in-house quality function that carries out regular supplier audits. Adverse event reporting and signal management for all medicine products show that generally, the Group’s products are well-tolerated, and many have been in existence for decades."
"We maintain necessary regulatory approvals for all products in the markets we trade in and have public and products liability insurance to provide an appropriate level of protection for the company. Supply disruption can occur due to our inability to procure critical ingredients, for example, due to geopolitical events, logistics failures, or reliance on a single site of manufacture. Manufacturing, sourcing, or distribution issues, including an inability to increase production volumes to meet demand, can impinge on our potential sales and compromise our future performance and, in an extreme scenario, cash generation. We maintain close working relationships with our key suppliers to ensure we have early visibility of any potential issues. We ensure we maintain adequate stocks of critical ingredients and finished goods to cushion the impacts of any disruption in the supply chain. We forward book transportation to minimize the impacts of any disruption to logistics provision, for example, due to geopolitical and economic events. We put in place dual sourcing arrangements for key products to mitigate against manufacturer failure or inability to supply to meet sales demand. Where possible and cost-effective, the potential financial impact of supply chain disruption is mitigated by insurance. Principal risks and uncertainties continued. Risk has increased versus last year. Risk has reduced versus last year. Risk has not changed materially since last year. Organic growth is key brand potential. Complementary acquisitions. Investing in people. Acting responsibly. Links to strategy: trends, governance, additional information, financial statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview. Strategic Report. Operational risks continued. Risk description and relevance. Potential impacts. Key mitigating activities. Trend. Business systems failure to maintain and develop business systems and technology which adequately supports business processes, organizational infrastructure, and strategic growth ambitions, and enables us to manage any business continuity risk from unforeseen events. The business is highly dependent on multiple IT systems, and systems failure as a result of a business continuity event could have a significant impact on the business’s ability to continue to operate effectively. Loss of income or late market reporting as a result of a business continuity event causing loss of access to key resources, systems, and/or data could also potentially result in compliance failure, loss of control, and an inability to trade. Quality of data degrades as a result of not effectively managing data shared across multiple systems, leading to poor decision-making and increased transactional errors. The successful implementation of the ERP system has improved the internal control environment. Improved change control and change management processes better protect the integrity of our master data. An IT steering group is in place to maintain oversight of core systems and lead on changes required as a result of systems development or regulatory changes. Business continuity plans are in place and under regular review. Cyber security risk that the integrity, confidentiality, and availability of our data and third-party information which we hold is compromised through cyber-attacks. We hold significant amounts of confidential data relating to our products, our commercial activities, our financial transactions, and all other aspects of our business operations in electronic format, making it susceptible to being compromised through cyber-attacks. We also hold significant amounts of confidential data on our customers and employees, some of which is collected via our transaction processes, and so includes their financial information in addition to other personal data, which is similarly at risk of loss, corruption, or unauthorized dissemination as a result of a successful cyber-attack. There is a reputational impact if we suffered a major loss of personal data as a result of a successful cyber-attack. Financial loss, data loss, or reputational damage could occur due to fraud perpetrated through a successful social engineering attack. Financial transactions could be rerouted fraudulently because sensitive transactional data is given away. Data destruction or ransom could result from a malicious link being clicked. We use anti-virus software, firewalls, and network segmentation. We ensure all business software remains up to date to provide additional in-built security. We implement and review incident management, business continuity, and IT disaster recovery plans. We maintain appropriate physical and cyber-security measures to prevent unauthorized access to information. We provide training and alerts to staff to ensure that they are aware of known risks. We engage third parties to review and recommend ongoing improvements to enhance IT security and resilience. Principal risks and uncertainties continued. Risk has increased versus last year. Risk has reduced versus last year. Risk has not changed materially since last year."
"Organic growth is key brand potential. Complementary acquisitions. Investing in people. Acting responsibly. Links to strategy: trends, governance, additional information, financial statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview. Strategic Report. Operational risks continued. Risk description and relevance. Potential impacts. Key mitigating activities. Trend. People failure to attract and retain sufficient high-quality people to deliver the business’s strategic growth ambitions. By virtue of its business model, Alliance has a high level of reliance on the skills and knowledge of its employees, many of whom have considerable sector experience or other specialist expertise, making them attractive to competitors and not always easy to replace. As the business continues to scale and expand its geographic presence, our requirements for high-caliber people continue to increase. The loss of key employees could potentially weaken the Group’s operational and management capabilities, potentially impeding its ability to grow. Loss of continuity and knowledge as a result of employee replacement could lead to operational inefficiencies. There may be a potential lack of required skills and expertise to support the continued growth of the business, its systems, procedures, and processes. We maintain competitive incentive and reward structures that remain attractive to existing employees and enable us to continue to attract high-quality applicants for new roles. Clearly defined roles and responsibilities are supported by documented systems and procedures to provide a level of continuity in the event an employee leaves the Group. We maintain relationships with a number of international and local recruitment agencies to ensure we can find and recruit good quality employees. We maintain a balance between permanent and contract heads to increase flexibility, particularly for project-based work. Supply chain management. The increasing globalization of our supplier base as a result of recent acquisitions has served to increase our exposure to risks around environmental, health and safety, business ethics, supply chain security, and climate, and increases the risk of failing to maintain sufficient oversight of our end-to-end supply operations associated with these areas. This is potentially a significant risk for Alliance, as our outsourced supply model has historically afforded only limited visibility of our end-to-end supply chain. Potential reputational damage, loss of product supply, and loss of revenues could result from failure to maintain sufficient oversight of our end-to-end supply operations. The implementation of our Know Your Supplier program, partnering with a market-leading data analytics provider, aims to improve the visibility of potential red flags in our supply chain. This enables us to align compliance and escalation processes to facilitate timely remediation of issues. Our Know Your Customer program bolsters our customer qualification and approval processes. Compliance risks. Risk description and relevance. Potential impacts. Key mitigating activities. Trend. Product regulations risk of non-compliance with product classification regulations and registration requirements, including relevant internal and external quality regulations and requirements, across all territories in which our products are manufactured and/or sold. Product regulations are continually being updated, new requirements introduced, or product classifications changed. In a number of territories, our product registrations are maintained by local distributors to comply with local regulatory requirements, creating an added layer of complexity. Some of our products may not gain regulatory approval or could face the risk of having their regulatory status challenged or adversely altered. This could affect the Group’s ability to launch new products or maintain sales of its current products in current jurisdictions or pursue further geographic expansion. Non-compliance with product classification regulations or registration requirements may result in a product having to be withdrawn from the market, with a consequential loss of sales. If compliance issues cannot be remediated, this could lead to cessation of product supply or limitation of market opportunities. We allocate sufficiently experienced internal resources to support the regulatory approval of products, including any extensions to other markets. We maintain regular discussions with local regulatory advisers to monitor any products that may be subject to challenge. Principal risks and uncertainties continued. Risk has increased versus last year. Risk has reduced versus last year. Risk has not changed materially since last year. Organic growth is key brand potential. Complementary acquisitions. Investing in people. Acting responsibly. Links to strategy: trends, governance, additional information, financial statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview. Strategic Report. Compliance risks continued. Risk description and relevance. Potential impacts. Key mitigating activities. Trend. Legal and compliance risk of non-compliance with relevant laws and regulations in all countries in which we operate, including anti-corruption laws, data privacy laws, competition laws, accounting, taxation, and listing regulations."
"As the scope and scale of our business operations increases, we face an increasingly complex compliance burden. The level of legal and regulatory requirements to which we are subject continues to increase, and so do the penalties for non-compliance, making it vital that we effectively manage all the various aspects of our compliance risk. As we enter new territories and overseas markets, we become exposed to increased bribery, anti-slavery, and corruption risks. Likewise, as the Group expands its operations, the VAT and general tax environment in which it operates becomes more complex, and the risk of incorrectly reporting and paying relevant taxes increases. The Group has ongoing regulatory requirements, such as pharmacovigilance, which could, if not adhered to, lead to substantial fines and impact the Group’s ability to sell certain products. We may incur penalties for non-compliance as a result of adverse findings from regulatory inspections, which may potentially impact the sales of our products and damage our brands and reputation. Bribery, anti-slavery, and corruption all carry their own penalties and reputational damage. A failure to abide by data protection rules or incur a breach of data security could also pose a financial and reputational risk to the Group. Breaches of VAT and taxation rules also carry a risk of interest and penalties becoming payable. An infringement decision by the CMA relating to an alleged anti-competitive agreement could lead to a fine of up to £7.9 million if the Company’s appeal is not successful. We maintain continuing oversight of corporate compliance by an in-house company secretarial function. The introduction of the new ERP system will assist with supply chain management and VAT reporting. Training is made available to all employees on anti-bribery, anti-money laundering, competition law, market abuse, modern slavery, sanctions, tax evasion, and GDPR. We engage third-party experts in our overseas territories to help ensure compliance with local rules and regulations. A wide-ranging induction process for new starters ensures they understand their individual and the Group’s obligations in relation to matters such as adverse event reporting. A notice of appeal against the infringement decision will be filed. Ongoing work with an expert legal team ensures that the Company’s appeal is as robust and effective as possible to give the company the greatest chance of succeeding. Financial risks. Risk description and relevance. Potential impacts. Key mitigating activities. Trend. Foreign exchange risk movements in foreign exchange rates adversely impact financial performance. The Group earns a proportion of its revenues and profits in currencies other than Sterling, principally Euros, US dollars, and Hong Kong dollars, but accounts for the business in Sterling. The reporting of revenues and profits is therefore subject to volatility due to changes in exchange rates. Due to the acquisition of Biogix, which earns revenues and profits in US dollars, this risk has increased since last year. The change in CBEC distributor in 2021 has increased the Group’s exposure to Hong Kong dollars. Adverse movements in Sterling exchange rates versus Euro, US dollar, Hong Kong dollar, and other currencies could occur. The Group’s funding structure, with borrowings denominated in Sterling, Euros, and US dollars, provides a natural hedge to some of these exposures. The Group has a risk management policy to hedge up to 75% of its estimated future foreign currency EBITDA exposure for up to 18 months at any given point in time. The Group uses forward foreign exchange contracts to implement this policy, which are generally designated as cash flow hedges. Principal risks and uncertainties continued. Risk has increased versus last year. Risk has reduced versus last year. Risk has not changed materially since last year. Organic growth is key brand potential. Complementary acquisitions. Investing in people. Acting responsibly. Links to strategy: trends, governance, additional information, financial statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview. Strategic Report. Other risks. Risk description and relevance. Potential impacts. Key mitigating activities. Trend. Pandemics, geopolitical, and other worldwide events. In common with most other businesses, we will always be at risk from extreme and unexpected global events affecting our ability to operate. This could be an event that affects our people, our operational sites, our IT systems, or any other aspect of our business operations. This was the case with the COVID-19 pandemic, which surfaced in 2020 and is now being managed in accordance with the latest guidance and advice. More recently, the escalation of geopolitical events in Europe could cause supply chain disruption within the business and subject us to economic uncertainty."
"A reduction in revenues or profitability and/or failure to achieve expected growth could occur due to reductions in demand or potential supply issues. Any significant impact on the Group’s revenues and profitability could potentially affect the Group’s ability to comply with its borrowing covenants. Pressure on sourcing and supply chain could lead to an increase in the cost of transportation, raw materials, and goods in general, and a reduction in the availability of certain materials, both of which could impact profitability. Increased costs and reduced demand for goods due to weaker economic growth and higher inflation could occur. General inflationary pressures being experienced by the wider business community will lead to increased pressure on workforce costs and rewards, which in turn could impact profitability. We regularly review and update demand forecasts to understand and mitigate any potential adverse effects on revenues, supported by our recently improved sales and operations planning processes. We maintain close working relationships with suppliers and distributors and ongoing monitoring for any signs of distress. We keep abreast of global events and economic conditions in the territories we operate to ensure risks are monitored accordingly. Emerging risks. Risk description and relevance. Potential impacts. Key mitigating activities. Trend. Environmental climate change risk to the longer-term viability of the business due to the impacts of environmental and climate change, both the direct impacts, such as the severity and frequency of adverse weather events and rising sea levels, and the indirect impacts, such as higher energy costs and infrastructure funding, which are likely to become increasingly prevalent as we transition to a low-carbon economy. These have yet to be determined. Increased business focus on environmental strategy and associated risks. Engagement of third-party expert support. Creation of TCFD roadmap and emissions reduction targets. Principal risks and uncertainties continued. Risk has increased versus last year. Risk has reduced versus last year. Risk has not changed materially since last year. Organic growth is key brand potential. Complementary acquisitions. Investing in people. Acting responsibly. Links to strategy: trends, governance, additional information, financial statements. Alliance Pharma plc – Annual Report and Accounts 2021. Company Overview. Strategic Report. Governance. Chairman’s introduction. Board of directors. Governance. Nomination committee report. Audit and risk committee report. Remuneration committee report. ESG committee report. Task force on climate-related financial disclosures. Directors’ report. Alliance Pharma plc – Annual Report and Accounts 2021. Governance. Company Overview. Strategic Report. Additional information. Financial statements. Good governance practice continues to remain a priority for the Board as we continue to work together to deliver value to our shareholders. Chairman’s introduction. Dear shareholders and colleagues, a warm welcome to this year’s report on governance where I, as your Chairman, provide an overview of the Group’s governance arrangements. The Board believes governance is central to delivering on our strategy and helps ensure the successful operation of our business. Last year, in adapting to life with the pandemic, we were able to build a stronger, more connected, and resilient business. As we all settle into a world where the pandemic seems to be very much a part of life, the business likewise has adapted and responded to support its customers, suppliers, employees, and shareholders. The safety, health, and wellbeing of our employees continue to be of paramount importance, and we have further improved our technology and infrastructure to provide safe ways of working, thereby keeping disruption to a minimum. Following the acquisition of Biogix Inc., the business has worked hard on integration and continues to build strong foundations to ensure it can grow its consumer healthcare portfolio. In April 2021, Nigel Clifford resigned from the Board, and following a rigorous search and recruitment process, we were pleased to welcome Kristof Neirynck as a non-executive director on 1 December 2021. Kristof brings with him his experience in international consumer healthcare, marketing, digital transformation, and innovation. Further information about Kristof can be found in his biography on page 49. As a company admitted to AIM, our governance is underpinned by the Quoted Companies Alliance Corporate Governance Code 2018. During the year, we have complied with the principles of the QCA Code, and details of how we have done so can be found in the governance section of the Company’s website. The sustainability agenda continues to be progressed by the business with oversight from the newly formed ESG Committee. You can read more about the work of the Committee on page 76. This year’s AGM will be held at 10:00 AM on 18 May 2022."
"Further details can be found in the Notice of AGM accompanying this report. The Board would like to thank all shareholders and colleagues for their continued support, and we look forward to continuing with our good work during 2022. David Cook, Chairman, 30 March 2022. Alliance Pharma plc – Annual Report and Accounts 2021. Governance. Company Overview. Strategic Report. Additional information. Financial statements. Board of Directors. David Cook, Independent Non-executive Chairman. David joined the Board of Alliance as a Non-executive Director in 2014 and was appointed Chairman of the Board on 1 March 2018. David graduated in Chemistry at the University of Oxford and is a Chartered Accountant. He is currently Chief Financial Officer and an Executive Director of Ellipses Pharma, an international cancer drug development company, and was previously Chief Financial Officer and Chief Business Officer of Biotie Therapies Corp, a drug development company quoted in Helsinki and on NASDAQ. He has previously held senior financial positions with Jazz Pharmaceuticals International, EUSA Pharma, and Zeneus Pharma. David has extensive experience in financial and general business management. We are including the implementation of buy and build strategies in the life sciences sector, financing those businesses and managing investor relations across a number of stock markets globally. Experience Peter Butterfield, Chief Executive Officer Andrew Franklin, Chief Financial Officer Peter was previously the Company’s Deputy Chief Executive Officer and was appointed to his present office as Chief Executive Officer on 1 May 2018, having joined Alliance in 2010 as an Executive Director. Andrew joined Alliance in September 2015 from Panasonic Europe Ltd, where he was General Manager, European Tax and Accounting. Peter holds an honours degree in Pharmacology from the University of Edinburgh. Andrew holds an honours degree in Civil Engineering from the University of Wales, Cardiff. Peter has over 20 years of experience in the life sciences sector and strong leadership experience gained in a variety of contexts. Peter joined the Board of Alliance in 2010 with the acquisition of Cambridge Laboratories, where he spent five years, latterly as UK Commercial Director. Prior to joining Cambridge Laboratories, Peter spent six years at GlaxoSmithKline in a variety of marketing and sales roles. From 2010 to 2012, Andrew was Finance Director and Company Secretary of Genzyme Therapeutics Ltd, the UK and Ireland subsidiary of Genzyme Corporation. Prior to that, he gained 12 years of pharmaceutical experience with Wyeth in a variety of senior financial positions. Andrew is a Fellow of the Institute of Chartered Accountants in England and Wales with extensive experience in financial management of international businesses, including significant prior experience in life sciences companies. Committee membership View the Nomination Committee Report on page 56. Audit and Risk Committee Committee Membership Key Nomination Committee ESG Committee Remuneration Committee Committee Chair View the ESG Committee Report on page 76. Alliance Pharma plc – Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Board of Directors continued Richard joined Alliance as a Non-executive Director on 1 January 2019. Jo joined Alliance as a Non-executive Director on 1 January 2019. Richard has a degree in Engineering from Newcastle University and is a Chartered Accountant. Jo graduated in Natural Sciences from Cambridge University and is a Chartered Accountant. Richard is Chief Financial Officer at Medica Group PLC, the UK’s leading teleradiology provider. Prior to this, he was CFO and a Board member of US listed Mereo BioPharma Group PLC, a biopharma company developing a range of products in bone, endocrine and respiratory therapies with a focus on rare diseases. Richard joined Mereo from UK AIM listed Shield Therapeutics plc, where he was CFO and Company Secretary from early 2011, having initially joined the Board as a Non-executive Director in 2010. At Shield, he had a leading role establishing the finance operations and guiding Shield through its 2016 IPO. He has a background in investment banking, having held senior positions at Investec and Brewin Dolphin Securities, where he advised healthcare clients on a wide range of transactions including IPOs, M&A and fundraisings. Jo has 25 years of healthcare management experience gained in Europe, the US and Asia. Much of her career has been in pharmaceuticals at GlaxoSmithKline, where, amongst other roles, she headed the US vaccines business and Asia Pacific Pharmaceuticals business and led a programme to modernise the commercial model. She was previously Chief Operating Officer at the BMI group of private hospitals in the UK."
"She was Non-executive Director at Frimley Park NHS Foundation Trust in the UK, Duke NUS Medical School in Singapore and Cello Health plc. She is currently a Non-Executive Director at UK listed company Circassia Group plc and is also on the Board of Recordati S.p.a and Indivior PLC. Richard Jones, Independent Non-executive Director Jo LeCouilliard, Independent Non-executive Director View the Audit and Risk Committee Report on page 60. View the Remuneration Committee Report on page 65. Audit and Risk Committee Committee Membership Key Nomination Committee ESG Committee Remuneration Committee Committee Chair Kristof Neirynck, Independent Non-executive Director Date joined Qualifications Experience Committee membership Kristof joined Alliance as an Independent Non-executive Director on 1 December 2021. He graduated as a Master of Science in Electronic Engineering from the University of Ghent, Belgium. Kristof joined the Board on 1 December 2021. He is global Chief Marketing Officer at Avon Cosmetics and brings 20 years of experience in General Management, Marketing, Digital Transformation, and Innovation, having carried out roles in Fast Moving Consumer Goods, Consumer Packaged Goods, Luxury and Retail sectors across multiple geographies. He is well versed in operating across an omnichannel model, combining bricks and mortar retail, e-commerce and direct to consumer experience. Kristof joined Walgreens Boots Alliance in 2015 and in 2017 became their Chief Marketing Officer for their Global Brands division, where he had responsibility for a $4 billion sales portfolio of more than 20 of their owned brands in Beauty and Consumer Healthcare. Prior to this, Kristof held leadership roles at P&G’s Prestige, Laundry and Feminine Care global divisions, having started his career in 2002 at Procter & Gamble in Belgium before moving to Procter & Gamble International in Switzerland in 2004. Alliance Pharma plc – Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Governance Key activities of the Board and its Committees Throughout the year, the Board received regular updates on, and considered, strategy, the commercial and financial performance of the business, scientific affairs and operations, people and infrastructure and legal and governance. In addition to these standing items, other business considered by the Board and its Committees is set out below. Strategic planning Strategy planning, review of Group strategy, presentations from business and functions. 2022 Budget Presentations and budget approval. Corporate development Review of acquisition opportunities and integration of Biogix Inc. Business reviews Mainland Europe, Asia Pacific, US, various product and brand reviews, brand protection, Great Place to Work. Investor engagement and broker presentations Full and half year results webcast presentations, analyst calls and investor road-shows, private client fund manager meetings, one-to-one calls and AGM, and presentations from brokers. Company results, trading statements and dividends Annual Report and Accounts, dividend policy and declarations. Nomination Committee Board composition and Committee membership, succession planning, NED recruitment, terms of reference, bonus proposal for 2022. Remuneration Committee Review of salary proposals, 2020 corporate bonus awards, Company share option awards, 2021 corporate bonus scheme, objectives and targets, terms of reference. Audit and Risk Committee Key accounting estimates and judgements, significant accounting policies, annual audit process and fees, external auditor, internal audit, foreign currency and hedging, US accounting post acquisition of Biogix Inc., ERP accounting and accounting treatment of CMA investigation. ESG Committee 2021 and 2022 sustainability framework and initiative, investor engagement, disclosure and accounting metrics, carbon action plan and environmental strategy, corporate website disclosures, terms of reference. Governance and Legal Includes the review of risk management framework, Board Effectiveness Review, Governance reporting, review of Articles of Association, AGM Notice, D&O insurance, litigation, Modern Slavery Statement, review of gender pay. Although there is no scheduled meeting in August, a management pack is circulated. Alliance Pharma plc – Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Governance continued The role of the Board The Board is responsible for the Group’s vision, business model and strategy. Together, the Directors are responsible for providing effective leadership to promote the long-term success of the Company. Each year, the Board holds a two-day strategy planning meeting at which the SLT and other senior employees present their proposals. From this session, the Group’s strategic plan and business model is agreed. The CEO is responsible for the implementation of the strategy and reports to the Board formally at a half year review. The strategy is communicated to all employees by the management teams through breakfast briefings and online presentations."
"Further information on how the Company delivers the strategy to promote long-term growth can be found on pages 17 to 22 and in its business model on page 16. There is a formal list of matters reserved for the Board, which may only be amended by the Board and is available on our website. The Board’s key responsibilities include: Maintaining the policy and decision-making process through which the strategy is implemented. Checking that necessary financial and human resources are in place to meet strategic aims. Providing entrepreneurial leadership within a framework of good governance and sound risk management. Monitoring performance against key financial and non-financial indicators. Responsibility for risk management and systems of internal control. Setting values and standards in corporate governance matters. Corporate culture and business conduct Our culture is underpinned by a clear set of values, which help guide decision-making at all levels in the business. The Board expects the business to foster relationships and operate high standards of business conduct. The Board reviews and approves the Group’s policies which have been implemented and communicated internally and externally to those who are expected to adhere to them. For example, this includes policies on diversity and inclusion, the prevention of bribery and corruption, fair competition and anti-slavery and human trafficking. Further information about our policies can be found in Business Ethics on our website. Engagement with shareholders The Board and its Committees recognise that to meet its responsibilities to shareholders and other stakeholders, it is important to ensure effective engagement with, and encourage participation from, these parties. The Board factors the needs and concerns of all the Company’s stakeholders into its discussions and decision-making, having been made aware of the needs, interests, and any impact of such decisions on the Company’s stakeholders. Visibility and awareness are further increased through senior management who have collective responsibility for communicating and engaging with specific stakeholder groups. This includes making sure that the business as a whole upholds its values and monitors behaviour for acceptability. Recently, the Company invested in its Investor Relations by appointing a new Head of IR and Corporate Communications. Further information on our dialogues and engagement with shareholders and other stakeholders can be found on pages 34 and 53. Throughout the year, the CEO and CFO meet with potential and existing investors and they feed back to the Board the key summary points from their meetings. In addition to these meetings, there were 57 scheduled meetings held as part of the Company’s investor road-shows for the annual 2020 and half-year 2021 results. The Board is provided with an analysis of the Company’s investor base at each Board meeting and research notes by sell-side analysts are circulated to all Directors. Furthermore, analysts’ notes, and brokers’ briefings are received and considered by the Board in order to ensure, as far as possible, a clear and up-to-date understanding of investors’ views. Information on investor sentiment is also provided to the Board by the Company’s brokers and financial PR advisers. Alliance Pharma plc – Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Governance continued A list of the Company’s major shareholders can be found in the investor section of our website, and a list of notifiable holdings can be found on page 80 of the Directors’ Report. These are regularly updated following the formal notification of movements to the Company. The Company further communicates with shareholders through its Annual Report and Accounts, half-year announcements, trading updates and at the Company’s AGM. Such reports as well as other relevant announcements and related information are all available on the Group’s website. The website also offers a facility to sign up for email alert notifications of Company news and regulatory announcements. With employees The Board receives regular updates on People and employee engagement at its meetings. This includes briefings following surveys, organisational structure and other positive initiatives to support health and wellbeing. From time to time, employees are invited to attend various Board and Committee meetings to present on key operational and strategic matters. The Board and its Committees The Board currently comprises six Directors, being the Chairman, three further independent Non-executive Directors and two Executive Directors. Independence on the Board is reviewed and confirmed annually by the Nomination Committee. The Chairman The Chairman, David Cook, has primary responsibility for leading the Board and facilitating the effective contribution of all members to meetings."
"He maintains a strong focus on governance to ensure good practice is embedded in the business with good flows in communication and reporting. He has regular dialogue with the CEO to ensure the business and the management team receive the support from the Board necessary to progress the strategy. The Chairman also meets with the Non-executive Directors on their own at least once a year and further meets with them as part of the Board evaluation process. Shareholders have an opportunity to engage with the Chairman and the Board at the Company’s AGM. The Chief Executive Officer (CEO) The CEO, Peter Butterfield, is responsible for the day-to-day running of the business and implementation of the Group’s strategy. He is supported by the SLT who have management responsibility for the business operations and support functions. Relevant matters are reported to the Board by the CEO and, as appropriate, the CFO and other members from the SLT. The Non-executive Directors Non-executive Directors are required to commit the time necessary to fulfil their role. Their role is to: Provide oversight and scrutiny of the performance of the Executive Directors. Constructively challenge to help develop and execute on the agreed strategy. Satisfy themselves as to the integrity of the financial reporting systems and the information they provide. Satisfy themselves as to the robustness of the internal controls. Ensure that the systems of risk management are robust and defensible. Review corporate performance and the reporting of such performance to shareholders. Each of the Non-executive Directors sits on at least three of the Committees ensuring that between them they have a role in determining the pay and benefits of the Executive Directors and in the planning of Board succession, including the appointment and, if necessary, removal of Executive Directors. Three independent Non-executive Directors, all of whom have an accountancy qualification, sit on the Audit and Risk Committee, enabling them to review internal controls and financial reporting matters. They have a direct relationship with the external auditors. Each Non-executive Director is appointed for an initial term of five years, subject to annual re-election by shareholders at the AGM. Their appointment term may be renewed by mutual agreement. Alliance Pharma plc – Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Governance continued Improving brand protection and distribution of products During the year, the Board receives regular updates on what the business is doing to protect its brands to ensure that opportunities are maximised to key geographical regions of the business. Plans put forward considered various stakeholder needs, including: Investing in resources and the development of existing skills and expertise both in the UK and in APAC. Maximising benefits and financial value to the business and shareholders. Investing in the detection and prevention of counterfeit products to ensure product quality and consumer safety. Reviewing and engaging key distribution partners and channels to protect the integrity of the supply of products to customers and consumers. Case study 1 ESG is very much at the heart of Board decisions. The Board continues to press forward with its focus on Sustainability, having established an ESG Committee at the beginning of 2021. A dialogue with key institutional shareholders formed part of a stakeholder engagement programme to ascertain and understand their views and approach. With a focus maintained on shareholders, people, customers and suppliers, and our impact on the wider community and planet, stakeholder needs are very much at the centre of a progressive strategy. During the year: External consultants have been engaged to support, help and inform the development of our sustainability strategy and framework and broaden understanding. An active dialogue was maintained with the investor community. Feedback was provided to the Board following open workshops with employees to better understand their views on ESG and climate-related matters. These sessions led to the Sustainability Forum. Engagement with the Remuneration Committee to ensure alignment with the Company’s reward and benefits strategy. Case study 2 Engaging with the Company’s stakeholders is well embedded in the business as we continue to look after our relationships with employees, customers and suppliers and consumers and the wider communities. Promoting long-term success — s.172 Companies Act 2006 The powers and duties of the Directors are determined by legislation and the Company’s Articles of Association. The Directors are aware and mindful of their duties and obligations under s.172 of the Companies Act 2006. Directors are required to act in good faith."
"Discussions give due consideration to the impact of decisions on the Group’s strategy and values, stakeholders and the Directors are provided with written reports, market reviews, guidance, and presentations and briefings from both internal members of staff and external advisers as part of the process. Decisions are taken with a view to promoting the success of the Group and having considered the likely and long-term consequences for stakeholders concerned. Under s.172 Companies Act 2006, a company’s directors have a duty to discharge their responsibilities having regard to: The likely consequences of any decision in the long term. The interests of the company’s employees. The need to foster the company’s business relationships with suppliers, customers and others. The impact of the company’s operations on the community and the environment. The desirability of the company maintaining a reputation for high standards of business conduct. The need to act fairly as between members of the company. Stakeholder engagement and section 172 Alliance Pharma plc – Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Board attendance, support and meeting management Attendance schedule In leading and controlling the Company, the Directors are expected to attend all meetings. The Board and its Committees meet regularly on scheduled dates. This includes a two-day strategy meeting in each year which is also attended by all senior executives of the Group, the purpose of which is to review progress in delivering agreed plans and to develop and settle the Group’s business plans and long-term strategic targets and set the framework for the achievement of those goals. The Board held 11 scheduled meetings and three unscheduled meetings during the year. Meetings follow a clear agenda, supported by written reports and presentations from both Board Committees. The Board has delegated and empowered four Committees: a Remuneration Committee, a Nomination Committee, an Audit and Risk Committee and an ESG Committee. Each Committee has written terms of reference set by the Board, which are reviewed annually and are available on the Company’s website. Membership of each Committee is determined by the Board on the recommendation of the Nomination Committee. Executive Directors are only permitted to be members of the ESG Committee. Each Committee Chair reports to the Board on the activities considered and determined by the relevant Committee. A summary of the Committees’ responsibilities and their work during the year can be found in the reports from the Committees appearing later in this section. Governance continued Internal members of staff as well as external advisers and consultants. Three unscheduled meetings of the Board were called to deal with non-routine business. Meeting management The Company Secretary is secretary to the Board. Board and the Boards Committees. On behalf of the Chairman, the Company Secretary is responsible for ensuring that all Board and Committee meetings are conducted properly and that the Directors are properly briefed on any item of business to be discussed. He has a direct line into the Chairman on all matters relating to governance and is responsible for ensuring governance, legal and regulatory compliance is considered, recorded and implemented. Procedures are in place for distributing meeting agendas and reports so that they are received in good time, with the appropriate information. Ahead of each Board meeting, the Directors each receive written reports updating on strategy, finance, including monthly management accounts, operations, commercial activities, business development, risk management, legal and regulatory, people and infrastructure and on investor relations. Meeting papers are distributed via an electronic board portal. The Directors may have access to independent professional advice, where needed, at the Groups expense. Director training and development All the Directors are responsible for ensuring their skills and knowledge are kept up to date. This is done in varying ways but includes professional training, online training or attending seminars and webinars offered by advisers and consultancies. In addition, regular updates on corporate governance, legal or regulatory changes are also provided via reporting or through presentations to the Board. Directors conflicts of interest The Company has effective procedures in place to monitor and deal with conflicts of interest. Directors are required to notify the Company of any situation that could give rise to a conflict or potential conflict thereby compromising their independence and objectivity. Each member is required to disclose any such potential conflicts at the start of every meeting."
"The Board is fully aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board. Where any such conflict arises, the Board determines whether or not a Director can vote or be a party of the item under consideration in accordance with the Companys Articles of Association. The Board is satisfied that potential conflicts have been effectively managed throughout the year. Board Meeting attendance 91% attendance Member Role Status Attendance David Cook Chairman Independent 11/11 Peter Butterfield CEO 11/11 Andrew Franklin CFO 11/11 Kristof Neirynck NED Independent 1/1 Jo LeCouilliard NED Independent 11/11 Nigel Clifford NED Independent 4/4 Richard Jones NED Independent 10/11 Kristof Neirynck joined the Board of Directors on 1 December 2021. Nigel Clifford resigned from the Board of Directors on 30 April 2021. Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Board effectiveness As required under the QCA Code, the Board continually monitors and improves its performance and evaluates its performance based on clear and relevant objectives. The Chairman evaluates the performance of the Board annually to offer Directors an opportunity to discuss their contribution in terms of their skills and experience as well as identifying areas for improvement or development to enhance the capabilities of the Board as a whole. The Nomination Committee reviews any outcomes affecting Board and Committee composition. In last years Annual Report we set out the feedback from the 2021 review which focused on four key areas including roles, contributions, and stakeholder engagement; meeting management and priorities; ambition and strategic planning and Board culture and dynamics. Where necessary and helpful, the Executive and senior leadership team can maintain a dialogue with the Non-executive Directors and can contact each other freely. During the year, the progress made included The Board holding a dedicated two-day face-to-face strategy meeting at which management teams delivered their presentations on their proposals for the short-to-medium terms plans for the business. Alongside this there was a mid-year meeting to review progress against the strategy. Governance continued Improved reporting to ensure there is the right balance of information to support decision-making. Meetings are held face-to-face where possible and the current Board schedule provides for some meetings to be held at our overseas offices. The Board is mindful of investors views and there is a good level of engagement through telephone meetings, road-shows, presentation days and responding to written requests for information. During the year, there was enhanced engagement with investors on ESG matters to understand their views. In addition, the Board recently approved the appointment of a new Head of Investor Relations and Corporate Communications and looks forward to hosting a Capital Markets Day in 2022. The 2022 evaluation consisted of one-to-one meetings between the Chairman and each Director to discuss various matters relating to Board and Committee performance and their effectiveness. Each meeting was also attended by the Company Secretary, who obtained feedback from each Director on the Chairman. Results and outcomes were reviewed, summarised and circulated to Board members for discussion in February 2022. The table below sets out the key focus areas arising from the 2022 review: Areas of focus Feedback and recommendations Board planning framework and dynamics The planning framework drives discipline and behaviours. The strong proximity of the Board and management is a real strength and there is always open and sensible discussion and challenge from Directors. Focus on strategy The strategy is well formulated. The Board continues to understand the impact of emerging trends and envision the longer-term plans. The recent appointment of Kristof Neirynck demonstrates the Boards commitment to strategy by enhancing skills and capabilities in the area of consumer healthcare. Performance and remit of Board Committees Overall the Committees are chaired and run very well. The Remuneration, Nomination and ESG Committees need to ensure their work continues to evolve as the strategy develops, particularly in the areas of remuneration policy and succession planning. Board engagement There is good engagement with investors and the Board is to consider how it could engage with employees outside of surveys and presentations. The next review in relation to 2022 is scheduled for early 2023."
"Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Nomination Committee Report Chairmans statement On behalf of the Nomination Committee, I am pleased to introduce the Nomination Committee Report in which we set out the Committees responsibilities and report on the activities of the Committee during the year. As a growing international Consumer Healthcare business it is critical that we employ the capabilities of and develop our people to help us continue to deliver on our strategy. We remain focused on understanding our framework on gender and ethnic diversity and inclusion, and succession planning across the business. During the year much of the Committees focus has been on succession planning, Board composition, and the search and appointment of a new Non-executive Director. On 1 December 2021, we warmly welcomed Kristof Neirynck to the Board and he was also appointed to the Nomination, Remuneration and ESG Committees. You can read more about our recruitment and induction processes on page 59 of this report. David Cook Nomination Committee Chairman 30 March 2022 As a growing Consumer Healthcare business we seek the very best skills and experience to help us achieve the Groups strategic objectives. Nomination Committee Report Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Diversity and inclusion As part of a progressive plan, we review the skills on our Board and work with Group HR to ensure we identify any gaps. We talk about a range of areas such as diversity of thought, experience, gender, ethnicity, skills, nationality, and specific skills identified to strengthen and develop the knowledge base on the Board. When necessary we also engage and work with specialist recruitment consultants to help identify talent and search for potential candidates that meet our objective criteria. As a Board of a company admitted to AIM, we monitor the guidance and best practice in the market around the areas of gender and ethnicity, in particular the percentage targets set for FTSE main market listed companies. Should investors wish to discuss any aspects of the work of the Committee, I will be available to answer questions at this years AGM. The Companys Diversity and Inclusion Policy can be found on the Companys website. Nomination Committee Report continued DIRECTOR ROLE GENDER FINANCE CONSUMER HEALTHCARE PHARMA INTERNATIONAL GROWTH FINANCIAL MARKETS Peter Butterfield CEO M Andrew Franklin CFO M Kristof Neirynck INED M David Cook INED M Jo LeCouilliard INED F Richard Jones INED M UK and overseas financial markets experience. Board gender diversity Male 83% Female 17% The role of the Committee The Nomination Committees primary roles are to carry out a selection process for the appointment and reappointment of all Directors to the Board, and to review the structure, size and composition of the Board including in terms of skills, knowledge, experience and diversity. The Committee also reviews the leadership needs of the organisation and monitors succession planning for both Board and senior executive roles. The framework of duties is set out in its Terms of Reference which are available on the Companys website. Each year the Committee reviews its own performance and its Terms of Reference. Duties of the Committee The duties of the Committee include Keeping itself informed about strategic issues and commercial changes affecting the Company. Reviewing the structure, size, and composition of the Board, including diversity, skills, knowledge, and experience. Considering succession plans for Directors and other senior executives. Identifying and nominating candidates to fill Board vacancies. Evaluating the balance of skill, knowledge, experience, and diversity prior to commencing any appointment process. Reviewing the results of the Board performance evaluation insofar as it relates to composition and time commitment of Directors. Making recommendations to the Board on matters such as Committee membership, reappointment, and re-election of Directors. Members of the Committee have access to the Company Secretary, who attends and minutes all meetings. To enable the Committee to discharge its duties effectively, the Company Secretary is responsible for ensuring the Committee receives high-quality, timely information. The Chair of the Committee reports to the Board on its proceedings after each meeting on all matters within its duties and responsibilities and will make any recommendations to the Board it deems appropriate. Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Attendance During the year, the Committee held two scheduled meetings and reported on its activities to the Board."
"Nomination Committee Report continued Activities of the Committee Board composition The Committee reviews any outcomes from the annual Board performance evaluation that relate both to composition and time commitment from Non-executive Directors. The Committee keeps under review the Boards composition to ensure it provides a sufficiently wide range of skills and experience to enable it to pursue its strategic goals and to address anticipated issues in the foreseeable future. This process includes reviewing the mix of skills, sector experience and financial, public markets and international experience. Being a global business, the Committee is aware of the benefits of diversity on the Board and at the senior management level. Committee membership Appointments to the Committee are made by the Board. Only members of the Committee have the right to attend meetings. However, where appropriate, the Chief People and Infrastructure Officer and the CEO are invited to attend certain meetings of the Committee to support with discussions around succession planning and recruitment process. Committee membership changes Nigel Clifford stepped down from the Committee on 30 April 2021. With effect from 1 December, Kristof Neirynck was appointed a member of the Nomination Committee. It remains committed to considering diversity when discussing appointments and succession plans. The Company and the Board always seek to search for, recruit and appoint the best available person based on aptitude and ability, regardless of gender, marital or civil partnership status, race, colour, nationality, ethnic or national origins, pregnancy, disability, age, sexual orientation, religion or belief. NED search and appointment During 2021, the Nomination Committee conducted a search and recruitment process followed a review of the skills, capabilities and experience on the Board. As an international consumer healthcare business with diverse products across many territories, the Board sought to recruit someone with close knowledge and extensive experience in the marketing of products in the healthcare sector, across several countries, particularly in the US, APAC and European regions. The Committees process was supported by the Chief People and Infrastructure Officer and the Company engaged the services of an external executive search and recruitment agency. Following a recommendation by the Nomination Committee, the Board was pleased to announce the appointment of Kristof Neirynck as a Non-executive Director on the 29 June 2021. He took office on 1 December 2021 and brings with him the addition of skills and experience in marketing, digital transformation and innovation gained in fast-moving consumer healthcare companies. Board balance and independence The Committee considers there to be an appropriate balance between Executive and Non-executive Directors on the Board, and following this years Board evaluation, members confirmed that discussions are not dominated by any one or small group of people when making decisions. Having considered the guidelines on independence, on appointment as Chairman, David Cook was independent and continues to be regarded by the Board as independent alongside Richard Jones, Jo LeCouilliard and Kristof Neirynck. Senior Independent Director Each year the Nomination Committee considers whether it is appropriate to have a Senior Independent Director to act as a sounding board and intermediary for the Chairman or other Board members. As part of their review in 2021, it was concluded that the appointment of a Senior Independent Director is not necessary at this time, but the potential appointment will be kept under review. External directorships The Chairman and Non-executive Directors hold appointments as Directors and/or senior management on a small number of other companies, as detailed in their biographies on pages 48 and 49. It is considered that the Chairman and Non-executive Directors allocate sufficient time and commitment to fulfil their duties to the Company. Nomination Committee 2 Meetings 100% attendance Member Role Status Attendance David Cook Chairman Independent 2/2 Jo LeCouilliard NED Independent 2/2 Kristof Neirynck NED Independent Nigel Clifford NED Independent 1/1 Richard Jones NED Independent 2/2 Additional ad hoc meetings were held during the year to deal with NED recruitment. Resigned from the Board on 30 April 2021. Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Nomination Committee Report continued Board appointments and succession planning Succession planning The Committee works closely with the Board and, with the support of the Chief People and Infrastructure Officer, develops strategies in support of progressive and orderly succession planning for Board and senior management. Planning includes consideration of the challenges and opportunities facing the Company and careful evaluation of the skills and experience needed on the Board in the future."
"When developing these plans, the Directors are mindful of the need for a more diverse executive pipeline to help increase diversity levels in senior positions. Page 75 in the Remuneration Committee Report sets out the term of appointment for each Director. The nine-year tenure of the Chairman will come to an end early 2023, after which he is no longer considered to be independent. Accordingly, the Committee has started to consider succession for the role and shareholders will be notified of any proposed changes as and when it would be appropriate to do so. Board appointments and induction Whether as part of formal succession planning or to fill any Board vacancy that should arise, the Committee leads the process for the appointment of Directors. The Chairman does not chair the Committee when it is dealing with the appointment of his successor. Any appointment process follows a careful assessment of the balance of skills, knowledge and experience and diversity on the Board to identify capabilities that would enhance the Board and support the long-term strategy of the Group. The Chief People and Infrastructure Officer prepares a role description and capabilities required for the appointment. The services of an external recruitment agency are engaged to facilitate the search with instructions to consider candidates from a wide range of backgrounds. Potential candidates are also considered on merit and against objective criteria with due regard to the benefits of diversity, including gender, and time available to devote to the position. Potential candidates are required to disclose business interests that may result in a conflict of interest. From a short-list of suitable candidates, interviews are held with the Chairman of the Board, CEO and Chief People and Infrastructure Officer and other Board members. The Committee then recommends appointments to the full Board for their formal approval. New appointments are proposed to shareholders for approval at the next AGM following the first date of appointment. On appointment, all Directors receive a personally tailored induction. This includes meetings with members of the Board, members of the senior leadership team, the Group General Counsel and Company Secretary, and presentations from key functions in the business. They are provided with an overview of the Groups structure and operations and governance policies and receive copies of past Board minutes and reports via the electronic board portal. In addition, the portal holds other key corporate documents and information, for example, Matters Reserved for the Board, Committee Terms of Reference, the Companys Articles of Association and the Directors and Officers liability insurance arrangements. Annual re-election of Directors at AGM In accordance with the Companys Articles of Association, all Directors are subject to election or re-election by shareholders at the AGM. In line with good practice, the Committee recommended to the Board that all six Directors, being eligible, put themselves forward for annual re-election at the Companys AGM. Alliance Pharma plc Annual Report and Accounts 2021 Governance Chairman's statement On behalf of the Audit and Risk Committee, I am pleased to introduce the Audit and Risk Committee Report. As a company admitted to AIM, we are guided by the QCA's Audit Committee Guide and, when appropriate to do so, look to the UK Corporate Governance Code 2018 and to investor guidelines for best practice. In this report we set out the Committee's responsibilities and report on the activities of the Committee during the year. At the start of the year, alongside our regular work carefully reviewing the Company's annual financial statements, the associated accounting treatment and disclosures, efforts focused on the integration of Biogix Inc. following its acquisition on the 29 December 2020. The Committee carried out a post-acquisition accounting review of Biogix Inc., which included a review of the independent audit conducted in respect of the Company's financial statements prior to acquisition, significant judgements and estimates used in considering the impact of the acquisition under IFRS 3 Business Combinations and the appropriateness of the disclosures and accounting rules for the year ended 31 December 2020 in respect of the acquisition. We continue to monitor the integrity of the financial statements and other announcements as the business works to achieve its goals. Audit and Risk Committee Report Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Audit and Risk Committee Report continued In addition, there was a mid-year review of financial controls in the US. Key controls have been implemented including the appointment of a Divisional Financial Controller."
"Regular reviews were held with the Company's Auditor, KPMG LLP, without management in attendance. In 2021, the Committee welcomed Huw Brown as the new lead audit partner. The Chair meets with Huw Brown outside of the formal Committee meetings as part of relationship engagement. As part of the Committee's annual review of. The need for an internal audit function has been concluded by the Committee that, with the growth of the business and the corresponding complexities, it is appropriate to establish a new internal audit function. Management is currently in the process of appointing a new Internal Audit Manager who will report to me. The role of the Committee is to assist the Board with monitoring and reviewing the Company’s financial results and other reporting and has oversight of the effectiveness of risk management and systems of internal control. Its role is to provide confidence to shareholders on the integrity of our reported financial results and provide challenge to the external auditors and senior management. The framework of duties is set out in its Terms of Reference which are available on the Company’s website. Each year the Committee reviews its own performance and its Terms of Reference. The duties of the Committee include reviewing the management and reporting of financial matters including key accounting policies, reviewing the Annual Report and Accounts and advising the Board on whether, when taken as a whole, it is fair, balanced, and understandable and provides shareholders with the information necessary to assess the Company’s performance, business model, and strategy. The Committee reviews the Group’s risk register quarterly, and the Committee believes that the Group strategy has the support of a management team who understand the risk management framework required to deliver it. Information about our principal risks and uncertainties and our system of risk management and internal control can be found on pages 39 to 45 and on pages 63 and 64. The Company intends to undertake a tender process for audit services and expects this process to be completed by Q3 2022. Notwithstanding such process, a resolution to re-appoint KPMG LLP will be proposed at this year’s Annual General Meeting. The Committee is responsible for considering the appointment of external auditors and the frequency of re-tendering and rotation of the audit, overseeing the relationship with, and the independence and objectivity of, the external auditors, setting policy in relation to the use of the external auditors for non-audit services, advising the Board on the Company’s appetite for and tolerance of risk and the strategy in relation to risk management and reviewing any non-conformances with these, reviewing the Company’s risk management and internal control systems and their effectiveness, and reviewing the Company’s procedures for detecting fraud, bribery, and corruption and ensuring arrangements are adequate for employees to raise concerns. Members of the Committee have access to the Company Secretary who attends and minutes all meetings. To enable the Committee to discharge its duties effectively, the Company Secretary is responsible for ensuring the Committee receives high-quality, timely information. The Chairman of the Committee works closely with the CFO and the finance department to ensure papers for meetings are comprehensive and comprehensible. When appropriate to do so, the Committee seeks the support of external advisers and consultants. The Committee reports to the Board which includes reporting on any matters where it considers action or improvement is needed, including recommendation of remedial actions. The Chair of the Committee reports to the Board on its proceedings after each meeting on all matters, including any reporting issues and on estimates and judgments made in the preparation of financial statements. During the year, the Committee held four scheduled meetings and reported on its activities to the Board. As at the date of this report, the members of the Audit and Risk Committee, all of whom held office throughout the year and to the date of this report unless otherwise stated, are Richard Jones, Chairman, Independent, 4 out of 4 attendance; David Cook, NED, Independent, 4 out of 4 attendance; Jo LeCouilliard, NED, Independent, 4 out of 4 attendance. Appointments to the Committee are made by the Board following any recommendations from the Nomination Committee. Only members of the Committee have the right to attend meetings. All three members of the Committee have a mix of knowledge and skills gained through their experience of business, management practices including risk, the industry sector, and have recent and relevant financial experience."
"The CEO, CFO, and the Group Head of Finance are invited to attend all meetings, while other senior financial managers will attend as appropriate. The external auditor also attends the meetings to discuss the planning and conclusions of their work and meet with the members of the Audit and Risk Committee without any members of the executive team present after each meeting. The Audit and Risk Committee can call for information from management and consults with the external auditor directly if required. Key activities of the Committee include reviewing the content and integrity of financial statements and any formal announcements relating to financial performance, including review of the significant financial reporting judgments contained therein, reviewing the financial statements and narrative reporting in the Annual Report and Accounts for 2020 and 2021 with reference to the reports being fair, balanced, and understandable, and including a review of the appropriateness of the disclosures considering requirements and guidance under IFRS, the AIM Rules for Companies, Companies Act 2006 requirements, FRC guidance, and the QCA Corporate Governance Code 2018. The Committee also reviews the preliminary results for the financial years ended 31 December 2020 and the unaudited half-year results to 30 June 2021, and considers reports from the external auditor in respect of the Annual Report and Accounts for 2020 and 2021. The Committee reviews matters that have informed the Board’s assessment of whether the Company is a going concern, including a review of the going concern methodology, assessment in support of the going concern assumption, concluding the expectation that the Group has adequate resources to continue in operation for the foreseeable future. In respect of the preparation of the financial statements for the year ended 31 December 2021, the Committee reviewed key accounting judgments and estimates including a review of the group’s weighted average cost of capital, a review of intangible assets including consideration of impairment under IAS 36, estimates and judgments in respect of going concern, review of alternative performance measures, and accounting for the Biogix Inc acquisition. The Committee also reviewed the legal and accounting considerations and draft disclosures for the financial statements for the year ended 2021, including the making of a provision following the CMA’s Infringement Decision on 3 February 2022, and reviewed an assessment under IFRS 15 and the revenue recognition in relation to a major cross-border e-commerce distribution agreement. The Committee reviewed the accounting treatment for ERP systems in light of IFRS Interpretations Committee decisions on cloud computing arrangements, financial and other internal controls and risk management systems, including the Group’s Principal Risks and Uncertainties, and reviewed the Company’s Whistleblowing policy and procedures. The Committee reviewed its own Terms of Reference which are considered to be satisfactory. The Committee and Board were satisfied that the Committee and its members continue to operate effectively individually and collectively and had discharged all of the duties within its remit. The Board has primary responsibility for the Group’s overall approach to risk management and systems of internal control and has delegated its oversight to the Committee. During the year, the Committee has reviewed and reported on the identification, evaluation, and management of risks facing the business and has considered the effectiveness of associated processes and controls to ensure a healthy balance between the risk we face and harnessing the opportunities that align with strategy to grow a strong and sustainable business. At least once a year, the Board also reviews risk management and those risks the Board is not prepared to take are either avoided or, as far as possible, are mitigated and/or transferred to insurers. The responsibilities surrounding risk management and internal control systems are designed to meet the needs of the size and complexity of the business. It takes into account the applicable requirements of pharmaceutical regulators in the various markets in which the business operates as well as the legal requirements of being a UK company admitted to AIM. Internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material loss or misstatement. The key components of the current systems of internal controls include clearly communicating Alliance’s values and strategy to ensure these are understood and people know what is expected, developing business and financial plans that support the strategy, reviewing policies and procedures to ensure these remain fit for purpose, strengthening controls through enterprise resource planning, regular reporting of actual performance relative to goals, budgets, and forecasts, ensuring there is a structure of accountability, and training and monitoring."
"Every year, the Audit and Risk Committee considers the need for an internal audit function. This year the Committee has taken a decision to establish an internal audit function and its activities will be reported in the 2022 Annual Report. The Company has a Whistleblowing Policy and procedures to help with the detection and prevention of fraud. Published on the Company’s Intranet, the Policy provides all employees access to a confidential forum in which it is possible to raise concerns about potential and perceived improprieties. Provided it is appropriate to do so, the process is managed by the Company Secretary in conjunction with Human Resources. The outcomes of any investigations carried out in accordance with the Policy are reported to the Committee. Each year, the Committee assesses the proposed audit plan for the external auditor’s review of the Company’s full-year financial statements. This plan sets out the scope of the audit, areas of significant risk of material misstatement, timetable, and fees. KPMG formally presents their findings to the Committee but throughout the auditing process there is regular dialogue and engagement with management with any significant matters or risks being communicated. Prior to the Board’s approval of the Annual Report and Accounts, the Committee reviews with the auditor the representations set out in the management representation letter and reports to the Board. The auditor presents the Board with a management representation letter which the Committee will have reviewed and discussed with the auditor as part of its year-end meetings. The Committee is responsible for agreeing the terms of engagement with the Company’s external auditors KPMG. The objectivity and independence of the external auditors are safeguarded by reviewing the auditors’ formal declarations, monitoring relationships between key audit staff and the Company, and tracking the level of non-audit fees payable to the external auditors. KPMG took up office as the Company’s auditor in 2016. The auditor’s appointment requires the approval of shareholders at the AGM. The Company intends to undertake a tender process for audit services and expects this process to be completed by Q3 2022. Notwithstanding such process, a resolution to re-appoint KPMG LLP will be proposed at this year’s Annual General Meeting. Each year, the Committee reviews the scope and fees for the annual audit of the Company. On behalf of the Remuneration Committee, I am pleased to introduce this year’s Remuneration Committee Report. As a company admitted to AIM, we are guided by the QCA’s Remuneration Committee Guide and, when appropriate to do so, look to the UK Corporate Governance Code 2018 and to investor guidelines for best practice. The Committee remains aware of the importance placed by investors on remuneration. In carrying out its duties, we continue to balance our remuneration policy and practices with our size and complexity as well as with the performance of the business. We promote the long-term growth of shareholder value, in line with the Group’s strategy, and the need to ensure that our people remain motivated through fair remuneration strategies. The Committee believes that the Company’s current remuneration policy encourages and rewards the right behaviors and that any risks created by its structure are within the appetite of the Board. The key activities of the Committee during the year included reviewing our remuneration policies and remuneration levels in the context of appropriate AIM market comparisons, ensuring our policy achieves its objectives and continues to attract, retain, and motivate a high-quality management team to run the Alliance business successfully for our shareholders. We aim to ensure that our remuneration arrangements align to support implementation of the Group’s strategy for the medium to long term. The Committee continues to monitor trends and developments in relation to remuneration and market practices and corporate governance and welcomes views from its shareholders. Being committed to and maintaining a healthy dialogue with our shareholders helps to ensure that our remuneration strategy is understood and remains appropriate across all levels of the organization. I will be attending the AGM on 18 May 2022 and will be available to answer any shareholder questions on the Committee’s activities. In the meantime, I would like to thank our shareholders for their continued support. The role of the Remuneration Committee is to ensure there is a formal process for considering Executive remuneration. On behalf of the Board, it reviews the pay, benefits, and other terms of service of the Executive Directors of the Company and the broad pay strategy with respect to other senior executives."
"The framework of duties is set out in its Terms of Reference which are available on the Company’s website. Each year the Committee reviews its own performance and its Terms of Reference. Members of the Committee have access to the Company Secretary who attends and minutes all meetings. To enable the Committee to discharge its duties effectively, the Company Secretary is responsible for ensuring the Committee receives high-quality, timely information. The Chair of the Committee reports to the Board on its proceedings after each meeting on all matters within its duties and responsibilities and will make any recommendations to the Board it deems appropriate. The Committee will also engage with the Nomination Committee when considering, for example, the appointment of Directors or contractual terms on termination. During the year, the Committee held a total of six meetings and reported on its activities to the Board. As at the date of this report, the membership of the Remuneration Committee comprises three Independent Non-executive Directors and their attendance was as follows: Jo LeCouilliard, Chairman, Independent, 6 out of 6 attendance; David Cook, NED, Independent, 6 out of 6 attendance; Nigel Clifford, NED, Independent, 2 out of 2 attendance; Kristof Neirynck, NED, Independent, 1 out of 1 attendance. Nigel Clifford resigned from the Board of Directors on 30 April 2021. Kristof Neirynck joined the Committee on 1 December 2021. During the year, matters reviewed and considered by the Remuneration Committee included reviewing policies on remuneration, external environment, market comparators, increases to annual base salaries, short-term and long-term reward and incentives, and assessing the extent to which targets have been achieved under the performance-related bonus scheme. When appropriate to do so, the Remuneration Committee seeks the support of external advisers and consultants. During the year, the Committee undertook a competitive tender process and appointed Ellason LLP as adviser to the Committee. Ellason LLP are members of the Remuneration Consultants Group, which sets out guidelines to ensure that any advice received is independent. Ellason LLP provides no other services to the Company and the Committee is satisfied that the advice received is objective and independent. No Directors or senior managers are involved in any decisions as to their own remuneration. As the Company is not a fully listed company, it is not required to produce a formal remuneration policy or seek shareholder approval of that policy. However, we set out below additional information that the Committee believes will be most useful to shareholders and reflects remuneration practices that are appropriate for an AIM company of our size. The policy is designed to ensure our Executive Director pay arrangements remain supportive of and drive the strategy. Base salaries are reviewed annually to ensure they remain in line with other pharmaceutical, healthcare, and AIM companies and reflect the size and scope of the individual’s role. Within that frame of reference, the Company aims to be at or near the median level. Annual base salaries increase in line with the remuneration policy and take effect from May each year. The Committee is committed to ensuring that salaries remain competitive relative to the AIM 100. Levels are set to attract and retain individuals to lead and drive forwards the agreed strategy for the Company. Executive Directors can participate in the Company’s defined contribution pension scheme. In line with all employees, only their base salaries are pensionable. The Company contributes twice the amount contributed by the employee up to a maximum of 10%. When appropriate to do so, Executive Directors may take benefits as a salary cash supplement, which will ordinarily be reduced to take account of the employer National Insurance Contributions. Other benefits in kind include life assurance, healthcare, and the provision of a cash allowance in lieu of a company car. The delivery of the Group’s in-year, short-term corporate goals is incentivised by offering a cash-settled bonus linked to two factors: the achievement of budgeted levels of underlying profit before tax, which is the key metric the Board considers in monitoring corporate performance, and personal performance of each Executive. As part of this incentive strategy, Executive Directors are eligible to participate in the all-employee Annual Bonus scheme. The level of that bonus is determined by first assessing whether the threshold level of financial performance has been achieved by the business and, once this has been achieved, applying a further multiplier which is determined by assessment of the Executive’s personal performance for the relevant year. The financial targets are set at the start of each financial year."
"The targets are determined with the approval of the Remuneration Committee to ensure they incentivise the Executives and align with delivery of the Group’s strategy. Personal performance is measured on various factors including delivery of pre-set personal targets. Based on a combination of financial and personal performance, the Annual Bonus that each of the Executives is able to earn is as follows: Chief Executive Officer: A bonus of 50% of base salary is payable for on-target financial performance, increasing on a sliding scale up to a maximum of 100% of base salary. The bonus payable can be further increased by applying a personal performance multiplier. The maximum personal performance multiplier is 1.5 times, meaning up to an additional 50% of salary. The CEO’s potential maximum Annual Bonus opportunity is therefore 150% of base salary. Chief Financial Officer: A bonus of 40% of base salary is payable for on-target financial performance, increasing on a sliding scale up to a maximum of 80% of base salary. The bonus can be further increased by applying a personal performance multiplier. The maximum personal performance-related multiplier is 1.5 times, meaning up to an additional 40% of salary. The CFO’s potential maximum Annual Bonus opportunity is therefore 120% of base salary. The Company operates two share incentive schemes to encourage a culture of long-term growth and performance that aligns with share ownership. Executive Directors can participate in both the market value Company Share Option Plan and a nil-cost Long-Term Incentive Plan. Any awards granted to the Executive Directors are subject to performance metrics which are reviewed regularly by the Committee, and the level of award is reviewed annually to ensure that the aggregate remuneration remains competitive. Performance targets for Directors’ awards granted under the Long-Term Incentive Plan and Company Share Option Plan continue to be based on Earnings Per Share and Total Shareholder Return related targets, assessed over a three-year performance period. The maximum total market value of shares over which awards may be granted under the Long-Term Incentive Plan to any participant during any financial year is 100% of the participant’s salary. However, in exceptional circumstances, the Committee may, at its absolute discretion, grant a higher amount. The maximum market value of shares under the approved part of the Company Share Option Plan shall not exceed £30,000. There is no limit on the market value of shares when granting unapproved share option awards. To align Directors and Senior Management’s interests with our shareholders, the Company operates a Share Ownership Policy. When exercising share options, relevant employees are required to build a qualifying interest in shares or vested options capable of exercise that is equal to a percentage of their base salary at the prevailing time. Ordinary shares are valued at their market value at the time of any calculation carried out to determine whether a qualifying interest has been established or needs to be increased. The CEO is required to build a qualifying interest equal to 200% of his base salary, while the CFO is required to build an interest equal to 150% of his salary. Non-executive Directors of the Company receive a basic fee for the services provided to the Company. These are reviewed by the Company from time to time to ensure levels remain in line with comparable companies. There are no performance measures in relation to fees paid to Non-executive Directors. The Non-executive Directors do not receive an additional allowance for chairing one or more of the Committees of the Board. The aggregate remuneration payable to the Directors in respect of the period was as follows: Peter Butterfield: Salary or fees 335,500, Other 12,377, Pension 28,998, Bonus 238,889, Total remuneration excluding share options 615,764, Exercised share option gains 363,146, Total remuneration including share options 978,910. Andrew Franklin: Salary or fees 226,667, Other 11,922, Pension 22,667, Bonus 155,940, Total remuneration excluding share options 417,296, Total remuneration including share options 417,296. Nigel Clifford: Salary or fees 115,000, Other 0, Pension 0, Bonus 15,000, Total remuneration excluding share options 44,389, Total remuneration including share options 15,000. David Cook: Salary or fees 82,667, Other 0, Pension 0, Bonus 82,667, Total remuneration excluding share options 78,488, Total remuneration including share options 82,667. Richard Jones: Salary or fees 45,750, Other 0, Pension 0, Bonus 45,750, Total remuneration excluding share options 44,389, Total remuneration including share options 45,750. Jo LeCouilliard: Salary or fees 45,750, Other 0, Pension 0, Bonus 45,750, Total remuneration excluding share options 42,723, Total remuneration including share options 45,750."
"Kristof Neirynck: Salary or fees 23,844, Other 0, Pension 0, Bonus 3,844, Total remuneration excluding share options 0, Total remuneration including share options 3,844. Total remuneration for all Directors was 1,589,217 for 2021 and 1,172,249 for 2020. No Director received any remuneration from a third party in respect of their service as a Director of the Company. Base salaries for the CEO and CFO were increased in line with the wider workforce during the year from £330,000 to £338,250 for the CEO and from £220,000 to £230,000 for the CFO. These increases took effect on 1 May 2021. Both the CEO and CFO received an employer pension contribution of twice the amount contributed by the Director up to a maximum of 10% of salary. The column headed ‘Other’ in the table above shows the value of benefits provided to each Executive Director, including a cash allowance in lieu of a company car and healthcare. Only the Executive Directors accrue retirement benefits, and both of whom did so through defined contribution schemes. The Company does not operate a defined benefit scheme. The Committee reviewed the achievement of actual underlying profit before tax against budgeted levels of underlying profit before tax, the key metric for monitoring corporate performance. In addition, the Committee considered the personal performance of the Executive Directors as measured against various factors including pre-set personal objectives. An increase to Non-executive Directors’ fees was approved during the year and took effect on 1 May 2021. The annual fee paid to David Cook is £84,000. Jo LeCouilliard, Kristof Neirynck, and Richard Jones each receive a fee of £46,125 per annum. The Company operates two share incentive schemes under which share options are granted to Executive Directors and senior management. More details on our share plans can be found in the Directors’ Report. During the year, the Committee approved the award of market value share options to the Executive Directors and Senior Leadership Team. The quantum of award is one share for every £2 of base salary and, where appropriate, may attract tax advantages. On 29 September 2021, the Company granted Peter Butterfield 29,182 approved and 139,943 unapproved share options under the Company Share Option Plan. On the same date, the Company granted Andrew Franklin 115,000 unapproved share options under the same plan. These share options were all granted with an exercise price of 102.8p per share. Based on the exercise price, the value of the awards as at the date of grant was equal to £173,860 for the CEO and £118,220 for the CFO. These awards will vest on the third anniversary from the date of grant, 29 September 2024, subject to meeting the performance targets. All awards under the Long-Term Incentive Plan are subject to standard malus and clawback provisions which allow the Company, in certain circumstances, to either terminate outstanding options or seek repayment of after-tax value of options which have been exercised by an Executive who has been dismissed as a result of a set of prescribed irregularities. All options granted to Executive Directors before 2019 will only vest if targets for growth in the Company’s underlying diluted Earnings Per Share are met over a period of three years. Earnings Per Share is an important metric which provides a strong incentive to drive the Group’s business over that longer-term period and to mitigate downside risks that could affect the Group’s profitability. In 2019, the Committee reviewed performance targets as part of the introduction of the Long-Term Incentive Plan and introduced a second measure, in addition to Earnings Per Share, based on Total Shareholder Return. As such, all options granted in 2021 to Executives under the Company Share Option Plan and Long-Term Incentive Plan are subject to Earnings Per Share and Total Shareholder Return performance conditions. Awards vesting during the year included market value share options made in 2018 under the Company Share Option Plan to Peter Butterfield and Andrew Franklin, which vested 100% based on the achievement of the Earnings Per Share target for the financial year ending 31 December 2020. The closing mid-market price of Ordinary shares on 31 December 2021 was 108.8p and the range during the year was from 82.0p to 110.0p."
"CSOP Unapproved 23 September 2020 73.70 EPS and TSR 165,000 23 September 2023 23 September 2024 LTIP 23 September 2020 Nil EPS and TSR 246,269 23 September 2023 23 September 2024 CSOP Unapproved 29 September 2021 102.80 EPS and TSR 139,943 29 September 2024 29 September 2031 CSOP Approved 29 September 2021 102.80 EPS and TSR 29,182 29 September 2024 29 September 2031 LTIP 29 September 2021 Nil EPS and TSR 180,970 29 September 2024 29 September 2025 3,550,548 2,455,000 705,000 1,750,000 Andrew Franklin Type of award Date of grant Exercise price Performance condition Number of options granted Vested Exercised Lapsed Number of options capable of exercise Exercisable from Exercisable to CSOP Unapproved 04 December 2015 46.75 No 1,935,829 1,935,829 1,435,829 500,000 04 December 2018 04 December 2025 CSOP Unapproved 27 October 2016 47.50 EPS 155,000 155,000 155,000 27 October 2019 27 October 2026 CSOP Unapproved 27 October 2016 47.50 EPS 400,000 400,000 400,000 27 October 2021 27 October 2026 CSOP Unapproved 15 September 2017 53.00 EPS 170,000 170,000 170,000 15 September 2020 15 September 2027 CSOP Unapproved 05 October 2018 81.60 EPS 178,000 178,000 178,000 05 October 2021 05 October 2028 CSOP Approved 05 December 2019 76.90 EPS and TSR 39,011 05 December 2022 05 December 2029 CSOP Unapproved 05 December 2019 76.90 EPS and TSR 55,989 05 December 2022 05 December 2029 LTIP 05 December 2019 Nil EPS and TSR 111,183 05 December 2022 05 December 2023 CSOP Unapproved 23 September 2020 73.70 EPS and TSR 110,000 23 September 2023 23 September 2024 LTIP 23 September 2020 Nil EPS and TSR 134,328 23 September 2023 23 September 2024 CSOP Unapproved 29 September 2021 102.80 EPS and TSR 115,000 29 September 2024 29 September 2031 LTIP 29 September 2021 Nil EPS and TSR 100,681 29 September 2024 29 September 2025 3,505,021 2,838,829 1,435,829 1,403,000 Andrew Franklin did not exercise any share options during the year. Remuneration Committee Report continued Directors’ Remuneration continued Share incentive awards Executive Directors hold options through the Company’s share option and long-term incentive plans. Details of options held under the Company’s employee share schemes by the Directors as at 31 December 2021 and who served during the year are as shown opposite. Shares are retained as required in order to comply with the Company’s Share Ownership Policy for which details are provided on page 74. On 21 April 2021, Peter Butterfield exercised 205,000 options over Ordinary shares of 1p each granted to him by the Company under the CSOP in 2017. The exercise price was 53.0p per share. 93,000 shares were then subsequently sold at a market price of 95.4p per share. On 19 November 2021, Peter Butterfield exercised 500,000 options over Ordinary shares of 1p each granted to him by the Company under the CSOP in 2016. The exercise price was 47.5p per share. 269,417 shares were then subsequently sold at a market price of 102.5p per share. Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Directors’ interests and shareholdings Share ownership policy The Company operates a share ownership policy under which the Executive Directors and certain other employees are required when exercising options to acquire and maintain an interest in Alliance Pharma shares up to a percentage of base salary. The policy requires Executive Directors, when they exercise options, to retain shares in the Company with a value equal to 50% of the net gain until such time as the required level of shareholding is achieved. Once an Executive Director has built a stake in the Company equal to the required levels, they are free to exercise without having to retain shares. Interests may also be maintained as a result of a Director acquiring Ordinary shares in the open market. The Company Secretary maintains a record of individual required levels and qualifying interests based on information provided by an individual subject to this policy and reports periodically to the Remuneration Committee regarding compliance. Pursuant to the policy, 50% of the value of any vested but unexercised awards count towards the holding requirements. Ordinary shares are valued at their market value at the time of any calculation carried out using the previous day’s closing middle market quotation. From 1 April 2021, the holding requirements under the share ownership policy increased from 100% to 200% of base salary for the CEO and from 100% to 150% of base salary for the CFO."
"Remuneration Committee Report continued Directors’ Remuneration continued As at 21 March 2022, the Executive Directors hold the following interests in Ordinary shares of the Company: Director Percentage of salary 2021 Base salary Shareholding Vested but unexercised awards Value of holdings % achieved Peter Butterfield CEO 200% £338,250 442,104 1,750,000 £838,504 248% Andrew Franklin CFO 150% £230,000 128,384 1,403,000 £558,129 243% At the closing market price on 21 March 2022: 111.4p. The following table shows the interests of the Directors and their spouses and minor children in the shares of the Company. Director At 31 December 2020 At 31 December 2021 Beneficial Non-beneficial Total Beneficial Non-beneficial Total Peter Butterfield 412,461 442,104 Andrew Franklin 128,384 128,384 David Cook 234,129 234,129 Richard Jones 15,000 15,000 Jo LeCouilliard Kristof Neirynck Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Directors’ service contracts All Executive Directors are employed under 12-month rolling service contracts. The services of all Executive Directors may be terminated by the Company or individual giving 12 months’ notice or immediately, in the event that the Director is not re-elected by shareholders at an AGM. Executive Director Date of appointment Date of current contract Unexpired term Notice period (Company) Notice period (Director) Peter Butterfield Chief Executive 22 February 2010 05 August 2010 Rolling 12 months 12 months 12 months Andrew Franklin Chief Financial Officer 28 September 2015 25 June 2015 Rolling 12 months 12 months 12 months The Non-executive Directors are employed under letters of engagement which may be terminated by the Company by giving the appropriate notice or immediately, in the event that the Director is not re-elected by shareholders at an AGM. Non-executive Director First date of appointment Current term Unexpired term David Cook Chair and Independent NED 01 April 2014 4 years 13 months Jo LeCouilliard Independent NED 01 January 2019 5 years 22 months Richard Jones Independent NED 01 January 2019 5 years 22 months Kristof Neirynck Independent NED 01 December 2021 5 years 57 months The Executive Directors’ service contracts and Chairman and Non-executive Directors’ letters of appointment are available for inspection by shareholders at the Company’s registered office or by emailing the Company Secretary at Company.Secretary@AlliancePharma.co.uk. Remuneration Committee Report continued Directors’ Remuneration continued Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Chairman’s statement I am pleased to be introducing the first report from the ESG Committee. This Committee was newly formed in 2021 and during the last year it has been busy getting to grips with issues associated with our approach to sustainability, environmental considerations including climate change, government policies, metrics, reporting requirements, and investor and other stakeholder needs all of whom are engaging with this much-needed agenda. In this report we set out the Committee’s responsibilities and report on the activities of the Committee during the year. The business sees this as a much-needed and positive step forward and there has been good engagement with our various stakeholders. In particular, the Committee would like to thank our employees who took part in the workshops which preceded the creation of the Sustainability Forum and to those shareholders who have also worked with us to help us better understand responsible investing. The Committee looks forward to building on all the hard work being done. David Cook ESG Committee Chairman 30 March 2022 Driving ESG and the sustainability agenda is a real positive step benefiting all stakeholders across our business and its operations ESG Committee Report ESG Committee Report Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements The role of the Committee The ESG Committee’s primary role is to review the overarching ESG vision for the Company and ensure that the priorities are anchored and an integral part of the Company’s overall strategy. Duties of the Committee The duties of the Committee include: To ensure that the views of stakeholder groups on ESG matters are solicited and understood to inform the Company’s long-term strategic decisions. To identify the relevant ESG priorities that most significantly impact the Company and its stakeholders, its reputation and public interest role. To assist in defining and executing the Company’s strategy and, in so doing, agree the annual plan and targets relating to ESG matters. To review the Company’s performance against its annual plan and ESG targets, initiatives and commitments. To guide the Company’s ESG communication strategy."
"To ensure that ESG priorities are reflected in the Company’s culture through its purpose, vision, values and behaviours as well as its supplier code of conduct. Committee membership All Board members currently sit in the Committee and have the right to attend meetings. The Committee works closely with the SLT and meetings are also attended by the Corporate Sustainability Lead. Others are invited to attend as appropriate to support the Committee with discussions. Committee membership changes Nigel Clifford stepped down from the Committee on 30 April 2021. With effect from 1 December, Kristof Neirynck was appointed a member of the ESG Committee. Attendance During the year, the Committee held three scheduled meetings and reported on its activities to the Board. ESG Committee 3 Meetings 100% attendance Member Role Status Attendance David Cook Chairman Independent 3/3 Peter Butterfield CEO 3/3 Andrew Franklin CFO 3/3 Jo LeCouilliard NED Independent 3/3 Richard Jones NED Independent 3/3 Kristof Neirynck NED Independent 3/3 Activities of the Committee An overview of our approach and sustainability framework can be found on page 25. Activities Reviewed 2021 and 2022 objectives and sustainability framework and initiatives. Received investor presentations to understand ESG investor perspectives. Reviewed feedback from one to one meetings held with investors to understand their objectives. Reviewed the mapping of Alliance’s sustainability disclosures and accounting metrics to SASB. Reviewed the Company’s ratings with MSCI and Sustainalytics. Appointed energy consultancy firm to help shape the medium-term ambition particularly in areas of TCFD and Scope 3 emissions, supply chain management and development of key metrics. Oversaw the Company’s environmental strategy, carbon action plan and sustainable packaging strategy. Liaised with Remuneration Committee to develop ESG link to remuneration strategy. Reviewed the Acting Responsibly section on the corporate website. Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Task Force on Climate-related Financial Disclosures TCFD Recommendation Response Further information Governance Disclose the organisation’s governance around climate-related risks and opportunities. a) Describe the Board’s oversight of climate-related risks and opportunities. b) Describe management’s role in assessing and managing climate-related risks and opportunities. The ESG Committee is responsible for setting the Group’s overarching sustainability strategy, including its environmental strategy, and for identifying relevant ESG priorities that most significantly impact the Group, including those relating to climate change. The SLT, supported by the Corporate Sustainability Lead, is responsible for operationalising this strategy. Governance ESG Committee Report page 76 Strategy Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning where such information is material. a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term. b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning. c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario. The actual and potential impacts of climate-related risks and opportunities on the Group’s business, strategy and financial planning have yet to be fully quantified. We are therefore unable to determine the extent to which these are likely to be material. Given the nature of our business and our operating model, whilst there are likely to be some financial and operational impacts, at this stage we have yet to determine the extent to which these may be material. We expect to complete the scenario analysis required to enable us to make a proper assessment during 2022. Environmental Strategy page 33 The purpose of the TCFD recommendations is to provide a foundation to improve investors’ and others’ ability to appropriately assess and price climate-related risks and opportunities. The recommended disclosures are structured around four thematic areas that represent core areas of how organisations operate: governance, strategy, risk management, and metrics and targets. We are still in the early stages of evaluating the impact of climate change on our business and strategy. As part of our 2021 reporting, we are therefore making partial disclosures, setting out our approach to climate-related issues as they relate to governance, strategy and risk management, together with those metrics which we are currently able to provide. We are looking to undertake the scenario analysis required to enable us to provide more extensive disclosures in line with TCFD recommendations in 2022, as we progress our wider environmental sustainability strategy. This will form part of our reporting for the year ended 31 December 2022."
"Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Task Force on Climate-related Financial Disclosures continued Recommendation Response Further information Risk Management Disclose how the organisation identifies, assesses, and manages climate-related risks. a) Describe the organisation’s processes for identifying and assessing climate-related risks. b) Describe the organisation’s processes for managing climate-related risks. c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management. Climate change has been identified as an emerging risk, on the basis that we do not currently have sufficient clarity around it to be able to assess its likely impact, and the likelihood of this impact occurring. The risk has been included on the Group risk register and is being managed as part of the Group’s wider risk management framework, under the oversight of the Board with the support of the Audit and Risk Committee Principal Risks and Uncertainties pages 39 to 45 Metrics and Targets Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material. a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas emissions, and the related risks. c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets. Additional information on metrics and targets used to assess and manage relevant climate-related risks, to the extent that they are material, will be provided as part of our 2022 reporting once we have completed the required scenario analysis. Our Scope 1 and 2 GHG emissions for our UK operations for 2021 are included as part of our Streamlined Energy and Carbon Reporting. In 2021, we quantified our Scope 3 GHG emissions for 2020. This led to Environmental impacts supply chain and logistics being included as one of the eight Areas of Focus within our Sustainability Framework. We intend to publish emissions reductions targets in late 2022 for Scopes 1 and 2 and are aiming to set Scope 3 targets in 2023. Environmental Strategy page 33 SECR page 83 Sustainability Overview pages 25 to 27 Sustainability Performance pages 28 to 32 Alliance Pharma plc Annual Report and Accounts 2021 Governance Company Overview Strategic Report Additional Information Financial Statements Directors' Report Scope of this report The Directors present their Annual Report, together with the audited financial statements of the Company and the Group, for the year ended 31 December 2021. The Directors’ Report required under the Companies Act 2006 includes and comprises the Directors’ biographies on pages 48 and 49, the Governance statement on pages 50 to 55, the Remuneration Committee Report on pages 65 to 75 and the Strategic Report on pages 06 to 45. As permitted under the Companies Act 2006, certain matters which would otherwise need to be included in this Directors’ Report have instead been discussed in the Strategic Report on pages 06 to 45. These matters include. Any important post-balance sheet events, the likely future developments in the business of the Company and its subsidiaries, and the activities of the Company and its subsidiaries in the field of research and development. Principal activities The principal activity of the Company is to act as a holding company. The principal activity of the Group is the acquisition, marketing, and distribution of consumer healthcare and pharmaceutical products. Branches A list of the Group’s subsidiaries and associated undertakings can be found on pages 121 and 122 under note 13 to the financial statements. There are no branches of the Company outside the UK. Alliance Pharmaceuticals GmbH, a company within the Alliance Group, has a Swiss branch which operates under the name Alliance Pharmaceuticals GmbH Düsseldorf, Zweigniederlassung Uster. Directors Names and biographical details of the Directors of the Company at the date of this report are shown on pages 48 and 49. The rules setting out the powers of Directors, their appointment, and replacement are set out in the Company’s Articles of Association. Further information on the process can be found on page 59 of the Nomination Committee Report. Details of Executive Directors’ service contracts and letters of appointment for Non-executive Directors can be found in the Remuneration Report on page 75. All Directors put themselves forward for annual re-election at the Company’s Annual General Meeting."
"Directors’ indemnities The Company’s Articles of Association contain provisions for Directors to be indemnified, including the funding of defense costs, to the extent permitted by the Companies Act 2006. This indemnity would only be available if judgment was given in the individual’s favor, or he or she was acquitted, or relief under the Companies Act 2006 was granted by the court. There were no qualifying pension scheme indemnity provisions in force during the year. Share capital and shareholders’ rights The Company’s issued share capital as at 21 March 2022 is 538,658,812 Ordinary shares of 1p each. Each Ordinary share carries one vote at general meetings of the Company. There are no restrictions on the transfer of Ordinary shares other than restrictions which may from time to time be imposed by law. The Company is not aware of any agreements between shareholders that may restrict the transfer of securities or voting rights. The Company has no shareholder authority to acquire its own shares. Dividends The Board declared an interim dividend in respect of the year ending 2021 of 0.563p per share, which was paid on 7 January 2022. The Directors are recommending a final dividend of 1.128p per share, which, subject to shareholders’ approval at the AGM, will be paid on 7 July 2022 to shareholders on the register at close of business on 10 June 2022. The total dividend paid and proposed in respect of the year ended 31 December 2021 is therefore 1.691p per share. Substantial shareholdings As at 21 March 2022, as required under AIM and certain disclosure rules, the Company has been notified of the major shareholdings in the table below. Both the number of shares held and the percentage holding are stated as at the latest date of notification to the Company. Details of all major shareholdings can also be found in the Investor section of the Company’s website. Shareholder Number of shares held Percentage of issued share capital Fidelity Mgt & Research 53,913,307 10.01% Slater Investment 49,692,096 9.23% Van Lanschot Kempen 42,254,750 7.84% Blackrock Inc. 34,648,461 6.43% Investec Group 24,825,908 4.61% Rathbone plc 20,626,281 3.83% Polar Capital Holdings 19,096,921 3.55% Royal Bank of Canada 16,197,254 3.01% Company share incentive plans The Company operates two incentive share plans. The Alliance Company Share Option Plan 2015 (CSOP) For many years, the Company has operated a CSOP under which all employees are eligible to receive awards in the form of market value options. At the discretion of the Committee, awards are typically granted subject to a three-year vesting period and following maturity, participants have a seven-year period in which to exercise their options. Options awarded are based on one share for every £2 of salary and where appropriate may attract HMRC tax advantages. Employees based outside of the UK will receive non-tax advantaged share option awards and, where this is not possible, the Committee considers awards in the form of share appreciation rights. All awards granted to Executive Directors and Senior Management are subject to performance conditions. These are explained in the Remuneration Committee Report on pages 71 and 72. The Alliance Long-Term Incentive Plan 2019 (LTIP) In 2019, the Company introduced the LTIP which forms part of the remuneration strategy for the Executive Directors and members of the Senior Leadership Team. Awards are granted in the form of nil-cost share options based on a percentage of base salary. All awards granted under the LTIP are subject to performance conditions and malus and clawback provisions. Subject to achieving the performance conditions set by the Committee, such awards will vest three years from the date of grant and participants will have 12 months in which to exercise any vested award. Details in relation to awards granted to the Company’s Executive Directors are contained in the Remuneration Report on page 73. Employee Benefit Trust (EBT/Trust) and management of dilution The Company manages dilution rates within the standard guidelines. In 2017, the Group established the Alliance Pharma Employee Benefit Trust to facilitate the acquisition of Ordinary shares in the Company for the purpose of satisfying awards granted under share option schemes. The Group has been operating the Trust to help manage dilution limits in line with good practice. The Trust is administered by an independent Trustee who operates the Trust independently of the Group. The EBT is a discretionary trust, the sole beneficiaries being employees, including Executive Directors, of the Group who have received applicable awards."
"The Trustees must act in the best interests of the beneficiaries as a whole and will exercise their discretion in deciding whether or not to act on any recommendations proposed by the Company. Any assets held by the Trust would be consolidated into the Group’s financial statements. The Company may grant awards on the basis that it is the Company’s intention to settle the exercise of awards through shares purchased in the open market on an arm’s length basis. Awards granted and settled in this way are not included in the Company’s headroom and dilution calculation. The Group may fund the EBT to purchase on the EBT’s own account shares in the Company on the open market. This is in return for the EBT agreeing to use the shares in the Company that it holds to satisfy certain outstanding awards made under the Company’s share option schemes. The purchasing in the market of shares to satisfy the exercise of options places a cash requirement on the business. To date, no shares have been purchased by the Trust for satisfaction of outstanding or future share option awards. To further help manage dilution limits, and where appropriate and agreed with the Committee, share options are net settled upon exercise. Employee share dealing and share ownership In accordance with AIM Rule 21, all employees are made aware of and are required to comply with the Company’s Share Dealing Policy when dealing in the Company’s shares or exercising options over shares. The Dealing Code sets out the rules relating to close periods, clearance procedures, time frames, and disclosure requirements. The Company operates a share ownership policy under which the Executive Directors and certain other employees are required, when exercising options, to acquire and maintain an interest in Alliance Pharma shares up to a percentage of base salary. Details of which can be found on page 70. Accounting policies, financial instruments, and risks Details of the Group’s financial instruments and financial risk management disclosures can be found in note 21 of the Group financial statements on pages 125 to 129. Charitable donations During the year ended 31 December 2021, the Group contributed £25,635 to charitable causes. Political donations No political donations or contributions were made, or political expenditure incurred during the period. Directors’ obligations to the auditor The Directors confirm that so far as each of the Directors is aware, there is no relevant audit information of which the Company’s auditor is unaware, and they have each taken all the steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. Company’s auditor The Company intends to undertake a tender process for audit services and expects this process to be completed by Q3 2022. Notwithstanding such process, a resolution to re-appoint KPMG LLP will be proposed at this year’s Annual General Meeting. Annual General Meeting This year’s AGM will be held on 18 May 2022, the business of which is set out in the Notice of Meeting. A circular containing the Notice of Meeting together with an explanatory letter from the Chairman accompanies the Annual Report and is also available on the Company’s website. Please note that following the Company’s move to electronic communications, we are no longer producing hard copy forms of proxy. These are available on request from the Company’s Registrars. Electronic communications Shareholders are encouraged to move away from hard copy Company communications. This means that, instead of being obliged to send Annual Reports, notices of shareholder meetings, and other documents to shareholders in hard copy by post, the Company can instead elect to publish them on its website at www.alliancepharmaceuticals.com. Using the website and email allows us to reduce printing and postage costs and it is better for many shareholders who can choose and access just the information they need from the website at any time. Shareholders still have the right to ask for paper versions of shareholder information, but we are strongly encouraging all shareholders to consider the electronic option. Shareholders can also vote electronically using the following link, www.signalshares.com. Registering your details on the Link share portal also gives shareholders easy access to information about their shareholdings and the ability to vote at general meetings or appoint a proxy to vote. Annual reporting figures The total consumption and emissions figures for energy supplies reportable by Alliance Pharma Plc."
"Consumption and greenhouse gas emissions totals The following figures show the consumption and associated emissions for this reporting year for our operations, with figures from the previous reporting period included for comparison. Scope 1 consumption and emissions relate to direct combustion of natural gas and fuels utilized for transportation operations, such as company vehicle fleets. Scope 2 consumption and emissions relate to indirect emissions relating to the consumption of purchased electricity in day-to-day business operations. Scope 3 consumption and emissions relate to emissions resulting from sources not directly owned by us. This relates to grey fleet only. Totals The total consumption figures for reportable energy supplies are shown as follows: Utility and Scope 2021 Consumption 2020 Consumption Grid-supplied electricity (Scope 2) 256,103 241,399 Gaseous and other fuels (Scope 1) 10,644 10,644 Transportation (Scope 1 and 3) 144,186 100,864 Total 410,933 352,907 The total emission figures for reportable energy supplies are set out below. Conversion factors utilized in these calculations are detailed in the appendix: Utility and Scope 2021 Consumption 2020 Consumption Grid-supplied electricity (Scope 2) 54.38 56.27 Gaseous and other fuels (Scope 1) 1.95 1.96 Transportation (Scope 1 and 3) 33.68 23.78 Total 90.01 82.01 Intensity metric An intensity metric of tCO2e per £m turnover has been applied for our annual total emissions. The methodology of the intensity metric calculations is detailed in the appendix, and the results of this analysis are shown as follows: Intensity Metric 2021 Intensity Metric 2020 Intensity Metric tCO2e/£m turnover 0.70 0.75 Energy efficiency improvements We are committed to year-on-year improvements in our operational energy efficiency. As such, a register of energy efficiency measures available to us has been compiled, with a view to implementing these measures in the next five years. Measures ongoing and undertaken through 2021: We have undertaken a program of refurbishment and upgrading works at Avonbridge House, including replacement of windows with thermally efficient argon-filled double glazing, completion of air conditioning upgrade, completion of light-emitting diode lighting upgrade, insulation of attic space, and replacement of atrium glazing. Measures prioritized for implementation in 2022: We are actively looking at options for the installation of renewable energy generation at our Avonbridge site. Appendix to SECR Reporting methodology Scope 1 and 2 consumption and CO2e emission data have been calculated in line with the 2019 UK Government environmental reporting guidance. The following Emission Factor Databases consistent with the 2019 UK Government environmental reporting guidance have been used, utilizing the current published kWh gross calorific value and kgCO2e emissions factors relevant for reporting year 01/01/2021 – 31/12/2021: Database 2021, Version 1.0. For properties where Alliance Pharma is indirectly responsible for utilities, an average kWh/m² consumption was calculated at meter level, based upon CIBSE standard benchmarks and was applied to the properties with similar operations with no available data. These full year estimations were applied to one electricity supply and one gas supply. These estimations equated to 7% of reported consumption. Intensity metrics have been calculated utilizing the 2021 reportable figures for the following metric, and tCO2e for both individual sources and total emissions were then divided by this figure to determine the tCO2e per metric: Total turnover £128m Directors' Responsibilities Statement The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under the AIM Rules of the London Stock Exchange, they are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable law, and they have elected to prepare the parent Company financial statements on the same basis. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of the Group’s profit or loss for that period."
"In preparing each of the Group and parent Company financial statements, the Directors are required to select suitable accounting policies and then apply them consistently, make judgments and estimates that are reasonable, relevant, and reliable, state whether they have been prepared in accordance with UK-adopted international accounting standards, assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern, and use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report and a Directors’ Report that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Chris Chrysanthou Company Secretary 30 March 2022. Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Company Balance Sheet Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated and Company Cash Flow Statements Notes to the Financial Statements. Independent auditor’s report to the members of Alliance Pharma plc. Our opinion is unmodified. We have audited the financial statements of Alliance Pharma plc for the year ended 31 December 2021 which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated and Company cash flow statements and the related notes, including the accounting policies in note 2. In our opinion, the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 December 2021 and of the Group’s profit for the year then ended. The Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards. The parent Company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006. The financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) and applicable law. Our responsibilities are described below. We have fulfilled our. Ethical responsibilities under, and are independent of the Group in accordance with UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Overview Materiality: Group financial statements as a whole £1.5 million (2020: £1.5 million) 4.7% (2020: 4.7%) of normalized Group profit before tax Coverage 96% (2020: 92%) of group profit before tax Key audit matters vs 2020 Recurring risks Impairment of intangible brand assets Recoverability of parent company’s investment in subsidiaries Event driven New: CMA infringement decision New: Accounting treatment of costs related to cloud-based software arrangements. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement identified by us, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters."
"In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows: Financial Statements Governance Strategic Report Additional Information Company Overview 86 Alliance Pharma plc – Annual Report and Accounts 2021 Independent auditor’s report continued The risk Our response Impairment of Intangible Brand Assets (£368.8 million; 2020: £381.6 million) Refer to page 63 (Audit Committee Report), page 105 (accounting policy) and page 115 (financial disclosures). Forecast-based assessment: The estimated recoverable amount of intangible assets (excluding Goodwill and Computer Software) is subjective due to the inherent uncertainty involved in forecasting and discounting future cash flows. This assessment is based on assumptions such as forecast cash flows, discount rates and, in the case of finite life assets, the period over which management have forecast cash flows, which are inherently highly judgmental. The Group has a total of 53 CGUs, from which our risk has been identified in respect of 3, which hold an aggregate value of £10.8 million. Given the quantum of the balance in relation to our materiality and the inherent estimation uncertainty, we concluded this to be our most significant Key Audit Matter. The effect of these matters is that, as part of our risk assessment, we determined that the value in use across the portfolio has a high degree of estimation uncertainty with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole. The financial statements disclose the range/sensitivity estimated by the Group. For all CGUs, we held discussions with the directors, commercial, regulatory and financial management and considered information about the products available in the public domain. For higher risk CGUs our procedures included: Benchmarking assumptions: Using our own valuations specialist, we challenged the Group’s selection of discount and growth rates by comparing those used to externally derived data. In addition, we assessed whether the forecasts were consistent with current business strategies in place and information about the products available in the public domain, and that the selected useful economic lives for finite life assets were appropriate. Sensitivity analysis: We performed our own analysis to assess the sensitivity of the impairment reviews to changes in the key assumptions, including the discount rate, growth rate, useful economic lives, and the forecast cash flows. Historical comparisons: We compared the previously forecast cash flows to actual results to assess the historical accuracy of forecasting. Assessing transparency: We assessed the adequacy of the Group’s disclosures in respect of the sensitivity to changes in key assumptions. For CGUs which we determined were not higher risk, we performed historical comparisons and sensitivity analysis to ensure our risk assessment was appropriate. We performed the tests above rather than seeking to rely on any of the Group’s controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. The risk Our response CMA infringement decision (£7.9 million; 2020: £Nil) Refer to page 63 (Audit Committee Report), page 102 (accounting policy) and page 124 (financial disclosures). Dispute outcome: As explained in note 20, the Group received an infringement decision and fine of £7.9 million from the Competition and Markets Authority on 3 February 2022 relating to suspected anti-competitive agreements in relation to Prochlorperazine, which covered the period from June 2013 to July 2018. The amounts involved are significant, and the application of accounting standards to determine the amount to be provided as a liability is inherently subjective. The provision of £7.9 million recognized could be released in entirety if the Group is successful at appeal, or a lower amount agreed by the appeal. Following the issuance of an infringement notice by the CMA, this risk has increased. We have identified this matter as a risk of error and a risk of fraud due to perceived impact on the Group’s share price. Our procedures included: Enquiry of lawyers: Discussions with and inquiries of the Group’s in-house and external legal advisors, the directors and management. Our compliance expertise: Using our own forensic and compliance specialists, critically assessed the judgments taken by the Directors, and monitored external sources of information. Assessing transparency: Assessing whether the Group’s disclosures detailing the regulatory proceedings adequately disclose the potential liabilities of the Group. Accounting analysis: Assessing the directors' analysis of whether the receipt of the infringement decision was an adjusting or non-adjusting subsequent event."
"We performed the tests above rather than seeking to rely on any of the Group’s controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. Key audit matters: our assessment of risks of material misstatement continued Financial Statements Governance Strategic Report Additional Information Company Overview 87 Alliance Pharma plc – Annual Report and Accounts 2021 Independent auditor’s report continued Key audit matters: our assessment of risks of material misstatement continued The risk Our response Accounting treatment of costs related to cloud-based software arrangements (£15.0 million; 2020: £11.0 million) Refer to page 63 (Audit Committee Report), page 103 (accounting policy) and page 115 (financial disclosures). Accounting treatment: The Group has capitalized internal and external costs in respect of cloud-based software arrangements. In April 2021 the IFRS Interpretations Committee published an agenda decision on accounting for cloud computing costs. This IFRIC decision has been considered by the Group and the Group has concluded that no change in respect of the capitalization of certain costs associated with their Enterprise Resource Planning system is required. In assessing whether a change in accounting policy is required, the Group has exercised significant judgment in reaching a conclusion. The risk is that a potential change in accounting policy has not appropriately been identified and applied to both the current and prior years. Our procedures included: Accounting clarity: We assessed the accounting clarification of the IFRIC April 2021 decision against the Group’s treatment of capitalized ERP costs, including reviewing contractual documentation. Our IT expertise: In conjunction with the IT auditors, the audit team sought input from ERP implementation professionals on the practical and technical aspects of transferring the ERP from the cloud onto the company’s servers. Assessing transparency: We assessed the adequacy of the Group’s related disclosures in respect of the judgments taken by management. We performed the tests above rather than seeking to rely on any of the Group’s controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. The risk Our response Recoverability of parent company’s investment in subsidiaries (£199.3 million; 2020: £199.8 million) Refer to page 63 (Audit Committee Report), page 108 (accounting policy) and page 121 (financial disclosures). Low risk, high value: The carrying amount of the parent company’s investments in subsidiaries represents 99.9% (2020: 99.9%) of the company’s total assets. Their recoverability is not at a high risk of significant misstatement or subject to significant judgment. However, due to their materiality in the context of the parent company financial statements, this is considered to be the area that had the greatest effect on our overall parent company audit. Our procedures included: Test of detail: We compared the carrying amount of 100% of the investments with the net asset value of the respective subsidiaries, being an approximation of their minimum recoverable amount, to identify whether the net asset values were in excess of the carrying amounts and assessed whether those subsidiaries have historically been profit-making. The Group audit team performs the statutory audit of all material investments. We performed the test above rather than seeking to rely on any of the Group’s controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedure described. We continue to perform procedures over the selection of useful economic lives for intangible assets. However, following a consistent application of accounting policy in the current year, we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our report this year. We also continue to perform procedures over Goodwill, however, due to the absence of significant acquisitions in the current year and the significant levels of headroom present, we have not included it within this risk in our report this year. We also continue to consider the need for procedures over Business combinations: valuation of identified intangible assets. However, due to no business combinations having occurred in the current year, we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our report this year."
"Financial Statements Governance Strategic Report Additional Information Company Overview 88 Alliance Pharma plc – Annual Report and Accounts 2021 Independent auditor’s report continued Our application of materiality and an overview of the scope of our audit Materiality for the Group financial statements as a whole was set at £1.5 million (2020: £1.5 million), determined with reference to a benchmark of Group profit before tax, normalized to exclude the impairment of intangible assets, as disclosed in note 5, of £6.15 million and the CMA provision, also disclosed in note 5, of £7.9 million (2020: normalized to exclude the impairment and amortization of intangible assets, as disclosed in note 5, of £19.2 million), of which it represents 4.7% (2020: 4.7%). Materiality for the parent company financial statements as a whole was set at £0.9 million (2020: £1.4 million), determined with reference to a benchmark of Company total assets, of which it represents 0.5% (2020: 0.7%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 75% (2020: 75%) of materiality for the financial statements as a whole, which equates to £1.125 million (2020: £1.125 million) for the Group and £0.675 million (2020: £1.05 million) for the parent company. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £75,000 (2020: £75,000), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the Group’s 17 (2020: 19) reporting components, we subjected 3 (2020: 3) to full scope audits for group purposes and 1 (2020: 0) to an audit of account balances over revenue, trade receivables and cash and cash equivalents. The component for which we performed an audit of account balances was not individually significant but was included in the scope of our group reporting work in order to provide further coverage over the group’s results. The scope of the audit work performed was fully substantive as we did not rely upon the Group’s internal control over financial reporting. The components within the scope of our work accounted for the percentages illustrated opposite. The remaining 8% (2020: 11%) of total Group revenue, 4% (2020: 8%) of Group profit before tax and 11% (2020: 2%) of total Group assets is represented by 13 (2020: 14) of reporting components, none of which individually represented more than 10% (2020: 10%) of any of total Group revenue, Group profit before tax or total Group assets. For these components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material misstatement within these. Normalized group profit before tax £32.2 million (2020: £32.2 million) Group materiality £1.5 million (2020: £1.5 million) £1.5 million Whole financial statements materiality (2020: £1.5 million) £1.125 million Whole financial statements performance materiality (2020: £1.125 million) £1.1 million Range of materiality at 4 components (£0.2 million to £1.1 million) (2020: £0.6 million to £1.0 million) £75,000 Misstatements reported to the audit committee (2020: £75,000) Normalized PBT Group materiality Financial Statements Governance Strategic Report Additional Information Company Overview 89 Alliance Pharma plc – Annual Report and Accounts 2021 Independent auditor’s report continued The Group team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. The Group team approved the component materialities, which ranged from £0.2 million to £1.1 million (2020: £0.6 million to £1.0 million), having regard to the mix of size and risk profile of the Group across the components. The work on 1 of the 4 components (2020: 1 of the 4 components) was performed by component auditors and the rest, including the audit of the parent company, was performed by the Group team. The Group team performed procedures on the items excluded from normalized Group profit before tax. Other than the UK, the Group team visited one component location in the USA (2020: nil) during the year to perform audit procedures. Video and telephone conference meetings were also held with the component auditor for the component that was not physically visited."
"At these meetings, the findings reported to the Group team were discussed in more detail, and any further work required by the Group team was then performed by the component auditor. Going concern The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements. We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business model and analyzed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to adversely affect the Group’s and Company’s available financial resources and/or metrics relevant to debt covenants over this period were: The impact on customer confidence as a result of a slowdown in the global economy. Constraints on supply chain, sourcing or logistics and the impact it could have on the Group’s key products. The impact that changes in product regulation could have on the ability to sell new or existing products. The impact of the settlement of the penalty relating to the CMA infringement decision. Our application of materiality and an overview of the scope of our audit continued Group revenue Group total assets Group profit before tax Full scope for group audit purposes 2021 Audit of account balances 2021 Full scope for group audit purposes 2020 Residual components 8% 8% 89% 11% 92% (2020 89%) 84% 3% 11% 98% 2% 86% 1% 4% 92% 8% 95% 96% (2020 92%) 89% (2020 98%) Financial Statements Governance Strategic Report Additional Information Company Overview 90 Alliance Pharma plc – Annual Report and Accounts 2021 Independent auditor’s report continued Going concern continued We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources and covenants indicated by the Group’s financial forecasts. Our procedures also included a critical assessment of the assumptions in the Group’s base case and downside scenarios, in particular in relation to the recent geopolitical instability and the ongoing COVID-19 pandemic on the economic situation worldwide and its impact on the Group, and our knowledge of the entity and the sector in which it operates. We considered whether the going concern disclosure in note 2.18 to the financial statements gives a full and accurate description of the directors’ assessment of going concern, including the identified risks. Our conclusions based on this work: We consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. We have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company’s ability to continue as a going concern for the going concern period. We found the going concern disclosure in note 2.18 to be acceptable. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgments that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group will continue in operation. Fraud and breaches of laws and regulations – ability to detect. Identifying and responding to risks of material misstatement due to fraud. To identify risks of material misstatement due to fraud, we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included enquiring of directors and the audit committee, and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect fraud, including the Group’s channel for whistleblowing, as well as whether they have knowledge of any actual, suspected or alleged fraud."
"We read Board and Audit Committee meeting minutes, considered remuneration incentive schemes and performance targets for management and the directors, used analytical procedures to identify any unusual or unexpected relationships, and used our own forensic specialists to assist us in identifying fraud risks based on discussions of the circumstances of the Group. We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. This included communication from the Group audit team to component audit teams of relevant fraud risks identified at the Group level and a request to full scope component audit teams to report to the Group audit team any instances of fraud that could give rise to a material misstatement at the Group level. As required by auditing standards, and taking into account possible pressures to meet profit targets, we perform procedures to address the risk of management override of controls and the risk of fraudulent revenue recognition, in particular the risk that Group and component management may be in a position to make inappropriate accounting entries, and the risk that revenue is overstated through recording of revenues in the wrong period. We also identified a fraud risk related to the CMA infringement decision, in response to a perceived impact on the Group’s share price. Further detail in respect of the CMA infringement decision is set out in the key audit matter disclosures in section 2 of this report. We performed procedures including identifying journal entries and other adjustments to test for all full scope components based on risk criteria and comparing the identified entries to supporting documentation. These included those posted to unusual accounts and journal descriptions containing specific key words. We evaluated the business purpose of significant unusual transactions and assessed significant accounting estimates for bias. Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations. We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, through discussion with the directors, and discussed with the directors the policies and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. This included communication from the group to component audit teams of relevant laws and regulations identified at the Group level, and a request for component auditors to report to the group team any instances of non-compliance with laws and regulations that could give rise to a material misstatement at group. The potential effect of these laws and regulations on the financial statements varies considerably. Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation, distributable profits legislation and taxation legislation, and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: health and safety, anti-bribery, competition laws, employment law, product regulation and certain aspects of company legislation recognising the nature of the Group’s activities. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Further detail in respect of CMA infringement decision is set out in the key audit matter disclosures in section 2 of this report. Context of the ability of the audit to detect fraud or breaches of law or regulation. Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it."
"In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. Independent auditor’s report continued. Financial Statements Governance Strategic Report Additional Information Company Overview. We have nothing to report on the other information in the Annual Report. The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Strategic report and directors’ report. Based solely on our work on the other information, we have not identified material misstatements in the strategic report and the directors’ report. In our opinion the information given in those reports for the financial year is consistent with the financial statements, and in our opinion those reports have been prepared in accordance with the Companies Act 2006. We have nothing to report on the other matters on which we are required to report by exception. Under the Companies Act 2006, we are required to report to you if, in our opinion, adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us, or the parent Company financial statements are not in agreement with the accounting records and returns, or certain disclosures of directors’ remuneration specified by law are not made, or we have not received all the information and explanations we require for our audit. We have nothing to report in these respects. Respective responsibilities. Directors’ responsibilities. As explained more fully in their statement set out on page 84, the directors are responsible for the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website. Independent auditor’s report continued. Financial Statements Governance Strategic Report Additional Information Company Overview. The purpose of our audit work and to whom we owe our responsibilities. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Huw Brown for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 66 Queen Square, Bristol, BS1 4BE 30 March 2022. Independent auditor’s report continued."
"Financial Statements Governance Strategic Report Additional Information Company Overview. Consolidated Income Statement. Year ended 31 December 2021. Year ended 31 December 2020. Underlying Non-underlying Total Underlying Non-underlying Total Revenue 163,207 – 163,207 129,801 – 129,801 Cost of sales (53,757) – (53,757) (46,985) – (46,985) Gross profit 109,450 – 109,450 82,816 – 82,816 Operating expenses Administration and marketing expenses (60,202) (2,843) (63,045) (44,614) (1,300) (45,914) Amortisation of intangible assets (1,362) (7,168) (8,530) – (7,155) (7,155) Impairment of goodwill and intangible assets – (6,150) (6,150) – (12,057) (12,057) CMA provision – (7,900) (7,900) – – – Share-based employee remuneration (2,250) – (2,250) (1,374) – (1,374) Operating profit 45,636 (24,061) 21,575 36,828 (20,512) 16,316 Finance costs Interest payable and similar charges (3,646) – (3,646) (2,657) – (2,657) Finance income/(costs) 228 – 228 (643) – (643) (3,418) – (3,418) (3,300) – (3,300) Profit before taxation 42,218 (24,061) 18,157 33,528 (20,512) 13,016 Taxation (8,033) (2,805) (10,838) (6,372) 1,383 (4,989) Profit for the period attributable to equity shareholders 34,185 (26,866) 7,319 27,156 (19,129) 8,027 Earnings per share Basic (pence) 6.39 1.37 5.11 1.51 Diluted (pence) 6.30 1.35 5.05 1.49 All of the activities of the Group are classed as continuing. The accompanying accounting policies and notes form an integral part of these financial statements. Consolidated Statement of Comprehensive Income. Year ended 31 December 2021. Year ended 31 December 2020. Profit for the year 7,319 8,027 Other comprehensive income Items that may be reclassified to profit or loss Foreign exchange translation differences 636 (1,051) Foreign exchange forward contracts – cash flow hedge (191) (250) Interest rate swaps – cash flow hedge – 27 Total comprehensive income for the year 7,764 6,753. Consolidated Balance Sheet. Assets Non-current assets Goodwill and intangible assets 413,744 412,872 Property, plant and equipment 4,826 15,921 Deferred tax asset 3,526 2,139 Other non-current assets 371 682 Total non-current assets 422,467 431,614 Current assets Inventories 21,075 22,917 Trade and other receivables 30,821 25,114 Derivative financial instruments 64 310 Cash and cash equivalents 29,061 28,898 Total current assets 81,021 77,239 Total assets 503,488 508,853 Equity Ordinary share capital 5,382 5,329 Share premium account 151,328 150,645 Share option reserve 10,058 8,426 Other reserve (329) (329) Cash flow hedging reserve 48 239 Translation reserve (419) (1,055) Retained earnings 116,418 117,703 Total equity 282,486 280,958. Liabilities Non-current liabilities Loans and borrowings 116,060 138,328 Other liabilities 2,637 3,200 Deferred tax liability 61,728 56,181 Total non-current liabilities 180,425 197,709 Current liabilities Corporation tax 1,178 1,435 Trade and other payables 29,930 28,736 Provisions 9,469 – Derivative financial instruments – 15 Total current liabilities 40,577 30,186 Total liabilities 221,002 227,895 Total equity and liabilities 503,488 508,853. The financial statements were approved by the Board of Directors on 30 March 2022. Peter Butterfield Andrew Franklin Director Director. Company Balance Sheet. Assets Non-current assets Investment and loans to subsidiaries 199,348 199,776 Current assets Trade and other receivables 39 36 Cash and cash equivalents 141 297 Total current assets 180 333 Total assets 199,528 200,109 Equity Ordinary share capital 5,382 5,329 Share premium account 151,328 150,645 Share option reserve 8,962 7,955 Retained earnings 33,064 34,912 Total equity 198,736 198,841 Liabilities Current liabilities Trade and other payables 368 306 Corporation tax 424 962 Total liabilities 792 1,268 Total equity and liabilities 199,528 200,109. The Company’s profit for the year was 6,756,000. As permitted by section 408 of the Companies Act 2006, no separate Income Statement is presented in respect of the Parent Company. The financial statements were approved by the Board of Directors on 30 March 2022. Peter Butterfield Andrew Franklin Director Director. Consolidated Statement of Changes in Equity. Balance 1 January 2020 5,294 149,036 (329) 462 (4) 7,208 112,513 274,180 Issue of shares 35 1,609 – – – – – 1,644 Dividend paid – – – – – – (2,837) (2,837) Share options charge – – – – – 1,218 – 1,218 Transactions with owners 35 1,609 – – – 1,218 (2,837) 25 Profit for the year – – – – – – 8,027 8,027 Other comprehensive income Foreign exchange forward contracts – cash flow hedge – – – (250) – – – (250) Interest rate swaps – cash flow hedge – – – 27 – – – 27 Foreign exchange translation differences – – – – (1,051) – – (1,051) Total comprehensive income for the year – – – (223) (1,051) – 8,027 6,753 Balance 31 December 2020 5,329 150,645 (329) 239 (1,055) 8,426 117,703 280,958."
"Balance 1 January 2021 5,329 150,645 (329) 239 (1,055) 8,426 117,703 280,958 Issue of shares 53 683 – – – – – 736 Dividend paid – – – – – – (8,604) (8,604) Share options charge – – – – – 1,632 – 1,632. We have owners 53,683, 1,632, (8,604), (6,236). Profit for the year, 7,319. Other comprehensive income: Foreign exchange forward contracts, cash flow hedge (net of deferred tax), (191). Foreign exchange translation differences (net of deferred tax), 636. Total comprehensive income for the year, (191), 636, 7,319, 7,764. Balance 31 December 2021, 5,382, 151,328, (329), 48, (419), 10,058, 116,418, 282,486. Financial Statements Governance Strategic Report Additional Information Company Overview. Alliance Pharma plc, Annual Report and Accounts 2021. Company Statement of Changes in Equity. Ordinary share capital, £000s. Share premium account, £000s. Share option reserve, £000s. Retained earnings, £000s. Total equity, £000s. Balance 1 January 2020, 5,294, 149,036, 6,846, 32,316, 193,492. Issue of shares, 35, 1,609, 1,644. Dividend paid, (2,837), (2,837). Share options charge (including deferred tax), 1,109, 1,109. Transactions with owners, 35, 1,609, 1,109, (2,837), (84). Profit for the period and total comprehensive income, 5,433. Balance 31 December 2020, 5,329, 150,645, 7,955, 34,912, 198,841. Balance 1 January 2021, 5,329, 150,645, 7,955, 34,912, 198,841. Issue of shares, 53, 683, 736. Dividend paid, (8,604), (8,604). Share options charge (including deferred tax), 1,007, 1,007. Transactions with owners, 53, 683, 1,007, (8,604), (6,862). Profit for the period and total comprehensive income, 6,756. Balance 31 December 2021, 5,382, 151,328, 8,962, 33,064, 198,736. Financial Statements Governance Strategic Report Additional Information Company Overview. Alliance Pharma plc, Annual Report and Accounts 2021. Consolidated and Company Cash Flow Statements. Note Group Company Year ended 31 December 2021, £000s. Year ended 31 December 2020, £000s. Cash flows from operating activities. Cash generated from operations, 44,919, 46,405, (961), (2,133). Tax paid, (6,260), (4,838), (1,484), (1,012). Cash flows from/(used in) operating activities, 38,659, 41,567, (2,445), (3,145). Investing activities. Interest received, 10. Dividend received, 2,600, 2,800. Acquisition of Biogix Inc, (82,667). Purchase of intangible assets, (4,006). Purchase of property, plant and equipment, (1,526), (4,612). Proceeds from disposal of intangibles, 750, 1,405. Net cash (used in)/from investing activities, (4,599), (85,864), 2,600, 2,800. Financing activities. Interest paid and similar charges, (2,965), (2,866). Loan issue costs, (362). Capital lease payments, (924), (884). Contribution from/(investment in) subsidiary, 7,557, 1,738. Proceeds from exercise of share options, 736, 1,644. Dividend paid, (8,604), (2,837). Proceeds from borrowings, 82,595. Repayment of borrowings, (22,587), (21,541). Net cash provided by/(used in) financing activities, (34,344), 55,749, (311), (545). Net movement in cash and cash equivalents, (284), 11,452, (156), 200. Cash and cash equivalents at 1 January, 28,898, 17,830, 297, 97. Exchange gains/(losses) on cash and cash equivalents, 447, (384). Cash and cash equivalents at 31 December, 29,061, 28,898, 141, 297. The accompanying accounting policies and notes form an integral part of these financial statements. Financial Statements Governance Strategic Report Additional Information Company Overview. Alliance Pharma plc, Annual Report and Accounts 2021. General information. Alliance Pharma plc and its subsidiaries acquire, market and distribute consumer healthcare products and prescription medicines. The Company is a public limited company, limited by shares, registered, incorporated and domiciled in England and Wales in the UK. The address of its registered office is Avonbridge House, Bath Road, Chippenham, Wiltshire, SN15 2BB. The Company is listed on the AIM stock exchange. These consolidated financial statements have been approved for issue by the Board of Directors on 30 March 2022. Summary of significant accounting policies. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. Basis of preparation. These financial statements have been prepared and approved by the Directors in accordance with UK-adopted international accounting standards. Notes to the Financial Statements. Joint ventures. An entity is treated as a joint venture where the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Joint ventures are accounted for using the equity method and are initially recognised at cost. The consolidated financial statements include the Group’s share of the total comprehensive income and equity movements of equity accounted investees, from the date that joint control commences until the date that joint control ceases. Transactions eliminated on consolidation. Intra-Group balances and transactions, and any unrealised income and expenses arising from intra-Group transactions, are eliminated. Judgements and estimates."
"The preparation of the consolidated financial statements requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the relevant circumstances. Actual results may differ from these estimates. The financial statements have been prepared under the historical cost convention, with the exception of derivatives which are included at fair value. Consolidation. The Group financial statements consolidate those of the Company and its subsidiaries and equity account the Group’s interest in Joint Ventures. The parent Company financial statements present information about the Company as a separate entity and not about the Group. Subsidiaries. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The estimates and underlying assumptions are reviewed by the Directors on an ongoing basis. Judgements. The following are the critical judgements, apart from those involving estimates, that the Directors have made in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the Group’s financial statements. These are as follows: Assessment of cloud-based software costs in relation to the Group’s cloud hosted ERP system. Determining the treatment of payment to customers in significant contracts. This is considered a critical judgement, but the impact is immaterial for the current year. Identification and presentation of non-underlying items. Assessment of the Infringement Decision announced by the UK’s Competition and Markets Authority. Summary of significant accounting policies continued. Judgements and estimates continued. Intangible assets – cloud-based software costs. The determination of whether a cloud-based software arrangement represents a pure Software as a Service solution, or a right to take possession of, and to use, the software requires judgement. In light of the recent IFRIC agenda decision regarding cloud-based software, the Group has reviewed its service agreements in respect of its cloud-based ERP system and has considered several factors to conclude on the appropriate accounting treatment. These factors include the nature and key terms of licence arrangements, ownership of intellectual property rights, ability to restrict access to systems and the feasibility of removing software applications from the cloud environment and running them within the Group’s own IT environment instead, taking into account the associated costs and potential change in functionality. Having considered these factors, the Group concluded that it does have substantive control over the ERP system and has therefore recognised it as an intangible asset in line with the guidance under IAS 38. Had the Group concluded that it does not have control, a proportion of the costs would have been expensed in the Income Statement in the current year. Identification and presentation of non-underlying items. In 2020, the Group updated its classification policy for non-underlying items. Following the update, all amortisation and impairment charges for acquired intangible assets are included as non-underlying items, in line with the majority of peer companies of the Group. Significant restructuring costs, the CMA provision and the revaluation of deferred tax balances following substantial tax legislation changes are also included as non-underlying items. The Directors believe that this classification of underlying and non-underlying items, when considered together with total statutory results, provides investors, analysts and other stakeholders with helpful complementary information to understand better the financial performance and position of the Group from period to period, and allows the Group’s performance to be more easily compared against the majority of its peer companies. These measures are also used by management for planning and reporting purposes. They may not be directly comparable with similarly described measures used by other companies. Estimates. IAS 1 requires the disclosure of assumptions and estimates at the end of the current reporting period that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year."
"The Directors consider these estimates to be as follows: Key assumptions used in discounted cash flow projections for impairment testing of certain intangible assets. Revenue recognition. Identification of performance obligations. Revenue comprises consideration received or receivable for the sale of goods in the ordinary course of the Group’s activities, namely the distribution of pharmaceutical products. The Group has assessed the performance obligations as being each unit of good sold by the Group. The Group receives royalties in relation to certain agreements with distributors in exchange for the licensed use of intellectual property and trademarks owned by the Group, which are generally based on sales volumes. The Group also receives product margin generated by third parties on its behalf under certain transitional arrangements. The Group has assessed the performance obligations as being each unit of good sold by the third parties. Transaction price. The transaction price for each performance obligation comprises the stand-alone selling price for the product excluding value-added tax and net of rebates and discounts. Intra-Group sales are eliminated in the consolidated financial statements. Royalty income and the deductions relating to rebates and discounts are based on the Group’s contractual obligations. Certain of the rebate arrangements also include elements of variable consideration. The Group does not consider these elements to be significant, however an estimate of variable consideration is included where appropriate. The IFRS 15 exemption from estimating variable consideration has been applied to the Group’s sales-based royalties. The Group has considered whether it is an agent or principal under IFRS 15 for each commercial arrangement and accounted for these accordingly. The Group is considered the principal for all key commercial relationships relating to the sale of goods, except the relationship with certain supply partners. Timing of recognition. Under IFRS 15, an entity recognises revenue when it satisfies a performance obligation by transferring a good to a customer. An entity transfers a good to a customer when the customer obtains control of that good. Control may be transferred either at a point in time or over time. For the Group, revenue is recognised at a point in time when customers have control of the sold goods, or on an appropriate basis where royalty or other arrangements are in place with third parties. To determine the point in time control is transferred for the sale of goods, the Group considers all relevant indicators. Revenue is recognised net of a provision for the expected level of returns. Specific revenue streams. The Group has the following recognition policies for different commercial arrangements: Pharmaceutical product sales – ex-works terms: Recognition at a point in time when each unit of pharmaceutical product is available to the customer for collection. At this point in time, the customer has an obligation to pay for the goods, legal title and significant risks and rewards of ownership. Pharmaceutical product sales – dispatch terms and delivery at place: Recognition at a point in time when each unit of pharmaceutical product is dispatched to the customer or reaches the designated place. At this point in time, the customer has an obligation to pay for the goods, legal title and significant risks and rewards of ownership. This revenue recognition policy covers the cross-border e-commerce stream as referred to in the strategic report. Pharmaceutical product royalties receivable: Recognition at a point in time when the third party makes pharmaceutical product sales subject to a royalty agreement with the Group. Pharmaceutical product rebates, discounts and payments to customers: Recognition as a deduction from revenue when the third party makes pharmaceutical product sales subject to a rebate agreement with the Group or when sales are made in the scope of the VPAS Voluntary Scheme. VPAS applies to branded, licensed medicines which are available on NHS prescription. Under the scheme, a fixed percentage of measured sales is due to the Department of Health and Social Care and the rebate is calculated and paid on a quarterly basis. For medium-sized companies, the VPAS scheme includes an exemption where total measured sales are less than £5.0 million per year. As the Group’s total measured sales in 2021 were under this threshold, the Group was exempt from any VPAS payments and, as a result, no amounts were deducted from revenue. For transactions with variable consideration, such as coupons, this is recognised at the point of sale to the customer. Payments to customers are accounted for as a reduction of revenue unless they are linked to a distinct service, in which case they are classified as an operating expense."
"Pharmaceutical product transitional agreements: Recognition at a point in time when the third party makes pharmaceutical product sales subject to a transitional agreement with the Group. The amounts recognised in statutory revenue represent the product margin generated by the third party on behalf of the Group. Related transitional agreement fees are recognised within administrative expenses. This is relevant to Nizoral where the Group has transitional agreements with certain supply partners. Under the terms of the agreements, the Group receives the benefit of the net profit on sales of Nizoral from the date of acquisition up until the product licenses in the Asia-Pacific territories transfer to Alliance. The Group has determined it is an agent in these relationships as it does not control the sale of goods to third party customers. The Group does not consider that judgements made in evaluating when customers obtain control of a promised good to have significantly influenced the timing of revenue recognition in the year. Foreign currency. The consolidated financial statements are presented in Sterling, which is the presentational currency of the Group and the functional currency of the Company. Foreign currency transactions by Group companies are booked at the exchange rate ruling on the date of the transaction. Foreign currency monetary assets and liabilities are retranslated into Sterling at the rate of exchange ruling at the balance sheet date. Foreign exchange differences arising on translation are recognised in the Income Statement except for differences arising on the retranslation of a financial liability designated as a hedge of the net investment in a foreign operation that is effective, or qualifying cash flow hedges, which are recognised directly in other comprehensive income. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s presentational currency, Sterling, at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from translation of foreign operations are reported in other comprehensive income and accumulated in the translation reserve. Foreign currency differences arising on the retranslation of a hedge of a net investment in a foreign operation are reported in other comprehensive income and accumulated in the translation reserve, to the extent that the hedge is effective. Operating segments. Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s Chief Operating Decision Maker. The Group’s Board of Directors is the Group’s Chief Operating Decision Maker, as defined by IFRS 8, and all significant operating decisions are taken by the Board. Property, plant and equipment. Computer equipment, fixtures, fittings and equipment, plant and machinery and motor vehicles are stated at the cost of purchase less any provisions for depreciation and impairment. Depreciation of an asset starts when the asset is available for use. The rates. Generally applicable are Computer equipment 20 to 33.3 percent per annum straight line. Fixtures, fittings and equipment 20 to 25 percent per annum straight line. Plant and machinery 20 to 25 percent per annum straight line. At inception of a contract, the Group assesses whether a contract is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the Group’s incremental borrowing rate. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the Income Statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment. Goodwill is stated at cost less any accumulated impairment losses."
"Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment. Separately acquired brands are shown at cost less accumulated amortisation and impairment. Brands acquired as part of a business combination are recognised at fair value at the acquisition date, where they are separately identifiable. Brands are amortised over their useful economic life, except when their life is determined as being indefinite. Applying indefinite lives to certain acquired brands is appropriate due to the stable long-term nature of the business and the enduring nature of the brands. Indefinite life brands are tested at least annually for impairment. A review of the useful economic life of brands is performed annually to ensure that these lives are still appropriate. If a brand is considered to have a finite life, its carrying value is amortised over that period. Where an acquired intangible asset includes a definite period of patent protection and the value attributed to the patent is considered material, the Group has accounted for the value of the patent separate to the underlying brand. The patent is amortised over the period to patent expiry. Payments made in respect of product registration and distribution rights are capitalised where the rights comply with the above requirements for recognition of acquired brands. If the registration or distribution rights are for a defined time period, the intangible asset is amortised over that period. If no time period is defined, the intangible asset is treated in the same way as acquired brands with an indefinite life. If the licence period can be extended, the useful life of the intangible asset shall include the renewal period only if there is evidence to support renewal by the entity without disproportionate cost. Computer software comprises software purchased from third parties as well as the cost of internally developed software. Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and are probable of producing future economic benefits, are recognised as intangible assets. Direct costs of software development include employee costs and directly attributable overheads. Software integral to an item of hardware equipment is classified as property, plant and equipment. Costs associated with maintaining software programs are recognised as an expense when they are incurred. Amortisation is charged to the Income Statement on a straight-line basis over the estimated useful life from the date the software is available for use, generally eight years. In bringing the asset into use, the Directors have determined that the asset related to the ERP system should be reclassified from property, plant and equipment to intangible assets. The Directors have considered the impact on the prior period and have considered this not material. Research expenditure is charged to the Income Statement in the period in which it is incurred. Development expenditure is capitalised when it can be reliably measured and the project it is attributable to is separately identifiable, technically feasible, demonstrates future economic benefit, and will be used or sold by the Group once completed. The capitalised cost is amortised over the period during which the Group is expected to benefit and begins when the asset is ready for use. Development costs are reviewed at least annually for impairment by assessing the recoverable amount of each cash-generating unit to which the development costs relate. The recoverable amount is the higher of fair value less costs to sell and value in use. Development costs not meeting the recognition criteria are expensed as incurred. The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. For intangible assets with an indefinite life, assets with a finite life that show indicators of impairment, and goodwill this includes estimation of the recoverable amount. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset."
"For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. The Directors have determined that the cash-generating units are at product-group level. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units. For the purposes of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Inventories are included at the lower of cost, less any provision for impairment, or net realisable value. Except for the Biogix entity, which recognises inventory on an average cost basis, inventory cost for the Group is determined on a first-in-first-out basis. Inventory provisions have been made for slow-moving and obsolete stock. These provisions are estimates and the actual costs and timing of future cash flows are dependent on future events. The difference between expectations and the actual future liability will be accounted for in the period when such determination is made. Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investment and loans to subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. The Group holds derivative financial instruments to hedge its foreign currency risk exposures. Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognised in profit or loss unless designated as cash flow hedges. The Group designates certain derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates. At inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the hedge. The Group also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other."
"When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and accumulated in the cash flow hedging reserve. The effective portion of changes in the fair value of the derivative that is recognised in other comprehensive income is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the cash flow hedging reserve remains in equity until it is reclassified to profit or loss in the same period or periods as the hedged expected future cash flows affect profit or loss. If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the cash flow hedging reserve and the cost of hedging reserve are immediately reclassified to profit or loss. Exchange differences arising from the translation of the net investment in foreign operations are reported in other comprehensive income and accumulated in the translation reserve. Gains and losses on those hedging instruments designated as hedges of the net investment in foreign operations are recognised to the extent that the hedging relationship is effective; these amounts are included in exchange differences on translation of foreign operations as stated in the statement of comprehensive income. Gains and losses relating to hedge ineffectiveness are recognised immediately in the Income Statement for the period. Gains and losses accumulated in the translation reserve are reclassified to the Income Statement when the foreign investment is disposed of. Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Modifications of financial instruments including loans and borrowings are reviewed quantitatively and qualitatively to determine if the modification is substantial. Substantial modification of a financial liability results in derecognition of the original balance and recognition of a new financial liability at fair value. The difference between the carrying amount of the original financial liability and the fair value of the new financial liability is charged to the Income Statement. A non-substantial modification of financial liability does not result in the derecognition of the original balance, however it may also result in a gain or loss recognised in the Income Statement. Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses. The Group’s trade receivables are subject to the IFRS 9 expected credit loss model. The Group has applied the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance based on historic default rates. The expected credit loss rate varies depending on whether and the extent to which settlement of the trade receivables is overdue. Accrued income represents amounts owed unconditionally to the Group which have not been invoiced at the year end. For these assets, only the passage of time is required before payment becomes due. Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method. Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement. Dividends and interest received are included in investing activities. Dividends and interest paid are included in financing activities. The Company’s investment and loans to subsidiaries is stated at amortised cost less impairment. Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method."
"Employees including Executive Directors of the Group receive part of their remuneration in the form of share-based payments, whereby depending on the scheme, employees render services in exchange for rights over shares or entitlement to a future cash payment, the amount of which is determined with reference to the Company’s share price. The cost of equity-settled transactions with employees is measured, where appropriate, with reference to the fair value at the date on which they are granted. Where options need to be valued an appropriate valuation model is applied. The expected life used in the model has been adjusted based on management’s best estimate for the effects of exercise restrictions and behavioural considerations. The cost of equity-settled transactions is fully recharged to subsidiaries. The cost of cash-settled transactions is measured with reference to the fair value of the liability, which is taken to be the closing price of the Company’s shares. Until the liability is settled it is remeasured at the end of each reporting period and at the date of settlement, with any changes in the fair value being recognised in the Income Statement. The cost of equity-settled transactions is recognised, along with a corresponding increase in equity, over the years in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award. The cost of cash-settled transactions is recognised, along with a provision for expected cash settlement, over the vesting period. At each reporting date, the cumulative expense recognised for equity-settled transactions reflects the extent to which the vesting period has expired and the number of awards that in the opinion of management will ultimately vest. Management’s estimates are based on the best available information at that date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. The provision of shares to satisfy certain of the Group’s share option schemes can be facilitated by purchases of own shares by the Group’s Employee Benefit Trust. The costs of operating the Trust is borne by the Group but is not material. To date, no shares have been purchased by the Trust for satisfaction of outstanding or future share option awards. The Employee Benefit Trust is considered to be controlled by the Group. The activities of the Trust are conducted on behalf of the Group according to its specific business needs in order to obtain benefits from its operation and on this basis, the assets held by the Trust are consolidated into the Group’s financial statements. Share capital represents the nominal value of equity shares. Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. Share option reserve represents equity-settled share-based employee remuneration. Retained earnings represents retained profit. Other reserve represents the difference between the fair value and nominal value of shares issued on a reverse takeover. Cash flow hedging reserve represents the fair value of derivative financial instruments at the balance sheet date that are designated as cash flow hedges, net of deferred tax, less amounts reclassified through other comprehensive income. Translation reserve represents gains and losses arising on translation of the net assets of overseas operations into the Group’s presentation currency of Sterling. Provisions are recognised when there is a present legal or constructive obligation as a result of a past event, for which it is probable that a transfer of economic benefits will be required for settlement and where a reliable estimate can be made of the amount of the obligation. Where material, provisions have been discounted to their present value. Business combinations are accounted for using the acquisition accounting method. Identifiable assets and liabilities acquired are measured at fair value at acquisition date. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. The Group also engages in acquisitions. The input text contains product-specific assets such as brands set out in note 2.9."
"Where elements of the consideration paid are variable and based on future revenues, the cost of the intangible asset recognized is based on the agreed minimum payments, and any additional payments are expensed as the related sales occur. Going concern: The Group is in a net current asset position of £40.4 million (2020: £47.1 million). The Group’s debt funding is provided by a £165 million Revolving Credit Facility, together with a £50 million accordion facility, with a syndicate of lenders. This facility is available until July 2024. The Directors have prepared cash flow forecasts for a period of more than 12 months from the date of approval of these financial statements, the going concern period. These indicate that the Group will have sufficient funds, given the RCF financing available, to meet its liabilities as they fall due for that period. Also, the Directors have considered the sensitivity of cash flow forecasts to severe downside scenarios, including the potential impact of the timing of the payment in relation to the CMA decision, detailed further in note 20. The Directors considered a reverse stress test scenario which indicates that a decline in EBITDA against forecast of over 40% would be needed to result in a breach of loan covenants. The Directors consider this remote. The RCF is drawn in short to medium-term tranches of debt which are repayable within 12 months of drawdown. These tranches of debt can be rolled over provided certain conditions are met, including covenant compliance. The Group considers that it is highly unlikely it would be unable to exercise its right to roll over the debt based on the forecast covenant compliance in the severe downside modeled above. There are mitigating actions within the control of the Group it could take to maintain compliance with these conditions, including future covenant requirements. The Directors therefore believe that the Group has the ability and the intent to roll over the drawn RCF amounts when due and consequently has presented the RCF as a non-current liability. Consequently, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and have therefore determined it is appropriate to adopt the going concern basis in preparing the financial statements. Summary of significant accounting policies: The performance of the Group is assessed using Alternative Performance Measures. The Group’s results are presented both before and after non-underlying items. Adjusted profitability measures are presented excluding non-underlying items as we believe this provides both management and investors with useful additional information about the Group’s performance and aids effective comparison of the Group’s trading performance from one period to the next and with similar businesses. In addition, the Group’s results are described using certain other measures that are not defined under IFRS and are therefore considered to be APMs. These measures are used by management to monitor ongoing business performance against both shorter-term budgets and forecasts but also against the Group’s longer-term strategic plans. APMs are presented in note 34. The Group does not consider adjusted profitability measures or APMs to be a substitute for, or superior to, IFRS measures. Revenue and segmental information: The Group’s reportable segments are the strategic business units that represent different parts of the overall product portfolio, these being Consumer Healthcare brands and Prescription Medicines. The business units are managed separately as each portfolio requires different expertise to deliver the corresponding product offering as a result of the inherently different characteristics of these product types. Operating segments reflect the way in which information is presented to and reviewed by the CODM for the purposes of making strategic decisions and assessing Group-wide performance. The Group’s Board of Directors is the Group’s CODM. The Group evaluates performance of the operational segments on the basis of revenue and gross profit. Other than intangible assets, disclosed in note 11, assets and liabilities are reported to the Board at Group level and are not separated segmentally."
"Revenue information by brand for the year ended 31 December 2021: Consumer Healthcare brands: Kelo-cote 48,845 Amberen 19,233 Nizoral 14,189 MacuShield 8,829 Aloclair 5,773 Vamousse 4,110 Other Consumer Healthcare brands 14,397 Total revenue – Consumer Healthcare brands: 115,376 Prescription Medicines: Hydromol 7,009 Flamma Franchise 6,610 Forceval 5,685 Other prescription medicines 28,527 Total revenue – Prescription Medicines 47,831 Total revenue 163,207 Revenue information by geography: Europe, Middle East and Africa 89,188 Asia Pacific and China 48,030 Americas 25,989 Total revenue 163,207 Operating segment results for the year ended 31 December 2021: Consumer Healthcare Revenue 115,376 Prescription Medicines Revenue 47,831 Total Revenue 163,207 Cost of sales (31,545) (22,212) (53,757) Gross profit 83,831 25,619 109,450 Major customers: The revenues from the Group’s largest customers are as follows. No customers separately comprised 10% or more of revenue. Major customer 1 is a multinational organization with sales in both EMEA and AMER regions. Profit before taxation: Profit before taxation is stated after charging or crediting amounts receivable by the Company’s auditor and its associates in respect of the audit of these financial statements, the audit of the financial statements of subsidiaries, other assurance services, amortization of intangible assets, impairment of intangible assets, CMA provision, losses on disposals, share options charge, depreciation of plant, property and equipment, and gain or loss on foreign exchange transactions. Non-underlying items: The Group presents a number of non-IFRS measures which exclude the impact of significant non-underlying items. This is to allow investors to understand the underlying trading performance of the Group, and can exclude items such as amortization and impairment of acquired intangible assets, restructuring costs, significant gains or losses on disposal, remeasurement and accounting for the passage of time in respect of contingent considerations, and the revaluation of deferred tax balances following substantial tax legislation changes. Finance costs: Interest payable and similar charges on loans and overdrafts, amortized finance issue costs, interest on lease liabilities, and finance income including interest income and net exchange gains or losses are detailed. Directors and employees: Employee benefit expenses for the Group during the year include wages and salaries, social security costs, other pension costs, and share-based employee remuneration. The average number of employees of the Group during the year is also provided. Taxation: Analysis of the charge for the period includes corporation tax in respect of the current period and adjustment in respect of prior periods, as well as deferred tax. Dividends: An interim dividend of 0.563p per share for the 2021 financial year was paid on 7 January 2022. The Board is proposing a final dividend payment of 1.128p per share for 2021, taking the total dividend payment for the year to 1.691p. Earnings per share: Basic EPS is calculated by dividing the earnings attributable to Ordinary shareholders by the weighted average number of Ordinary shares in issue during the year. For diluted EPS, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all. We are here live in Omaha, Nebraska. Good morning, everybody. I am Becky Quick, along with Mike Santoli. In just 30 minutes, Berkshire Hathaway Chairman and CEO Warren Buffett is going to be taking the stage with his Vice Chair Charlie Munger. Dilutive potential ordinary shares. There are no differences in earnings used to calculate each measure as a result of the dilutive employee share options. A reconciliation of the weighted average number of ordinary shares used in the measures is given below: Year ended 31 December 2021, Year ended 31 December 2020. Basic EPS calculation: 535,295,583, 531,062,798. Employee share options: 7,039,113, 6,256,040. Diluted EPS calculation: 542,334,696, 537,318,838. The underlying basic EPS is intended to demonstrate recurring elements of the results of the Group before non-underlying items. A reconciliation of the earnings used in the different measures is given below: Year ended 31 December 2021, £000s, Year ended 31 December 2020, £000s. Earnings for basic and diluted EPS: 7,319, 8,027. Non-underlying items: 26,866, 19,129. Earnings for underlying basic and diluted EPS: 34,185, 27,156. The resulting EPS measures are: Year ended 31 December 2021, pence, Year ended 31 December 2020, pence. Basic EPS: 1.37, 1.51. Diluted EPS: 1.35, 1.49. Underlying basic EPS: 6.39, 5.11. Underlying diluted EPS: 6.30, 5.05. Goodwill and intangible assets. The Group goodwill, £000s. Consumer healthcare brands and distribution rights, £000s. Prescription medicines brands and distribution rights, £000s. Computer software, £000s. Total, £000s. Cost at 1 January 2021: 32,404, 258,203, 152,890, 0, 443,497. Transfer from property, plant and equipment: 0, 0, 0, 11,037, 11,037."
"Additions: 0, 0, 0, 4,006, 4,006. Acquisition: (183), 0, 0, 0, (183). Exchange adjustments: 161, 1,877, (1,346), 0, 692. At 31 December 2021: 32,382, 260,080, 151,544, 15,043, 459,049. Amortisation and impairment at 1 January 2021: 1,144, 6,459, 23,022, 0, 30,625. Non-underlying impairment for the year: 0, 1,500, 4,650, 0, 6,150. Non-underlying amortisation for the year: 0, 226, 6,942, 0, 7,168. Underlying amortisation for the year: 0, 0, 0, 1,362, 1,362. At 31 December 2021: 1,144, 8,185, 34,614, 1,362, 45,305. Net book amount at 31 December 2021: 31,238, 251,895, 116,930, 13,681, 413,744. At 1 January 2021: 31,260, 251,744, 129,868, 0, 412,872. The Group goodwill, £000s. Consumer healthcare brands and distribution rights, £000s. Prescription medicines brands and distribution rights, £000s. Total, £000s. Cost at 1 January 2020: 16,532, 171,102, 152,439, 0, 340,073. Acquisition: 15,427, 89,990, 0, 105,417. Disposals: 0, 0, (714), (714). Exchange adjustments: 445, (2,889), 1,165, (1,279). At 31 December 2020: 32,404, 258,203, 152,890, 443,497. Amortisation and impairment at 1 January 2020: 0, 4,226, 7,187, 11,413. Non-underlying impairment for the year: 1,144, 2,007, 8,906, 12,057. Non-underlying amortisation for the year: 0, 226, 6,929, 7,155. At 31 December 2020: 1,144, 6,459, 23,022, 30,625. Net book amount at 31 December 2020: 31,260, 251,744, 129,868, 412,872. At 1 January 2020: 16,532, 166,876, 145,252, 328,660. Computer software. The addition of the computer software intangible asset is explained in note 2.3, judgements and estimates. Prior year acquisitions. On 29 December 2020, the Group completed the acquisition of 100% of the share capital of Biogix Inc, a privately held, US-based consumer healthcare company. The acquisition brings into the Group a highly successful and fast-growing brand, Amberen, with significant near-term growth potential. As part of this acquisition, an intangible brand asset with fair value of $121.0 million (£90.0 million) for the product Amberen, and goodwill of $20.8 million (£15.4 million), have been recognised. During the year ended 31 December 2021, there was a reduction in the working capital adjustment paid in cash by $0.2 million (£0.2 million). Useful economic lives. As a result of the 2020 Strategic Review, the Group segregated its portfolio of assets into two areas: consumer healthcare brands and prescription medicines. Following this determination, the Directors considered the continuing appropriateness of indefinite useful lives which have previously been adopted across the intangible brand asset portfolio. This is in the context of the focus on growing consumer healthcare brands, their increasing dominance of the portfolio, and the rollout of digital excellence programmes, as further detailed in the Strategic Report. Prescription medicines have been considered in the context of more limited requirement for promotional investment and potential exposure to other market factors detailed further below. For the majority of consumer healthcare brand assets, indefinite useful lives have been judged to remain appropriate. This is due to the expected long-term growth profile of the consumer healthcare business and the enduring nature of the brands, which are supported by continuing marketing spend. For prescription medicines brand assets, finite useful lives of up to 20 years were adopted prospectively from 1 January 2020. The determination of this lifespan has taken into account all relevant factors for each individual asset, including typical pharmaceutical asset life cycles and the potential development of alternative treatments over time. Certain brands were acquired with patent protection, which lasts for a finite period of time. It is the opinion of the Directors that these patents do not provide any incremental value to the value of the brand and therefore no separate value has been placed on these patents. This assessment is based on a view of future profitability after patent expiry and past experience with similar brands. It is the opinion of the Directors that the indefinite life assets meet the criteria set out in IAS 38. This assessment is made on an asset-by-asset basis taking into account how long the brand has been established in the market and subsequent resilience to economic and social changes, stability of the industry in which the brand is used, potential obsolescence or erosion of sales, barriers to entry, whether sufficient marketing and promotional resourcing is available, and dependency on other assets with defined useful economic lives. The prescription medicines brand assets have a weighted average remaining life of 18 years at 31 December 2021 (2020: 19 years). The net book value of intangible assets and goodwill which are considered to have indefinite useful lives are allocated to CGUs in the following table."
"Goodwill relating to the acquisition of certain assets and businesses from Sinclair IS Pharma plc is allocated to the group of related consumer healthcare and prescription medicines product CGUs. Other goodwill amounts are allocated to the product CGU with which they were originally acquired. Intangible assets that are considered to have indefinite lives all relate to the consumer healthcare segment, except for Sinclair prescription medicines goodwill. At 31 December 2021: Goodwill, £000s. Consumer healthcare brands and distribution rights, £000s. Total, £000s. Amberen: 15,179, 89,629, 104,808. Nizoral: 0, 60,307, 60,307. Vamousse: 0, 11,596, 11,596. MacuShield: 1,748, 8,740, 10,488. Ashton and Parsons: 0, 1,562, 1,562. Lefuzhi: 0, 1,514, 1,514. Anbesol: 0, 987, 987. Aiweidi: 0, 212, 212. Opus range: 1,849, 0, 1,849. Cambridge intangibles: 598, 0, 598. Products acquired from Sinclair: Kelo-cote (non EU, excluding US): 0, 40,842, 40,842. Kelo-cote (EU): 0, 17,800, 17,800. Aloclair: 0, 14,000, 14,000. Atopiclair: 0, 2,300, 2,300. Goodwill – Sinclair prescription medicines: 1,347, 0, 1,347. Goodwill – Sinclair consumer healthcare: 10,517, 0, 10,517. Total: 31,238, 249,489, 280,727. The difference in Amberen values in the table compared to note 31 are the result of foreign exchange retranslation of these US Dollar denominated assets. Impairment. As explained in note 2.9, all intangible assets are stated at the lower of cost less accumulated amortisation and impairment or the recoverable amount. The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. For intangible assets with an indefinite life, assets with a finite life that show indicators of impairment, and goodwill this includes estimation of the recoverable amount. These assets are tested at CGU level (or at group of CGUs level in the case of goodwill relating to the acquisition of certain assets and businesses) as the Directors believe these CGUs generate largely independent cash inflows. The impairment test involves determining the recoverable amount of the relevant cash-generating unit, which corresponds to the higher of the fair value less costs to sell or its value in use. The value in use calculation uses cash flow projections based on financial forecasts for up to the next five years extrapolated to perpetuity. Financial forecasts for the following year are based on the approved annual budget. Financial forecasts for years two to five are based on the approved long-range plan. Margins are based on past experience and cost estimates. As a result of the impairment review for the year ended 31 December 2021, the following impairment charges were identified: Haemopressin, a prescription medicine brand and distribution rights asset, impaired by £3.9 million due to market factors. Other prescription medicine brand and distribution rights assets impaired by £0.8 million due to increasing costs resulting from changes in the regulatory framework. Consumer healthcare brand and distribution rights assets impaired by £1.5 million due to viability of future sales in the current market. Key source of estimation uncertainty – value in use assumptions. For the year-end impairment review, key assumptions on which cash flow projections depend are as follows: Discount rates. Methodology: Cash flows are discounted at an appropriate rate, based on the Group’s post-tax Weighted Average Cost of Capital (WACC) adjusted where appropriate for country-specific risks, of between 6.3% and 8.6%, or pre-tax 7.9% to 10.8% (2020: 6.7% to 11.0%, or pre-tax 8.4% to 13.8%). The Group’s WACC has remained consistent overall, but the range of discount rates for individual brands is lower due to changes in the country profile of the individual brands. The Group risk-free rate has increased due to changes in government bond yields, the small stock premium has reduced to recognise the Group’s growth in market capitalisation and the equity beta has remained consistent based on sector market data. The risk premium to recognise the impact of COVID-19 remains consistent with the prior year. Estimation uncertainty: The assumptions included in the compilation of the CGU specific discount rates are designed to approximate the discount rate that a potential market participant would adopt. Given the nature of the Group’s business model, the discount rate necessarily includes estimation uncertainty. Forecast cash flows. Methodology: Approved budgets and forecasts for up to five years, based on management’s best estimate of cash flows by individual CGU. These forecasts are then uplifted for the CGU’s remaining useful economic life, or to perpetuity for assets with indefinite useful lives, using growth rates between -2.5% to 2.0% (2020: -3.0% to 2.0%) based on the Group’s long-term projections."
"Estimation uncertainty: The growth rates assumed in the Group’s budgets and forecasts inherently include estimation uncertainty relating to the achievement of commercial initiatives and external factors such as competition. Sensitivity analysis. The Group has conducted sensitivity analysis on the impairment tests. The valuations generally indicate sufficient headroom, and the Group does not consider that any reasonably possible change in key assumptions could result in an impairment for the majority of intangible assets. Management have identified a specific source of estimation uncertainty in relation to the Haemopressin asset. The value of the asset is currently supported by projected future cash flows in relation to a third-party licence agreement which is awaiting regulatory approval. It is considered likely that this approval will be granted, and the resulting cash flows are expected to support the carrying value of the asset. However, if approval is not granted, this would result in an additional impairment charge of £4.7 million, the carrying value post impairment. As there is uncertainty in relation to the projected cash flows in relation to this CGU if the licence is granted, additional risk has been factored into the value in use calculation. Based on data from existing markets, the resulting value in use calculations are considered to reflect the appropriate level of risk. The following table shows the key assumptions made. Remaining UEL years, value in use calculation assumptions. Pre-tax discount rate: 8.9%. Risk-related reduction of projected cash flows: 25%. The following table shows the potential impact of reasonably possible changes to the key assumptions made. Decrease in CGU recoverable amount: £000s. 2.0% increase in pre-tax discount rate: Haemopressin (602). Further reduction in projected cash flows (50% reduction): Haemopressin (1,784). Management have identified that for certain prescription medicines brands and distribution rights assets with lower headroom, a reasonably possible change in two key assumptions could cause the carrying amount to exceed the recoverable amount. These assumptions are detailed as follows. The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rates are determined based on management’s estimate of the long-term prospects for each product. Remaining UEL years, value in use calculation assumptions. Individual assumptions required for the estimated recoverable amount to equal to the carrying amount. Pre-tax discount rate: 18%. Terminal margin growth rate: 9.2%. Pre-tax discount rate: 0.0%. Terminal margin growth rate: 10.8%. Brand 1: 18, 9.2, 0.0, 10.8, (2.8). Brand 2: 18, 8.0, 2.0, 9.2, (0.5). The following table shows the potential impact of reasonably possible changes to individual assumptions on the estimated recoverable amount of the CGUs. Headroom, decrease in CGU recoverable amount: £000s. 2.0% increase in pre-tax discount rate: Brand 1 (355), Brand 2 (122). 2.0% reduction in terminal margin growth rate: Brand 1 (579), Brand 2 (168). Property, plant and equipment. The Group computer software and equipment, £000s. Fixtures, fittings and equipment, £000s. Plant and machinery, £000s. Right of use lease assets, £000s. Total, £000s. Cost at 1 January 2021: 13,048, 2,511, 32, 6,739, 22,330. Additions: 162, 1,323, 41, 275, 1,801. Transfer to intangible assets: (11,037), 0, 0, 0, (11,037). Disposals: (136), (104), 0, (708), (948). At 31 December 2021: 2,037, 3,730, 73, 6,306, 12,146. Depreciation at 1 January 2021: 1,620, 1,408, 8, 3,373, 6,409. Provided in the year: 186, 446, 28, 915, 1,575. Effect of movements in exchange rates: 0, (9), 0, 0, (9). Disposals: (136), (104), 0, (415), (655). At 31 December 2021: 1,670, 1,741, 36, 3,873, 7,320. Net book amount at 31 December 2021: 367, 1,989, 37, 2,433, 4,826. At 1 January 2021: 11,428, 1,103, 24, 3,366, 15,921. The Group computer software and equipment, £000s. Fixtures, fittings and equipment, £000s. Plant and machinery, £000s. Right of use lease assets, £000s. Total, £000s. Cost at 1 January 2020: 8,511, 2,699, 14, 5,293, 16,517. Additions: 4,562, 50, 0, 1,125, 5,737. Acquisition: 0, 0, 18, 294, 312. Effect of movements in exchange rates: 29, (3), 0, 27, 53. Disposals: (54), (235), 0, 0, (289). At 31 December 2020: 13,048, 2,511, 32, 6,739, 22,330. Depreciation at 1 January 2020: 1,172, 1,200, 4, 2,587, 4,963. Provided in the year: 504, 444, 4, 801, 1,753. Effect of movements in exchange rates: (2), (1), 0, (15), (18). Disposals: (54), (235), 0, 0, (289). At 31 December 2020, the net book amount was 1,620, 1,408, 8, 3,373, 6,409. At 31 December 2020, the amounts were 11, 428, 1,103, 24, 3,366, 15,921. At 1 January 2020, the amounts were 7, 339, 1,499, 10, 2,706, 11, 55, 4."
"Property, plant, and equipment of £4.1 million is located within the United Kingdom (2020: £14.4 million). The balance is located in France, China, Singapore, Spain, Germany, and the United States of America. Right of use assets relate to the Group’s leased offices. Financial Statements Governance Strategic Report Additional Information Company Overview Alliance Pharma plc – Annual Report and Accounts 2021 Notes to the Financial Statements continued Investments The Company’s investment and loans to subsidiary undertakings are as follows: Cost at 1 January 2021 was 199,776. Net movements were (428). At 31 December 2021, the amount was 199,348. At 1 January 2020, the amount was 194,630. Net movements were 5,146. At 31 December 2020, the amount was 199,776. The investment balance includes outstanding intercompany debt due from subsidiaries of £176.1 million. The Directors do not consider that this amount will be demanded by the Company and therefore it has been classified as an investment. No provision has been recognized for estimated credit losses on loans to subsidiaries, as it is considered these would be immaterial. The net movement for the year ended 31 December 2021 included interest charged of £6.1 million (2020: £5.8 million), the recharge of the share option charge of £1.1 million (2020: £1.1 million), the dividend received of £2.6 million (2020: £2.8 million), and payments received to reduce the loan. The subsidiary and associated undertakings where the Group held 20% or more of the equity share capital at 31 December 2021 are shown below: Company Country of registration or incorporation % owned Nature of business Advanced Bio-Technologies Inc. USA 100 Pharmaceutical sales Alliance Pharma France SAS France 100 Pharmaceutical sales Alliance Pharma (Singapore) Private Limited Singapore 100 Pharmaceutical sales Alliance Pharma S.r.l. Italy 100 Pharmaceutical sales Alliance Pharmaceuticals Limited England and Wales 100 Pharmaceutical sales Alliance Pharmaceuticals (Asia) Limited Hong Kong 100 Pharmaceutical sales Alliance Lifescience Technology (Shanghai) Co., Limited China 100 Pharmaceutical sales Alliance Pharmaceuticals Spain SL Spain 100 Pharmaceutical sales Alliance Pharma Inc. USA 100 Pharmaceutical sales Alliance Pharmaceuticals (Thailand) Co., Ltd Thailand 100 Pharmaceutical sales Alliance Pharmaceuticals (Philippines) Corporation Philippines 100 Pharmaceutical sales Alliance CHC (India) Private Limited India 100 Pharmaceutical sales Biogix Inc. USA 100 Pharmaceutical sales Maelor Laboratories Limited England and Wales 100 Non-trading Alliance Pharmaceuticals GmbH Germany 100 Non-trading Alliance Pharmaceuticals GmbH – Swiss Branch Switzerland 100 Non-trading Alliance Pharmaceuticals SAS France 100 Non-trading Opus Healthcare Limited Republic of Ireland 100 Non-trading Alliance Pharma (Ireland) Limited Republic of Ireland 100 Non-trading Alliance Consumer Health Limited England and Wales 100 Dormant Alliance Generics Limited England and Wales 100 Dormant Alliance Health Limited England and Wales 100 Dormant Alliance Healthcare Limited England and Wales 100 Dormant Caraderm Limited Northern Ireland 100 Dormant Dermapharm Limited England and Wales 100 Dormant MacuVision Europe Limited England and Wales 100 Dormant Opus Group Holdings Limited England and Wales 100 Dormant Opus Healthcare Limited England and Wales 100 Dormant Investments held directly by Alliance Pharma plc. The registered address in each country is as follows: Territory Company Registered Office Address USA Advanced Bio-Technologies Inc. One Urban Center, 4830 West Kennedy Blvd, Suite 600, Tampa FL 33609, United States Alliance Pharma Inc. 11000 Regency Pkwy, Ste 106, Cary NC 27518, United States Biogix Inc. 201 Continental Blvd., Suite 230, El Segundo, California 90245, United States France Alliance Pharmaceuticals SAS 35 rue d’Artois Paris 75008, France Alliance Pharma France SAS 35 rue d’Artois Paris 75008, France China Alliance Pharmaceuticals Lifescience Technology (Shanghai) Co., Limited Suite 1004, Nan Fung Tower, No. 1568, Road Huashan, Shanghai, 200030, P.R. China Germany Alliance Pharmaceuticals GmbH Hanseatic Trade Center, Am Sandtorkai 41, D-20457 Hamburg, Germany Hong Kong Alliance Pharmaceuticals (Asia) Limited Room 2105, 21/F Office Tower, Langham Place, 8 Argyle Street, Mongkok, Kowloon, Hong Kong Italy Alliance Pharma S.r.l. Viale Francesco Restelli 5, 20124, Milano, Italy Republic of Ireland Alliance Pharma (Ireland) Limited 6th Floor, South Bank House, Barrow Street, Dublin 4 Opus Healthcare Limited 6th Floor, South Bank House, Barrow Street, Dublin 4 Singapore Alliance Pharma (Singapore) Private Limited 1 Scotts Road, Shaw Centre 22-06, 228208, Singapore Spain Alliance Pharmaceuticals Spain SL Regus Business Center Torre de Cristal, Paseo de la Castellana, 259 C Planta 18, Cuatro Torres Business area 28046, Madrid, Spain Switzerland (Branch) Alliance Pharmaceuticals GmbH Düsseldorf Bahnhofstrasse 37, Postfach 2818, CH-8021 Zürich, Switzerland Thailand Alliance Pharmaceuticals (Thailand) Co., Ltd No."
"444 Olympia Thai Tower, 8th Floor, Ratchadapisek Road, Samsennok Sub-district, Huaykwang District, Bangkok, Thailand England and Wales All Companies Avonbridge House, Bath Road, Chippenham, Wiltshire, SN15 2BB Northern Ireland Caraderm Limited 6 Trevor Hill, Newry, County Down, BT34 1DN Philippines Alliance Pharmaceuticals (Philippines) Corporation 30/F 88 Corporate Center Sedeno Cor. Valero STS., Bel-Air 1209, City of Makati NCR, Fourth District, Philippines India Alliance CHC (India) Private Limited 314, Bhaveshwar Arcade Annexe, LBS Marg, Opp. Shreyas Cinema, Ghatkopar West Mumbai, Bandra Suburban, MH 400086 IN Unless otherwise stated, the share capital comprises ordinary shares and the ownership percentage is provided for each undertaking. All subsidiary undertakings prepare accounts to 31 December. Maelor Laboratories Limited is exempt from the Companies Act 2006 requirement relating to the audit of its individual accounts by virtue of Section 479A of the Act as the company has guaranteed the subsidiary company under Section 479C of the Act. Inventories The Group’s inventories at 31 December 2021 were as follows: Finished goods and materials were 24,311. Inventory provision was (3,236). The total was 21,075. Inventory costs expensed through the Income Statement during the year were £52,932,000 (2020: £39,636,000). During the year, £534,000 (2020: £1,284,000) was recognized as an expense relating to the write-down of inventories to net realizable value. Trade and other receivables The Group’s trade and other receivables at 31 December 2021 were as follows: Trade receivables were 23,929. Other receivables were 1,953. Prepayments were 3,102. Accrued income was 1,837. The total was 30,821. Accrued income, which is all classified as not past due, represents amounts owed unconditionally to the Group which have not been invoiced at the year end. For these assets, only the passage of time is required before payment becomes due. The aging of trade receivables of the Group as at 31 December is detailed below: Trade receivables, net of estimated allowances for expected credit losses: Not past due 20,405 1-30 days past due 2,573 31-60 days past due 633 61-90 days past due 318 Past 91 days – Total 23,929 Trade receivables, gross of estimated allowances for expected credit losses: Not past due 20,405 1-30 days past due 2,573 31-60 days past due 633 61-90 days past due 389 Past 91 days 780 Total 24,780 As at 31 December 2021, trade and other receivables of £851,000 (2020: £641,000) were past due and impaired. To manage credit risk, customers are required to pay in accordance with agreed terms. Our settlement terms are generally due within 30 or 60 days from the end of the month of sale. Cash and cash equivalents The Group’s cash and cash equivalents at 31 December 2021 were as follows: Sterling 17,541 Euros 3,862 US Dollars 2,427 Thai Baht 3,060 Other currencies 2,171 Cash at bank and in hand 29,061 Trade and other payables The Group’s trade and other payables at 31 December 2021 were as follows: Trade payables were 8,341. Other taxes and social security costs were 2,773. Accruals were 17,512. Other payables were 848. Lease liabilities were 456. The total was 29,930. Loans and borrowings The Group has a £165 million fully revolving credit facility, together with a £50 million accordion facility, with a syndicate of lenders. This facility is available until July 2024. This has been classified as a non-current liability. The bank facility is secured by a fixed and floating charge over the Company’s and Group’s assets registered with Companies House. The Group’s bank loans at 31 December 2021 were as follows: Secured bank loans were 117,025. Finance issue costs were (965). The total was 116,060. Movement in loans and borrowings: At 1 January 138,328 Net (payments)/receipts from borrowing (22,587) Additional prepaid arrangement fees – Amortization of prepaid arrangement fees 628 Exchange movements (309) At 31 December 116,060 Exchange movements on loans and borrowings with effective net investment hedges are reported in other comprehensive income and accumulated in the translation reserve. Other non-current liabilities The Group’s other non-current liabilities at 31 December 2021 were as follows: Lease liabilities were 2,426. Other non-current liabilities were 211. The total was 2,637. Provisions The CMA provision was as follows: At 1 January 2021 – Charge to Income Statement 7,900 Provisions utilized during the year – Exchange differences – At 31 December 2021 7,900 On 23 May 2019, the UK’s Competition and Markets Authority issued a Statement of Objection alleging anti-competitive agreement involving the Group and certain other pharmaceutical companies in relation to the sale of prescription prochlorperazine."
"Prochlorperazine is one of the Group’s smaller products and had peak sales in 2015 of £1.9 million and sales of £0.7 million in 2021. On 3 February 2022, the CMA announced its finding that four companies, including Alliance, had infringed competition law. The Directors fundamentally disagree with the CMA’s finding. The Group believes that it has a strong case and will be appealing the CMA’s decision and the proposed fine of £7.9 million at the Competition Appeal Tribunal, which is expected to be heard in late 2022 or early 2023, although the timing may be extended due to the current workload pressures within the court system. Historically, the Group’s assessment was that there were no matters for which a provision was required; however, the Infringement Decision has caused the Group to revisit this assessment. Despite the Group’s intention to appeal, the Directors believe that, as a result of the Infringement Decision, a provision of £7.9 million should be recorded at 31 December 2021. This reflects the amount of the proposed fine communicated by the CMA. In addition, in the event the Group’s appeal were to prove unsuccessful, the Directors consider that there are strong grounds upon which the amount of the fine could be reduced. However, as this is a matter which cannot be predicted with certainty at this time, the Directors believe that the most appropriate course of action is to include the maximum potential amount of the fine. If the appeal is unsuccessful, the Group may also be liable for a proportion of the legal costs of the CMA relating to the appeal. The Group has not recorded a provision in relation to these potential litigation costs as these costs relate to the decision to appeal which was taken after the year end and their amount cannot be reliably estimated. In accordance with IAS 37.92, the Group does not provide further information on the grounds that this could seriously prejudice the outcome of the appeal. The restructuring provision of £1.6 million at 31 December 2021 relates to the balance of restructuring costs in relation to the closure of the Milan office following a change to the operating model for our direct-to-market business in Italy. The related outflows are expected to occur in the year ended 31 December 2022. Financial instruments The Group uses financial instruments comprising borrowings, derivatives, cash and liquid resources, and various items such as trade receivables and trade payables that arise directly from its operations. The main risks arising from the Group’s financial instruments are liquidity risk, interest rate risk, foreign currency risk, and credit risk. The Board is responsible for risk management policies on managing each of these, which are summarized below, except credit risk which is detailed in note 15. Liquidity risk The Group’s operations are financed by retained earnings and bank borrowings, with additional equity being raised on a periodic basis to finance larger acquisitions. Borrowings are denominated in Sterling, Euro, and US Dollars. The purpose of Euro and US Dollar borrowings is to manage the currency exposure arising from the Group’s operations. The Group has a £165 million fully revolving credit facility, together with a £50 million accordion facility, with a syndicate of lenders. This facility is available until July 2024. The RCF is drawn in short to medium-term tranches of debt which are repayable within 12 months of draw-down. These tranches of debt can be rolled over provided certain conditions are met, including covenant compliance. The Group considers that it is highly unlikely it would be unable to exercise its right to roll-over the debt. This is due to mitigating actions it could take to maintain compliance with these conditions, including future covenant requirements, even in downside scenarios. The Directors therefore believe that the Group has the ability and the intent to roll-over the drawn RCF amounts when due and consequently has presented the RCF as a non-current liability. The Group also has access to an overdraft facility of £2.0 million. The maturity profile of the Group’s financial gross liabilities, except forward foreign exchange contracts for which maturity is disclosed separately, at the year-end is as follows: In one year or less: 36,166 In more than one year, but not more than two: – In more than two years, but not more than five: – In more than five years: – Total: 36,166 Debt and additional equity. The mixture of debt and equity is varied, taking into account the desire to maximize shareholder returns while keeping leverage at comfortable levels."
"Financial Statements Governance Strategic Report Additional Information Company Overview 132 Alliance Pharma plc – Annual Report and Accounts 2021 Notes to the Financial Statements continued 24. Share-based payments Under the Group’s share option scheme for employees and Executive Directors, options to subscribe for shares in the Company are granted normally once each year. The contractual life of an option is ten years from the date of grant. Generally, options granted become exercisable on the third anniversary of the date of grant, but in certain instances this can be extended to five years. Exercise of an option is normally subject to continued employment. Options are valued by a third-party provider using the Black-Scholes option-pricing model. Share options and weighted average exercise price are as follows for the reporting periods presented: 2021 2020 Number (000s) Weighted average price Pence Number (000s) Weighted average price Pence Outstanding at start of year 36,583 47.0 34,484 59.40 Granted 7,674 93.94 6,833 66.10 Exercised (5,306) 50.07 (3,516) 47.65 Forfeited (8,018) 63.27 (1,218) 74.70 Outstanding at end of year 30,933 71.62 36,583 61.39 Exercisable at end of year 11,845 60.12 12,539 47.02 Share options were exercised throughout the financial year. Share options were exercised at prices of between 29.25 and 81.60 pence per share. Certain options are subject to EPS or Total Shareholder Return (TSR) accretion performance criteria; those outstanding are as follows: Year of grant Exercise price Pence Exercise from 31 December 2021 Number (000s) 31 December 2020 Number (000s) 2013 35.75 2018 – 450 2014 33.75 2017 92 204 2015 43.75 2018 104 317 2016 47.50 2019 155 545 2016 47.50 2021 1,800 3,500 2017 53.00 2020 323 1,028 2018 81.60 2021 1,639 2,411 2019 76.90 2022 911 1,127 2019 0.00 2022 529 596 2020 73.70 2023 837 917 2020 0.00 2023 628 704 2021 102.80 2024 1,172 – 2021 0.00 2024 531 – 8,721 11,799 The total expense for the year relating to share-based payment plans was £2.3 million (2020: £1.4 million), of which £2.0 million (2020: £1.1 million) related to equity-settled transactions and £0.3 million (2020: £0.3 million) related to cash-settled transactions. It is assumed that, on average, options will be exercised after five years. The expected volatility is based on historical volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available information. The risk-free rate of return is based on UK Government bonds of a term consistent with the assumed option life. The cash-settled transaction expense includes provision for social security charges based on the applicable social tax rate applied to the number of share awards which are expected to vest, valued with reference to the year-end share price. The estimated total equity-settled fair value of the share options granted on 29 September 2021 was £1,551,000. The model inputs were a market price of 102.8 pence, expected volatility of 29.96% and a risk-free rate of 1.07%. Financial Statements Governance Strategic Report Additional Information Company Overview 133 Alliance Pharma plc – Annual Report and Accounts 2021 Notes to the Financial Statements continued 25. Cash generated from operations Group Company Year ended 31 December 2021 £000s Year ended 31 December 2020 £000s Year ended 31 December 2021 £000s Year ended 31 December 2020 £000s Profit for the year 7,319 8,027 6,756 5,433 Taxation 10,838 4,989 946 941 Interest payable and similar charges 3,646 2,657 – – Interest income (23) (10) (6,121) (5,777) Foreign exchange (gain)/loss (205) 644 – – Loss on disposal of intangibles – 308 – – Depreciation of property, plant and equipment 1,575 1,753 – – Amortisation and impairment of intangibles 14,680 19,212 – – Change in inventories 1,842 (5,206) – – Change in trade and other receivables (6,146) 6,728 (3) (12) Change in trade and other payables (326) 5,929 62 82 Change in provisions 9,469 – – – Share-based employee remuneration 2,250 1,374 – – Dividends received – – (2,600) (2,800) Cash generated from/ (used in) operations 44,919 46,405 (960) (2,133) 26. Capital commitments The Group had capital commitments at 31 December 2021 totaling £Nil (2020: £3,500,000). 27. Contingent liabilities Contingent liabilities are possible obligations that are not probable. The Group operates in a highly regulated sector and in markets and geographies around the world each with differing requirements. As a result, and in the normal course of business, the Group can be subject to a number of regulatory inspections, investigations, customer and other claims on an ongoing basis."
"It is therefore possible that the Group may incur penalties for non-compliance. In addition, a number of the Group’s brands and products are subject to pricing and other forms of legal or regulatory restrictions from both governmental and regulatory bodies and also from third parties. Assessments as to whether or not to recognize a provision in respect of these matters are judgmental as the matters are often complex and rely on estimates and assumptions as to future events. 28. Pensions The Group operates a defined contribution pension scheme for the benefit of Executive Directors and certain employees. The Group 31 December 2021 £000s 31 December 2020 £000s Contributions payable by the Group for the year 1,306 994 Financial Statements Governance Strategic Report Additional Information Company Overview 134 Alliance Pharma plc – Annual Report and Accounts 2021 Notes to the Financial Statements continued 29. Related party transactions During the year, the Company entered into the following transactions with related parties: The Company Transaction values for the year ended Amount due from related parties 31 December 2021 £000s 31 December 2020 £000s 31 December 2021 £000s 31 December 2020 £000s Alliance Pharmaceuticals Limited – Net funds received (10,170) 750 176,111 176,539 Alliance Pharmaceuticals Limited – Interest received 6,121 5,777 – – Alliance Pharmaceuticals Limited – Investments during the year – (272) – – Alliance Pharmaceuticals Limited – Share-based payment recharge 1,021 1,109 – – Alliance Pharmaceuticals Limited – Dividend declared and received 2,600 2,800 – – Net funds received represent net payments made against the intercompany loan by Alliance Pharmaceuticals Limited. 30. Joint ventures Name Principal activity Country of incorporation % Owned Synthasia International Company Limited Distribution of infant milk formula products in China Hong Kong 20 Synthasia Shanghai Company Limited Distribution of infant milk formula products in China China 20 Until 10 March 2021, the Group owned 20% of the issued share capital of Synthasia International Company Limited, which is a 100% parent of Synthasia Shanghai Company Limited (together known as ‘Synthasia’). The Group considered the existence of substantive participating rights held by both the Group and another shareholder which provide both parties with a veto right over the significant financial and operating policies of Synthasia and determined that, as a result of these rights and by exercise of judgment, Synthasia was accounted for as a joint venture. In accordance with IFRS 11 Joint Arrangements, a joint venturer shall recognize its interest in a joint venture as an investment and shall account for that investment using the equity method in accordance with IAS 28 Investments in Associates and Joint Ventures. In May 2018 the Group was notified that the import license partner was not going to receive the required approval to import Suprememil, the infant milk formula brand owned by Synthasia. Following subsequent discussions with the import license partner and Synthasia management, the Board concluded that the joint venture investment of £0.3 million, and associated loan balances of £2.2 million, was to be written down in full. Following the impairment further losses from the Synthasia joint venture have not been recognized. This is due to the Group having no obligation to fund such losses. On 10 March 2021 the Group fully divested its holding in Synthasia for nil consideration. As part of the terms of disposal, Suprememil brand trademarks were retained by the Group for potential future use. There are currently no forecasted sales for this brand. 31. Acquisition of Biogix Inc On 29 December 2020 the Group completed the acquisition of 100% of the share capital of Biogix Inc, a privately held, US-based consumer healthcare company. The acquisition brought into the Group a highly successful and fast-growing brand, Amberen, with significant near-term growth potential. The total amount paid in relation to the acquisition was $111.3 million, being $110.0 million consideration paid in cash on completion, $0.4 million estimated working capital adjustment paid in cash on completion and $0.9 million foreign exchange option cash premium paid in December 2020. Financial Statements Governance Strategic Report Additional Information Company Overview 135 Alliance Pharma plc – Annual Report and Accounts 2021 Notes to the Financial Statements continued 31. Acquisition of Biogix Inc continued The acquisition was funded by drawdown of $22.0 million and £66.1 million from the Group’s existing £165 million Revolving Credit Facility shortly before completion in December 2020. The Sterling drawdown was subsequently sold in a foreign exchange transaction to buy US Dollars for use in settlement of cash payments on completion."
"A portion of funding was drawn in Sterling so that, after taking account of existing borrowings, the Group’s overall loan position by currency matches expected post-hedging cash generated by currency. The fair values of the assets acquired, as at 29 December 2020, are as follows: Book value of assets and liabilities acquired $000s Fair value adjustments $000s Fair value of assets and liabilities acquired $000s Fair value of assets and liabilities acquired £000s Intangible fixed assets 37 121,000 121,037 89,990 Deferred tax asset 223 – 223 166 Property, plant and equipment 419 – 419 312 Current assets (excluding cash and cash equivalents) 5,824 – 5,824 4,330 Cash and cash equivalents 382 – 382 284 Current liabilities (1,587) – (1,587) (1,180) Lease liabilities (378) – (378) (281) Net assets 4,920 121,000 125,920 93,621 Deferred tax liability (35,101) (26,097) Goodwill 20,501 15,244 Fair value of net assets acquired 111,320 82,768 Cash consideration 110,000 81,784 Working capital adjustment paid in cash 411 308 Option premium paid in cash 909 676 Total consideration 111,320 82,768 The fair values set out above are final figures, following additional review of judgmental areas including intangible asset allocation and finalization of completion accounts during the year. There was a reduction in the working capital adjustment paid in cash by $249,000 (£183,000). The fair value of the intangible asset recognized on business combination all relates to Amberen. A single brand intangible asset was identified for valuation through completion of a formal purchase price allocation exercise. This brand recognition and positioning were the key drivers for the acquisition and are regarded as the main barrier to market entry. No other intangible assets were considered to have separately identifiable value. The brand was valued using a multi-period excess earnings approach, utilizing the Group’s long-term cash flow forecast and a post-tax discount rate of 10.75%. None of the goodwill recognized is expected to be deductible for income tax purposes. Legal and professional fees incurred in the acquisition of £1.3 million were recognized as non-underlying costs within administration and marketing expenses. 32. Events after the reporting date On 25 March 2022 the Group announced that it has completed the acquisition of the Kelo-cote US licensing rights and the second largest US scar treatment brand ScarAway from Perrigo Company PLC, a global consumer self-care company, for $19.4 million (£14.8 million), paid for in cash from the Group’s existing financial resources. The accounting considerations will be finalized in the second quarter of 2022 and included in the Group’s interim results for the six months ended 30 June 2022. 33. Ultimate controlling party The Company’s shares are listed on the Alternative Investment Market and are held widely. There is no single ultimate controlling party. 34. Alternative performance measures The performance of the Group is assessed using Alternative Performance Measures. The Group’s results are presented both before and after non-underlying items. Adjusted profitability measures are presented excluding non-underlying items as we believe this provides both management and investors with useful additional information about the Group’s performance and aids a more effective comparison of the Group’s trading performance from one period to the next and with similar businesses. In addition, the Group’s results are described using certain other measures that are not defined under IFRS and are therefore considered to be APMs. These measures are used by management to monitor ongoing business performance against both shorter-term budgets and forecasts but also against the Group’s longer-term strategic plans. APMs used to explain and monitor Group performance are as follows: Financial Statements Governance Strategic Report Additional Information Company Overview 136 Alliance Pharma plc – Annual Report and Accounts 2021 Notes to the Financial Statements continued 34. Alternative performance measures continued Measure Definition Reconciliation to GAAP measure Underlying EBIT and EBITDA Earnings before interest, tax and non-underlying items, then depreciation, amortization and underlying impairment. Calculated by taking profit before tax and financing costs, excluding non-underlying items and adding back depreciation and amortization. EBITDA margin is calculated using see-through revenue. Note A below Free cash flow Free cash flow is defined as cash generated from operations less cash payments made for interest payable and similar charges, capital expenditure and tax. Note B below Net debt Net debt is defined as the Group’s gross bank debt position net of finance issue costs and cash. Note C below Underlying effective tax rate Underlying effective tax rate is calculated by dividing total taxation for the year less impact of tax rate changes and non-underlying charges, by the underlying profit before tax for the year."
"Note D below See-through Income Statement Under the terms of the transitional services agreement with certain supply partners, Alliance receives the benefit of the net profit on sales of Nizoral from the date of acquisition up until the product licenses in the Asia-Pacific territories transfer to Alliance. The net product margin is recognized as part of statutory revenue. The see-through Income Statement recognizes the underlying sales and cost of sales which give rise to the net product margin, as management consider this to be a more meaningful representation of the underlying performance of the business, and to reflect the way in which it is managed. Note E below Constant exchange rate revenue Like-for-like revenue, impact of acquisitions, and total see-through revenue are stated so that the portion denominated in non-Sterling currencies is retranslated using foreign exchange rates from the previous financial year. Note F below Like-for-like Like-for-like figures compare financial results in one period with those for the previous period, excluding the impact of acquisitions and disposals made in either period. For 2021, like-for-like revenue excludes the impact of Amberen which was acquired in December 2020. Not needed Operating costs Defined as underlying administration and marketing expenses, excluding depreciation and underlying amortization charges. Not needed A. Underlying EBIT and EBITDA Reconciliation of Underlying EBIT and EBITDA Year ended 31 December 2021 £000s Year ended 31 December 2020 £000s Profit before tax 18,157 13,016 Non-underlying items 24,061 20,512 Underlying profit before tax 42,218 33,528 Finance costs 3,418 3,300 Underlying EBIT 45,636 36,828 Depreciation 1,575 1,753 Underlying amortization 1,362 – Underlying EBITDA 48,573 38,581 B. Free cash flow Reconciliation of free cash flow Year ended 31 December 2021 £000s Year ended 31 December 2020 £000s Cash generated from operations 44,919 46,405 Interest payable and similar charges (2,965) (2,866) Capital expenditure (5,532) (4,612) Tax paid (6,260) (4,838) Free cash flow 30,162 34,089 C. Net debt Reconciliation of net debt Note 31 December 2021 £000s 31 December 2020 £000s Loans and borrowings – non-current (116,060) (138,328) Cash and cash equivalents 29,061 28,898 Net debt (86,999) (109,430) Financial Statements Governance Strategic Report Additional Information Company Overview 137 Alliance Pharma plc – Annual Report and Accounts 2021 Notes to the Financial Statements continued 34. Alternative performance measures continued D. Underlying effective tax rate Reconciliation of underlying effective tax rate Year ended 31 December 2021. We are here live in Omaha, Nebraska. Good morning, everybody. I'm Becky Quick, along with Mike Santoli. In just 30 minutes, Berkshire Hathaway Chairman and CEO Warren Buffett is going to be taking the stage with his Vice Chair Charlie Munger. Year ended 31 December 2020. Total taxation charge for the year (10,838) (4,989). Non-underlying tax debit/credit (note 5) 2,805 (1,383). Underlying taxation charge for the year (8,033) (6,372). Underlying profit before tax for the year 42,218 33,528. Underlying effective tax rate 19.0% 19.0%. See-through Income Statement 2021. Statutory values. See-through adjustment. 2021 See-through values. Revenue – Consumer Healthcare brands 115,376 6,443 121,819. Revenue – Prescription Medicines 47,831 – 47,831. Total revenue 163,207 6,443 169,650. Cost of sales (53,757) (6,443) (60,200). Gross profit 109,450 – 109,450. Gross profit margin 67.1% – 64.5%. 2020 Statutory values. See-through adjustment. 2020 See-through values. Revenue – Consumer Healthcare brands 85,340 7,719 93,059. Revenue – Prescription Medicines 44,461 – 44,461. Total revenue 129,801 7,719 137,520. Cost of sales (46,985) (7,719) (54,704). Gross profit 82,816 – 82,816. Gross profit margin 63.8% – 60.2%. There is no impact from the see-through adjustment on Income Statement lines below gross profit. Constant exchange rate revenue 2021. AER. Foreign exchange impact. 2021 CER. LFL see-through revenue – Consumer Healthcare brands 102,586 3,389 105,975. LFL see-through revenue – Prescription Medicines 47,831 326 48,157. Like-for-like see-through revenue 150,417 3,715 154,132. Impact of acquisitions (Amberen) 19,233 1,362 20,595. See-through revenue 169,650 5,077 174,727. 2021 AER. Foreign exchange impact. 2021 CER. LFL statutory revenue – Consumer Healthcare brands 96,143 3,247 99,390. LFL statutory revenue – Prescription Medicines 47,831 326 48,157. Like-for-like statutory revenue 143,974 3,573 147,547. Impact of acquisitions (Amberen) 19,233 1,362 20,595. Statutory revenue 163,207 4,935 168,142. Financial Statements Governance Strategic Report Additional Information Company Overview. Alliance Pharma plc – Annual Report and Accounts 2021. Unaudited Information Shareholder Information. Shareholder enquiries. The Company’s share register is maintained by Link Group who are responsible for updating the register, including changes to shareholders’ names or addresses and processing off-market transfers of the Company’s shares."
"If you have any questions about your shareholding in the Company or you need to notify any changes to your personal details, you should write to Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL or telephone 0371 664 0300. Financial Calendar. Annual General Meeting 18 May 2022. Interim results announcement 20 September 2022. Year end 31 December 2022. Preliminary announcement 21 March 2023. Additional Information. Alliance Pharma plc – Annual Report and Accounts 2021. Additional Information Governance Strategic Report Financial Statements Company Overview. Five Year Summary. Year ended 31 December 2017. Year ended 31 December 2018. Year ended 31 December 2019. Year ended 31 December 2020. Year ended 31 December 2021. Revenue 101.6 118.2 135.6 129.8 163.2. Operating profit before non-underlying items 25.8 28.9 37.4 36.8 45.6. Non-underlying operating items 4.4 (5.3) (1.8) (20.5) (24.0). Operating profit 30.2 23.7 35.6 16.3 21.6. Profit before tax before non-underlying items 23.9 28.1 32.9 33.5 42.2. Profit before tax after non-underlying items 28.3 22.8 31.1 13.0 18.2. Intangible assets 278.6 335.2 328.7 412.9 413.8. Tangible assets 5.7 7.6 11.6 15.9 4.8. Current assets 49.1 58.7 65.0 77.2 81.0. Current liabilities 61.4 91.7 24.2 30.2 40.6. Equity 203.1 252.2 274.2 281.0 282.5. Average shares in issue (millions) 473.8 497.2 520.7 531.1 535.3. Shares in issue at period end (millions) 475.0 518.2 529.4 532.9 538.2. Earnings per share – basic (p) 6.08 3.69 4.80 1.51 1.37. Earnings per share – adjusted underlying basic (p) 4.05 4.54 5.09 5.11 6.39. Additional Information continued. Alliance Pharma plc – Annual Report and Accounts 2021. Additional Information Governance Strategic Report Financial Statements Company Overview. Advisers and Key Service Providers. Registered Office Avonbridge House, Bath Road, Chippenham, Wiltshire, SN15 2BB. Company number 04241478. Auditor KPMG LLP 66 Queen Square, Bristol, BS1 4BE. Financial PR Buchanan Communications 107 Cheapside, London, EC2V 6DN. Registrars Link Group 10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL. Nomad and Joint Broker Numis Securities Limited 45 Gresham Street, London, EC2V 7BF. Joint Broker Investec Bank plc 2 Gresham Street, London, EC2V 7QP. Bankers Bank of Ireland, Bows Bells House, 1 Bread Street, London, EC4M 9BE. Citibank, N.A. Citigroup Centre, 33 Canada Square, Canary Wharf, London, E14 5LB. Lloyds Bank PLC 25 Gresham Street, London, EC2V 7HN. National Westminster Bank PLC 250 Bishopsgate, London, EC2M 4AA. Silicon Valley Bank, Alphabeta, 14-18 Finsbury Square, London, EC2A 1BR. Additional Information continued. Alliance Pharma plc – Annual Report and Accounts 2021. Additional Information Governance Strategic Report Financial Statements Company Overview. Cautionary Statement. Cautionary statement regarding forward-looking statements. This Annual Report has been prepared for the members of the Company and no one else. The Company, its Directors, employees or agents do not accept or assume responsibility to any other person in connection with this document and any such responsibility or liability is expressly disclaimed. This Annual Report contains certain forward-looking statements with respect to the principal risks and uncertainties facing Alliance. By their nature, these statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The forward-looking statements reflect the knowledge and information available at the date of preparation of this Annual Report and will not be updated during the year. Nothing in this Annual Report should be construed as a profit forecast. The Report of the Directors in this Annual Report has been drawn up and presented in accordance with English company law and the liabilities of the Directors in connection with that report shall be subject to the limitations and restrictions provided by such law. In particular, Directors would be liable to the Company but not to any third party if the Report of the Directors contains errors as a result of recklessness or knowing misstatement or dishonest concealment of a material fact, but would not otherwise be liable. Glossary. ABHI Association of the British HealthTech Industry. ABPI Association of the British Pharmaceutical Industry. AGM Annual General Meeting. CBEC Cross Border E-Commerce. CEO Chief Executive Officer. CFO Chief Finance Officer. CMA Competition and Markets Authority. CMO Contract Manufacturer. ERP Enterprise Resource Planning. ESG Environmental, Social, and Governance. FDA US Food and Drug Administration. FTC Federal Trade Commission. HCP Healthcare Professional. IHP International Health Partners. J&J Johnson and Johnson. LSP Logistics Service Provider. NAD National Advertising Division. OTC Over the Counter."
"PAGB Proprietary Association of Great Britain. QPPV Qualified Person Responsible For Pharmacovigilance. SECR Streamlined Energy and Carbon Reporting regulations. S&OP Sales and Operations Planning. TCFD Task Force on Climate-related Financial Disclosures. VPAS Voluntary Pricing and Access Scheme. Alliance Pharma plc – Annual Report and Accounts 2021. Printed by Pureprint, a Carbon Neutral Company certified to ISO 14001 environmental management system. 100% of all dry waste associated with this production has been recycled. This publication is printed on Revive 100, an FSC certified paper produced from recycled material, manufactured at a mill that has ISO 14001 environmental standard accreditation. The paper is Carbon Balanced with World Land Trust, an international conservation charity, who offset carbon emissions through the purchase and preservation of high conservation value land. Through protecting standing forests, under threat of clearance, carbon is locked-in, that would otherwise be released. Alliance Pharma plc, Avonbridge House, Bath Road, Chippenham, Wiltshire, SN15 2BB, United Kingdom. T: +44 (0)1249 466966. F: +44 (0)1249 466977. E: ir@alliancepharmaceuticals.com. www.alliancepharmaceuticals.com. Alliance Pharma plc Annual Report and Accounts 2023. WE ARE ALLIANCE. Online Sustainability Report. Sustainability report at osr23.alliancepharmaceuticals.com. Annual Report. View our report online at alliancepharmaceuticals.com/investors/2023-annual-report. Our website. Visit our main site for further information at alliancepharmaceuticals.com. An Alliance of people, partners and brands, working together to achieve more. CONTENTS. Company Overview. Who We Are. Chair’s Introduction. 2023 Performance Overview. 2023 A Year in Review. A Clear Purpose. Living our Values. Strategic Report. Chief Executive’s Review. Market Overview. Our Strategy. Our Strategic Priorities. Spotlight on Brand growth. Commercial execution. Strategy supply partnerships. Organisational agility. Our People. Key Performance Indicators. Sustainability. Spotlight on Purpose. People. Planet. Product. TCFD. Stakeholder Engagement. Financial Review. Principal Risks and Uncertainties. Governance. Chair’s Introduction. Our Governance Structure. Board of Directors. Governance. Nomination Committee Report. Spotlight feature. Audit and Risk Committee Report. ESG Committee Report. Remuneration Committee Report. Directors’ Report. Directors’ Responsibilities Statement. Financial Statements. Independent Auditor’s Report. Consolidated Income Statement. Consolidated Statement of Comprehensive Income. Consolidated Balance Sheet. Consolidated Statement of Changes in Equity. Consolidated Cash Flow Statements. Notes to the Financial Statements. Company Balance Sheet. Company Statement of Changes in Equity. Notes to the Company Financial Statements. Additional Information. Unaudited Information. Five Year Summary. Advisers and Key Service Providers. Cautionary Statement. Glossary. HOW WE REPORT TO OUR STAKEHOLDERS. Strategic Report. Read about the development of our ecosystem in China. Governance. Read about how we have strengthened our Board. Financial Statements. Read about the roll out of our ERP system in APAC. I am delighted to have joined the Board as Chair this February at such an exciting and important time for the Company. Alliance has a strong global footprint in several fast growth Consumer Healthcare categories. I’d like to start by thanking you for your patience as we endured a number of audit delays. This process has been extremely frustrating for all of us, and whilst it has taken much longer than we anticipated to complete the audit, the delay has allowed us time to implement a thorough review of our processes and perform more detailed work in respect of impairments. This enhanced impairment review is now more robust, and we are working on a plan to ensure we are in a strong position for future audits. Over the past few months, I have enjoyed meeting members of the executive team, global senior leaders, and colleagues based in both Chippenham and Paris. I appreciate their knowledge, skills and enthusiasm, and am excited for the opportunities that lie ahead. I am pleased to have appointed Nick Sedgwick as our new CEO on 13 May 2024, following Peter Butterfield’s decision to leave the company. I thank Peter for all that he has done for Alliance over the past 14 years and wish him well in his future endeavours. In the next few months, I will spend time with the management team to deepen my understanding of the business as I look to support the enhancement of the group’s strategy, with a strong focus on organic growth through marketing, innovation and geographical diversification, and to ensure we deliver value. I’d like to thank everyone at Alliance for delivering the 2023 results and for welcoming me to the Company. I look forward to sharing my vision for the long-term future of Alliance later this year."
"Finally, I would like to congratulate Alliance for its successful appeal at the Competition Appeal Tribunal, which was announced on 23 May 2024, and unequivocally cleared the company and its former Directors, Peter Butterfield and John Dawson, of any anti-competitive behaviours. Camillo Pane Chair 18 June 2024. CHAIR’S INTRODUCTION. I am delighted to have joined the Board as Chair this February. I’d like to thank everyone at Alliance for delivering the 2023 results and for welcoming me to the Company. 2023 PERFORMANCE OVERVIEW. See-through revenue £182.7 million, +6% (2022: £172.0 million). Underlying profit/(loss) before tax £31.5 million, +4% (2022: £30.3 million). Underlying basic EPS 4.55p, +6% (2022: 4.28p). Statutory revenue £180.7 million, +8% (2022: £167.4 million). Reported profit/(loss) before tax £(48.8 million), +111% (2022: (£23.1 million)). Reported basic EPS (6.13)p, +56% (2022: (3.93)p). Free cash flow £21.3 million, +35% (2022: £15.8 million). Net debt £91.2 million, -11% (2022: £102.0 million). Kelo-Cote: Growth in Kelo-Cote franchise revenues. ScarAway: Increase in like-for-like sales. On-time in full Nizoral delivery, significant improvement. 2023 A YEAR IN REVIEW. Following a challenging first half, a strong second half performance drove record sales for 2023, leading to underlying profit expansion. The performance of our Kelo-Cote franchise was particularly impressive, growing 29% CER including sales from ScarAway, whilst Amberen was weaker than expected. We doubled the amount of revenues from products launched from our own innovation and development pipeline. With further investment planned to support new product development and increased marketing, the Group is well-positioned for growth over the medium term. Nizoral sales made on an agency basis are included within revenue, in line with IFRS 15. See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. Prescription Medicines performance is broadly stable with revenues of £46.3 million (2022: £46.8 million). Strong performance from the latest US acquisition, ScarAway, with £9.9 million revenue, up 20% at constant exchange rates on a like-for-like basis, exceeding original expectations. Progress continues to be made on brand innovation, with £3.5 million of revenues from internal development, more than double the £1.7 million in 2022. Non-cash impairments of £79.3 million are due to lowered future cash flow expectations and higher cost of capital, of which £46.4 million relates to Amberen, £10.3 million to Nizoral, and £22.6 million to twenty smaller assets in aggregate. The correction of valuation errors for the prior year has yielded a £28.3 million increase to non-cash impairment charges reported in 2022, of which £20.0 million relates to Amberen and £8.3 million to other intangibles. Underlying profit before tax increased 4% to £31.5 million (2022: £30.3 million) and reported loss before tax was £48.8 million (2022 restated: £23.1 million loss). Reported profit before tax loss of £48.8 million on higher impairment charges (2022 restated: £23.1 million loss). Robust free cash flow of £21.3 million (2022: £15.8 million), up 35%. Group leverage reduced to 2.05 times at 31 December 2023 (2.69 times at June 2023; 2.57 times at 31 December 2022). Consumer Healthcare see-through revenue is up 11% at constant exchange rates to £136.4 million (2022: £125.2 million) and up 9% on a reported basis. Continued strong consumer demand is driving significant recovery in Kelo-Cote franchise revenues in the second half, with full year revenues reaching £63.2 million, up 29% at constant exchange rates. Dividend paused while the Board considers a new policy. Leveraged our e-commerce knowledge to broaden the geographic reach of our e-commerce platforms and enter new markets, with further expansion planned in 2024. Nizoral manufacturing moved from Belgium to Thailand, driving cost savings, improving on-time-in-full order delivery, and reducing carbon emissions. There was a 48% reduction in Scope 1 and 2 emissions versus the 2018 baseline, on track to meet the interim 65% reduction target by 2025 and achieve net zero in 2030. Scope 3 emissions target set to achieve net zero by 2044, with an interim reduction target of 25% by 2030. Re-certified as a Great Place to Work in the UK, US, China, and Singapore. Strengthened the Board of Directors with the appointment of Jeyan Heper, Martin Sutherland, Richard McKenzie, and Eva-Lotta Sjöstedt. Post year-end appointments of new Independent Chair, Camillo Pane, and new CEO, Nick Sedgwick. Successful appeal of Competition and Markets Authority decision clearing Alliance, Peter Butterfield, and John Dawson (former CEOs) of any wrongdoing. £7.9 million provision for potential fine now released. A clear purpose: We empower people to make a positive difference to their health and wellbeing."
"Vision: To be a high-performing consumer healthcare company, built on a portfolio of leading, trusted, and proven brands. Where we will focus: Helping damaged skin, supporting healthy aging, and other high-performing brands in core priority markets. How we will win: Four strategic priorities underpinned by our values: performance, realism, accountability, integrity, skill, and entrepreneurship. Supported by our sustainability strategy. Living our values: Performance: Our UK campaign boosted sales and strengthened the Kelo-Cote brand. Realism: Our success is due to great teamwork and outstanding planning and delivery. Accountability: We take responsibility for ethical conduct in all of our business operations. Our PRAISE values are at the heart of how we work together; they are central to what makes Alliance unique. With limited consumer awareness of the scar treatment category in the UK, we sought to develop a creative campaign with a key focus on empowering women to support Kelo-Cote’s retail launch in Boots. We used pilot testing to ensure this message resonated with our target market: 18-50 year old women. Featuring real people with real scars, we ran an out-of-home billboard campaign in the UK during 2023, which delivered a 60% sales increase at Boots and a 12-point increase in prompted brand awareness. Our campaign has since been recognized by the Pharmaceutical Marketing Society as Best Digital Brand Promotion. Singles’ Day takes place in China every November. It is the world’s biggest shopping festival and a global e-commerce phenomenon. Following our success at the festival in 2022, our cross-functional team and our partners worked together closely to plan and accomplish exceptional performance for Alliance products in 2023. We achieved 197% year-on-year growth and sales worth £3.0 million during the festival. We sold 144,000 units of our products and close to one million people visited our Tmall store and live-streaming shows. During 2023, we continued to focus on ethical and legal compliance, which is fundamentally important to our business. We launched our Employee Code of Conduct, continued to embed our Partner Code of Conduct, and strengthened our suite of policy documents. Employees and other stakeholders now have access to Safecall, an independent speak-up helpline that is available in every country in which we operate. In addition, we introduced a new, more comprehensive program of online compliance training to upskill our employees and contractors. Integrity: We work hard to ensure the integrity of our products and supply chain. Skill: Our skilled colleagues step up when faced with a challenge. Entrepreneurship: I have learned more at Alliance than I could have imagined. As a business, we value integrity in all of our operations, and this extends to our products and supply chain. Counterfeiting and illicit trade put our consumers and patients at risk of serious adverse health effects and deprive them of the benefits that our products bring. We work closely with government agencies, law enforcement, and other organizations to prevent, detect, and respond to illicit trade. In 2023, we substantially reduced counterfeiting of Kelo-Cote in China through security measures, which included monitoring, investigations, and raids. Further anti-counterfeiting measures will follow in 2024. The regulatory transition from the European Medical Device Directive to the complex and detailed new Medical Device Regulation has required painstaking and meticulous work from our cross-functional team, necessitating extensive engagement with regulators and notifying bodies to clarify guidance. The new legislation did impact the supply of certain products in 2023, but we worked hard to resolve the situation effectively. We welcome the higher safety standards of the MDR, and thanks to our skilled team, we remain on track in terms of compliance with all affected products now back in stock. The Alliance graduate development program has given me the opportunity to explore and develop my entrepreneurial skills. I was encouraged to choose my own pathway and to step up to hold leadership responsibilities on major projects. The highlight so far has been my three-month rotation in Singapore, an exciting and dynamic environment where I helped to launch Kelo-Cote on e-commerce sites in Australia, Malaysia, and Singapore. Exceptional mentoring and support have allowed me to really contribute to the success of the business, and I am excited about my future at Alliance. Developing our Kelo-Cote ecosystem in China: In a rapidly evolving, and sometimes turbulent, market such as China, it is essential that we keep abreast of any developments within the ecosystem."
"In 2023, following a long period when we were prevented from being physically present in China due to COVID restrictions, we conducted numerous market visits, engaged extensively with our distributor partner, and liaised with local consultants to further expand our domain expertise. Consequently, we have invested selectively to extend our market reach in a targeted way, identifying new growth opportunities in both the cross-border and domestic channels. Our significant investment in knowledge building is helping to further cement the market-leading position of Kelo-Cote in China. Trading performance overview: We achieved record revenues in 2023, as we overcame a number of challenges in the first half to deliver a strong recovery in the second half. The performance of our Kelo-Cote franchise was particularly impressive, with revenues rising 29% at constant exchange rates to £63.2 million, including those from our most recent US acquisition, ScarAway, which exceeded our original expectations. While Amberen revenues were weaker than anticipated, we increased marketing investment to launch award-winning advertising campaigns for Kelo-Cote and MacuShield, which accelerated organic sales growth, and we brought a number of new products to market. Alliance’s clear focus on the core Consumer Healthcare business, in addition to our well-established scalable platform, is expected to deliver continued growth in the medium term. Our core priority markets remain competitive, but our key brands are well placed within their categories, and we will continue to increase investment in sales, marketing, and innovation to maintain their leadership position. We will continue to focus our resources on those market segments in which we already have a strong presence and expertise, in order to drive solid organic revenue growth above that of the broader Consumer Healthcare market over the longer term. A challenging first half but strong recovery in the second half: We started 2023 anticipating a greater weighting of revenues in the second half than usual for Alliance due to the planned destocking by our China cross-border partner for Kelo-Cote. While this destocking was completed in line with our forecasts, unexpected regulatory issues caused some manufacturing delays in certain smaller products in the first half, and Amberen sales were hampered by a number of industry-wide challenges put in place by Amazon. See-through revenue was £182.7 million, up 6% (2022: £172.0 million). Our strong second half performance drove record revenues and profit expansion in 2023. With further investment planned to support new product development and increased marketing, the Group is well positioned for mid-term growth. However, our colleagues worked hard to address the regulatory issues to ensure that all products were back in stock by the year end. Strong consumer demand for Kelo-Cote gave our distributor partners the confidence to restock in the second half, and our consumer activation campaigns delivered market share gains for Nizoral. Amberen revenues remain below our expectations, resulting in a further impairment, but we are strengthening our internal and external capabilities in e-commerce and digital marketing to help mitigate future problems on Amazon. While see-through revenues increased 6% in the year, gross profit increased at a slower rate than revenues at 3% to £105.0 million (2022: £101.7 million) due to a less favorable product mix and an increase in warehouse and distribution costs. However, through robust control of the costs we actively manage, operating costs decreased 5% versus the previous year, and underlying EBITDA increased 15% to £45.0 million (2022: £39.2 million). During 2023, we continued the global rollout of our ERP system to all ex-China APAC entities so that our regional and central operational and finance teams now operate on the same platform with a single, standardized way of working. This gives us increased and more immediate business visibility, which enhances our operational decision-making and agility. On 23 May 2024, we announced the successful conclusion of our appeal before the Competition Appeal Tribunal of a decision by the UK Competition and Markets Authority. In a unanimous judgment, the Tribunal upheld Alliance’s appeal, finding that there was no agreement to exclude competition from the market and no breach of competition law. The CMA’s decision and £7.9 million penalty imposed on Alliance have been set aside. In particular, the Tribunal found that Alliance’s two key witnesses were both impressive and compelling, with their evidence singled out by the Tribunal in its concluding remarks. Director disqualification proceedings brought by the CMA against two former Alliance CEOs, the first limb of which was joined to the appeal, will also now fall away. In 2021, we provided for the potential penalty, but now reverse this provision."
"Innovation and development: In 2023, £3.5 million of Group revenues were generated by products developed and launched by Alliance, representing 2.5% of total consumer sales in the year and more than twice the revenues delivered in 2022 (£1.7 million). This is a pleasing performance given that our dedicated innovation and development team was only established in 2021 and validates our decision to invest in it further. Kelo-Cote Kids (launched in 2022) and Canker-X, part of the Aloclair brand franchise (launched in early 2023), were responsible for the majority of these revenues. Amberen Advanced Menopause Relief gummy was launched in late 2023. This year, we will double our investment in innovation and development as we aim to achieve 10% of Consumer Healthcare sales through products developed on our innovation and development platform within the next five years. New products already launched in 2024 include ScarAway Kids and ScarAway Acne Scar Gel, both in the US. In May 2024, we launched a second gummy in the Amberen range, which uses a different active ingredient to the original gummy launched in late 2023. This new gummy aims to promote positive energy, mood, and improve sleep, which is particularly relevant to the perimenopause market. Continuing our sustainability journey: We continue to make good progress against our environmental sustainability agenda in 2023, setting a target to reach net zero for all Scope 3 emissions by 2044, with an interim target of 25% reduction by 2030, in addition to our previously published target to reach net zero Scope 1 and 2 emissions by 2030. This year, we conducted a risk assessment and climate change scenario analysis to support the publication of our second voluntary stand-alone Task Force on Climate-Related Disclosures Report and more extensive voluntary TCFD disclosures on our journey to mandatory TCFD compliance. During the year, we have invested to install photovoltaic panels on the roof of our UK Headquarters in Chippenham. This program of work also includes the installation of a new, more efficient substation and electric vehicle charging points. When this work completes and the panels become operational, we will be able to generate around 25% of our own electricity needs. Throughout the year, we developed a number of social and governance workstreams. We appointed a new e-learning provider to deliver engaging compliance training to our colleagues, including data protection, unconscious bias, modern slavery, anti-bribery and corruption, and competition awareness training. We also entered a three-year partnership with the social enterprise Slave Free Alliance to safeguard individuals across our business from modern slavery and human trafficking, including those in our supply chain. Working with Slave Free Alliance, we carried out a gap analysis, strengthened our Modern Slavery Statement, and provided training to our quality, sourcing, and supply chain teams to help these teams better identify modern slavery red flags during quality audits and supplier site visits. We implemented a Partner Code of Conduct in 2022 and, throughout 2023, have worked to ensure that all of our Contract Manufacturing Organizations and distributors agree to comply with our code. We have also introduced an Employee Code of Conduct, which includes a section on our Speak Up Policy. To support this, we have engaged Safecall, an independent reporting helpline, to allow colleagues and external partners to raise concerns anonymously from over 100 countries. The service is operational 24 hours a day, seven days a week, and available in over 60 languages. Further detail on the progress we have made with our sustainable business strategy will be provided in our Online Sustainability Report, which will be published shortly on our website. Contents Generation - Page Contents Generation - Sub Page Contents Generation - Section Building a Strong Alliance of Colleagues Our business, and the delivery of our strategy, is only possible due to our network of talented, dedicated colleagues. We currently employ more than 290 people in nine locations around the world. We created eight new roles in 2023, including Chief Operating Officer, as we looked to meet our evolving business needs. This, in addition to the headcount expansion we delivered in 2022, means we now have the right size organization to support our medium-term strategy. We have also continued our talent development programs to ensure we attract and retain an appropriate mix of skilled professionals. In 2023, we welcomed the second cohort of our graduate and year in industry programs to support those at the early stages of their career development, which also complements our existing apprenticeship program in the UK."
"Our investment in colleague engagement continues to pay dividends as evidenced by our re-certification as a Great Place to Work in the UK, US, China, and Singapore. In the 2023 survey, we were pleased to have received an overall Trust Index rating of 74 percent (2022: 79 percent) with 73 percent of participants globally saying that Alliance was a Great Place to Work (2022: 82 percent). On behalf of the Board, we would like to thank all those colleagues who helped us to deliver our achievements in 2023. Board and Executive Changes Alliance has successfully continued its journey to becoming a fast growth Consumer Healthcare company, with Consumer Healthcare revenues representing 75 percent of Group revenues in the Period. The Board and Executive team have evolved accordingly in 2023, to ensure that the Group has the right skills and expertise to align with its longer-term strategy. In February 2023, we welcomed Jeyan Heper to the Alliance Board as an Executive in the newly created role of Chief Operating Officer. Jeyan has a strong track record of strategic leadership in the international Consumer Health market, overseeing a number of global programs and driving growth in flagship brands. In his career spanning more than 25 years, Jeyan has held senior Executive roles at Procter and Gamble, Danone Group, and Ansell’s sexual wellness global business, before it was spun out to become Lifestyles Healthcare, a private equity/pharma-owned company where Jeyan became CEO, helping to bolster the Group’s operational capabilities, identify growth opportunities, and support the delivery of the Company’s strategy to expand its Consumer Health presence through leveraging his experience of ecommerce in China and the US, and improve operational effectiveness. The Board was strengthened further by the appointment of Martin Sutherland as an additional Independent Non-Executive Director in February 2023. Martin is a senior Executive with over 30 years of experience in global businesses and is currently Non-Executive Chair of Logiq Consulting Ltd, and a Non-Executive Director at both Forterra plc and XPS Pensions plc. Prior to this, Martin was CEO of De La Rue PLC. Martin has a proven track record of delivering growth through new product innovation, market diversification, and international expansion. In November 2023, we added a further two new Independent Non-Executive Directors, Eva-Lotta Sjöstedt and Richard McKenzie. Eva-Lotta has in-depth knowledge of global consumer retail, supply chain, and digital transformation and has held leadership roles in consumer-facing industries across Europe, Japan, China, and the US. From 2016 to 2018, Eva-Lotta was CEO of Georg Jensen, the luxury jewelry and Scandinavian design brand. Chief Executive’s Review Continued Company Overview Financial Statements Additional Information Strategic Report Governance Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation - Page Contents Generation - Sub Page Contents Generation - Section Prior to this, Eva-Lotta was CEO at Karstadt, a chain of premium department stores in Germany with a strong ecommerce presence. She started her career at IKEA, establishing the business in Japan where she worked for four years before becoming CEO of IKEA Netherlands and then Deputy Global Retail Manager. In this role, she was responsible for IKEA’s global multi-channel strategy and the implementation of its on and offline experiences throughout the entire global value chain. Richard has international ecommerce, distribution, supply chain, and logistics experience in the consumer, retail, and technology sectors, along with particular expertise in the Asia-Pacific region having lived and worked in mainland China for 10 years. From 2019 to 2023, Richard was Chief Commercial Officer and latterly President (Europe and Asia) for Ocado Solutions, driving the growth of this leading grocery ecommerce platform globally. Prior to this, Richard was a strategy consultant for OC&C in London and China, building the Company’s presence in Asia-Pacific, before becoming a Senior Partner for the Consumer Goods and Retail practice of Oliver Wyman in Asia-Pacific. During this time, he built extensive experience of the retail consumer market in China, and Asia-Pacific more broadly. In February 2024, Jo LeCouilliard stepped down from the Board with the appointment of Camillo Pane as the new Independent Chair of Alliance. Camillo Pane has over thirty years of relevant experience. He has held a number of senior positions at Reckitt Benckiser, including Senior Vice President and Global Category Officer for Consumer Health, before moving to Coty Inc, one of the largest beauty companies in the world, where, as CEO, he led the merger with Procter and Gamble Specialty Beauty."
"Most recently, he was Group CEO of Health and Happiness Group, a global Health and Nutrition company listed on the Hong Kong Stock Exchange with revenues of around 2.0 billion dollars. On behalf of the entire Group, we would like to thank Jo for her contribution to the business over the last five years. Peter Butterfield Director 18 June 2024 More information on our Senior Leadership Team can be found on our website. Chief Executive’s Review Continued Alliance Pharma plc Annual Report and Accounts 2023 Company Overview Financial Statements Additional Information Strategic Report Governance Contents Generation - Page Contents Generation - Sub Page Contents Generation - Section Market Overview The macro factors shaping our business 1. Omni-channel retail Whilst there has been a rise in the purchase of health products and services online, this is not the only way that consumers want to transact. A purchasing journey may include multiple or omni-channels, such as first seeking advice in a pharmacy but ultimately purchasing from a website via a mobile phone. Each channel must be optimized, so that the consumer is able to find what they want and can complete their purchase easily. 2. Environmental sustainability With greater focus and scrutiny on sustainability, the way a business operates matters more than ever. Many consumers now actively seek companies and brands whose values align with their own. For example, choosing products containing sustainably sourced ingredients or with environmentally friendly packaging. 3. Economic uncertainty Businesses operate in a volatile, uncertain, complex, and ambiguous world where being agile, resilient, and managing cost is essential to success. Faced with a higher cost of living, consumers tend to look for brands and services that offer the best value to them, and with proven results, rather than risk using something unknown. 4. Ageing global population By 2030, approximately 1.4 billion people globally will be over 60 years old and the global hotspot of ageing is shifting from Europe to East Asia. By 2040, about a third of all Chinese (400 million plus) will be over the age of 60 compared to just 18 percent in 2020. Ageing, as well as education and income advancement in emerging markets, will all increase the global demand for healthcare. 5. Growth in self-care There is a growing trend towards more proactive management of health and wellbeing, rather than an individual just taking action when they feel unwell. The rising cost of providing public healthcare means governments are becoming more supportive of this, increasing the availability of OTC medicines and supporting pharmacists and nutritionists to provide more first-line care and support. 6. Digital health The increasing adoption of digital health solutions is providing consumers, health practitioners, and manufacturers with greater access to information on medical conditions, treatments, and outcomes. Regular feedback from a digital device can lead to a more engaged consumer who is willing to take more actions to manage their health. By aggregating that feedback across many consumers, we can identify emerging needs or gaps in the market and develop new products and services to meet them. Six macro factors impacting our business Proactive consumers Where people previously adopted a reactive approach to their health and only took action when they felt unwell, more recent innovations and new technologies now allow a more proactive management of health. How We Targeted Our Message to a More Proactive Consumer in 2023 Our Purpose and Vision considers these macro factors in combination with our key areas of expertise, which we believe places us in a stronger position to deliver our strategy and to continue the successful evolution of our business. Amberen Supporting Women Through Menopause Our website for Amberen in the US contains a wealth of information to support women through menopause and provides the opportunity to subscribe to monthly shipments to improve consistent usage and ultimately product satisfaction. Marketing plans feature the use of both consumer and healthcare professional social media influencers to showcase the experiences of women who have benefitted from taking the supplement. Kelo-Cote Singles’ Day Success During the Singles’ Day festival in China, our global ecommerce team hosted a livestreaming event on Tmall to educate consumers on the benefits of using Kelo-Cote to improve the appearance of scars. This helped deliver a 20 percent increase in Kelo-Cote sales on Tmall during the festival, versus the same period the prior year."
"Alliance Pharma plc Annual Report and Accounts 2023 Company Overview Governance Financial Statements Additional Information Strategic Report Contents Generation - Page Contents Generation - Sub Page Contents Generation - Section As we continue to evolve into a predominantly Consumer Healthcare Company, our strategy focuses on the global priority categories of helping damaged skin and supporting healthy ageing. See our Purpose, Vision, and strategy infographic on page 05. Helping Damaged Skin Within the multi-billion dollar global skincare category, there are several skin health sub-categories, such as scar management, medicated anti-dandruff shampoo, and dry skin - sub-categories which are both fast-growing at present and have large future growth potential thanks to favorable demographics and high global prevalence of these conditions. Alliance already has brands, products, technology, and expertise within these high-growth sub-categories - brands that are grounded in science, which we can build and develop further, to make a positive difference to more people’s lives globally. Supporting Healthy Ageing The favorable demographics of the ageing global population are expected to continue, with forecasts predicting that an additional quarter of a billion people (or 40 percent of the global population) will be over the age of 45 by 2030. The 65 plus age group is growing consistently faster than any other age group, as medical advances facilitate longer lifespans. As people become increasingly proactive in managing their health, we anticipate sustained growth in those healthcare categories that support healthy ageing. This includes managing conditions that arise as a result of the ageing process, such as menopause, or age-related macular degeneration, and also long-term conditions which can occur at any age, where we can support an individual’s health and wellbeing over a longer period of time. Brands falling within the categories of Helping Damaged Skin and Supporting Healthy Ageing will be the focus of our innovation and future acquisition activities going forwards. In addition, we have a number of high-performing local brands and critical medicines, which are central to the delivery of our purpose. High-Performing Local Brands We have a number of high-performing local brands which continue to provide a strong contribution to the business and so warrant specific local focus and investment. These brands deliver significant sales in a market or region and have the potential to deliver good regional growth. Critical Medicines Critical medicines are for conditions that are life-threatening or where patients’ physical or mental health would be seriously impacted without the product and there are no viable alternatives. We see it as part of our social responsibility to ensure that our critical medicines continue to be made available to patients, and it is this, rather than financial returns or growth potential, which underpins our resource allocation decisions for this group of products. Foundation Brands We continue to review the future of our smaller brands which have lower contribution to our bottom-line performance and which may have higher associated risks and, if appropriate, will look to discontinue or divest these. Our Strategy Our vision is to be a high-performing Consumer Healthcare Company, built on a portfolio of leading, trusted, and proven brands. Core Priority Markets Since 2016, and aligned with our period of expansion through acquisition, we have been building the optimal global office base to support our future growth. We remain fully committed to this global footprint. We will continue to manage and drive growth from our nine offices located in Cary, Dublin, Düsseldorf, Madrid, Milan, Paris, Shanghai, Singapore, and our headquarters in Chippenham. From this fixed base of offices, we will service and grow our business globally, with particular focus on our identified Core Priority markets: The US, China, and UK will continue to be our highest priority geographies - these are markets where there remains significant growth potential and where we have existing scale. France and Germany offer attractive OTC markets, and whilst our revenue generation in these markets is relatively low at present, our direct presence and high-quality local teams provide the potential to drive both scale and growth. Collectively, these five markets currently account for around 77 percent of our annual sales (2022: 75 percent). Our remaining markets will continue to provide profitable incremental business. We believe that by 2027, this will have increased to around 50 percent to 55 percent of our total consumer healthcare sales."
"Cross-border ecommerce continues to be an important contributor to Kelo-Cote sales in China, both through the B2B and B2C channels, and in 2023 we leveraged our ecommerce knowledge to broaden the geographic reach of our ecommerce platforms and enter new markets. See our case study on developing the Kelo-Cote ecosystem in China on page 08 and the Realism case study on the Kelo-Cote Singles’ Day success on page 06. Our Strategic Priorities To enable the successful delivery of our strategy, we have identified four priorities for the business over the next three to five years: We will seek to enhance the attractiveness of our high-value brands, through: Insight-led, data-driven, measurable marketing investment. Acquisition and in-licensing of products or technologies to support our key brands. Innovation and development activity to keep our core brand portfolios ahead of their respective competitive sets. ScarAway, our most recent acquisition, generated £9.9 million revenue in 2023, up 20 percent CER on a like-for-like basis, as we responded to consumer demand to reintroduce discontinued SKUs. In 2023, we delivered £3.5 million revenues from products developed and launched by Alliance with Kelo-Cote Kids (launched in 2022) and Canker-X (launched in 2023) responsible for the majority of these revenues. See our Spotlight on building fast-growing brands on page 20 and our performance case study on page 06. Brand Growth We will build fast-growing brands where consumer choice is driven by the positive difference we make. We will continue to look for omni-channel presence in our core markets whilst recognizing that ecommerce represents our fastest growth channels in these markets, a trend which we expect to continue for many years to come. In 2023, 44 percent of our consumer healthcare sales were via ecommerce, up from 34 percent in 2022 and significantly more than the global average for consumer healthcare of around 15 percent. Commercial Execution We will increase the impact of our commercial execution, with a major focus on ecommerce. We remain committed to finding ways to consolidate our supply chain, moving to a smaller, high-performing network of strong partners with whom we can collaborate and invest for the future. Partners who will support us, not just with the manufacture and supply of current products, but also with innovation and the delivery of our environmental sustainability strategy. A smaller network of partners will also facilitate efficiency gains. In 2023, we successfully moved the manufacture of Nizoral from Belgium to Thailand to be closer to the customer, delivering cost savings and improving on-time-in-full order fulfillment, in addition to environmental benefits through a reduction in carbon emissions. See our case study on strategic supply partnerships on page 22 and our Sustainability overview on page 29. It is the diverse combination of skills, experience, and energy of Alliance’s people that help to create our strong culture. We are harnessing this culture to enable the successful delivery of our strategy with increased focus and pace. We recognize that new technologies, approaches, and opportunities enable companies to gain a competitive advantage quickly - innovation and ecommerce require us to excel in these fast-moving, competitive worlds. Change is continual and as the pace of change increases, we need to ensure we maintain sufficient agility to respond appropriately. Agile businesses are tuned into the dynamic external world and centered on their customers’ changing needs. They have a rapid cycle of ideas development - a test, learn, and adapt approach, which we believe is well-suited to areas such as innovation and ecommerce. We remain focused on ensuring we attract and retain the right people to support and maintain an agile culture. Our early careers program is building momentum, and we were delighted to be re-certified as a Great Place to Work in the UK, US, China, and Singapore. See our case studies on the early careers programme on page 23 and our People section on page 24. Strategic supply partnerships: We will transform our supply chain by investing in a network of strategic partnerships. Organisational agility: We will continue to cultivate an agile organisation and culture that delivers our growth. Alliance Pharma plc Annual Report and Accounts 2023. Company overview, Governance, Financial Statements, Additional Information, Strategic Report. Contents Generation – Page, Contents Generation – Sub Page, Contents Generation – Section. SPOTLIGHT ON: In response to consumer requests, we worked with our contract manufacturing partner for ScarAway to reintroduce tan scar sheets that had been discontinued by the previous brand owner prior to our acquisition. This decision supported market leading growth in 2023."
"Brand growth: Unlike clear scar sheets, tan scar sheets are designed to be washed and reused, offering the consumer greater flexibility and allowing them to observe their scar healing. Prior to Alliance’s acquisition of the brand, the previous owner had discontinued all tan sheets in the range. When tan products in the range went out of stock, we had numerous requests online and through our customer service helpline to bring them back. Working with our partner, we were able to quickly resupply the previous range, in addition to offering a new variety pack containing multiple sizes in one box. Scar sheets are particularly well suited to the ecommerce channel, so the decision to relaunch the range was well aligned with our strategy. The new SKUs and associated marketing activation helped to support 20% like for like revenue growth for ScarAway in 2023 and 30% growth in sheets, above that of the market. BRAND IN SILICONE SCAR SHEET CATEGORY: #1 GROWTH IN SCARAWAY SHEETS VERSUS CATEGORY GROWTH OF 22%. Neilson data as at 30.12.2023. Source: Nielsen, XAOC, ScarAway Competitive Set, L52 w/e 12/20/2023. WE ARE ALLIANCE: Consumers wanted the range, and we had a partner with the necessary raw materials already in stock, so the whole process was seamless and aligned with our strategy to focus on ecommerce. Alethea Taylor, US Brand Manager. Company overview, Governance, Financial Statements, Additional Information, Strategic Report. Alliance Pharma plc Annual Report and Accounts 2023. Contents Generation – Page, Contents Generation – Sub Page, Contents Generation – Section. SPOTLIGHT ON: Working with Saatchi & Saatchi Wellness, we developed a creative campaign to build and grow global consumer awareness of the Kelo-Cote franchise, following the acquisition of ScarAway in the US in 2022. Commercial execution: The campaign was launched first in the UK, building on the success of the out-of-home poster campaign and providing a useful benchmark for the wider EMEA market. By deliberately incorporating talent and messaging which has global appeal, we have ensured that the campaign assets can be repurposed for our core markets at little additional expense, whilst maintaining global brand consistency. In 2024, we intend to launch the campaign across Europe, the US and the cross-border market in China. 4.3 INCREASE IN POST CAMPAIGN UK BRAND AWARENESS. 12pp STAR RATING ON AMAZON. WE ARE ALLIANCE: By strategically investing in global marketing assets today, we are well positioned to strengthen the leadership of the Kelo-Cote franchise for the future. Natalie Bayes, Senior Global Brand Manager – Kelo-Cote. Alliance Pharma plc Annual Report and Accounts 2023. Company overview, Governance, Financial Statements, Additional Information, Strategic Report. Contents Generation – Page, Contents Generation – Sub Page, Contents Generation – Section. SPOTLIGHT ON: In 2023, we completed the transfer of our Nizoral production from the Belgium-based legacy CMO that we inherited at the time of the brand’s acquisition to a new CMO based in Thailand. Strategic supply partnerships: Our aim was to localise production, which is significantly more cost-effective and efficient for supplying Nizoral to our APAC markets. As well as shortening lead times, localised production also reduces carbon emissions as the product now travels a considerably shorter distance to market and is shipped by land or sea rather than air. Having selected a highly skilled and reliable CMO, we worked closely with them to ensure the seamless transfer of production with no disruption to supply. 100% ANNUALISED COST SAVINGS. £0.5m ON-TIME-IN-FULL DELIVERY, SIGNIFICANT IMPROVEMENT. WE ARE ALLIANCE: Moving production of Nizoral to Thailand provides significant advantages for our customers and our business, as well as reducing carbon emissions. Jerry Sun, APAC Operations Director. Company overview, Governance, Financial Statements, Additional Information, Strategic Report. Alliance Pharma plc Annual Report and Accounts 2023. Contents Generation – Page, Contents Generation – Sub Page, Contents Generation – Section. Our current graduate development programme colleagues. SPOTLIGHT ON: Our graduate development programme provides an exceptional opportunity to develop a career in international healthcare. Two graduates join our commercial and scientific affairs teams each year, along with a Year in Industry placement student in finance. Organisational agility: The programmes allow participants to experience the full breadth of our operations through rotations across different teams, which may include an international placement for the two-year graduate scheme. This helps our recruits to identify and create a career path that best suits their skills and interests. A key component of the programme is mentorship and support from senior leaders."
"Our other early careers options include apprenticeships and Year in Industry programmes, and we support our people to obtain professional qualifications. We have continued our partnering with local schools, supporting their work experience and summer placements programmes. WE ARE ALLIANCE: We provide extensive support and development to help our graduates build and accelerate their career at Alliance. Julie Murday, Head of Human Resources and Facilities. Top left: Georgia Wood, Commercial Graduate. Top right: Kathryn Brooks, Scientific Affairs Graduate. Middle: Lauren Green, Scientific Affairs Graduate. Bottom left: Haris Qureshi, Finance Trainee. Bottom right: Madeleine Thow, Commercial Graduate. Alliance Pharma plc Annual Report and Accounts 2023. Company overview, Governance, Financial Statements, Additional Information, Strategic Report. Contents Generation – Page, Contents Generation – Sub Page, Contents Generation – Section. In 2023, we welcomed 52 new colleagues into the business including our new Chief People Officer, Julie Skinner, and created eight new roles to support our strategy. Ensuring our people and culture continue to support the business’s medium-term growth ambitions. 292 SAY THIS IS A GREAT PLACE TO WORK. 2022: 82%. 73% TOTAL EMPLOYEES. 2022: 285. OUR PEOPLE: Our People. As at 31 December. Based on findings from Great Place to Work survey, October 2023. WE ARE ALLIANCE: The delivery of our strategy is only possible due to our network of talented, dedicated colleagues. Julie Skinner, Chief People Officer. Company overview, Governance, Financial Statements, Additional Information, Strategic Report. Alliance Pharma plc Annual Report and Accounts 2023. Contents Generation – Page, Contents Generation – Sub Page, Contents Generation – Section. OUR PEOPLE CONTINUED: In 2023, we continued to embed our culture, values and processes following a period of significant recruitment to support our refreshed strategy in 2022. We also continued to support early career development with the second cohort of graduate development programme participants and a new Year in Industry placement student. In a tough business climate, we are delighted to have been re-certified as a Great Place to Work in the UK, US, China and Singapore. STRENGTHENING OUR PROCESSES: One of our key focus areas for 2023 was the implementation of a global Human Resources Information System. With our preferred supplier identified in 2022, we made great progress in launching the system in the UK and US in H2 23, and remain on track to onboard all remaining colleagues in H1 24. The new information system provides significant efficiency benefits, moving previously manual processes for booking annual leave and appraisals onto a standardised platform. Further opportunities exist to host reward and recognition tools on the platform. SUPPORTING OUR EMPLOYER BRAND: We continue to have a strong response to our employee engagement survey which generates valuable insight and feedback from which to shape our People plans for the coming years. Whilst recruitment remains challenging in this sector, we continue to provide a compelling career proposition and attract high calibre candidates with our strong positive culture and team ethos. MOVING FORWARDS: We recognise the need to offer flexibility to our colleagues whilst balancing the need to collaborate across the business, and are continuing to refine our approach to hybrid working in a way that suits the individual, teams and wider business. The arrival of our new Chief People Officer, Julie Skinner, in late 2023 allows fresh perspective and ideas. She will lead the development of a comprehensive People plan, incorporating an Equity, Diversity and Inclusion strategy throughout 2024, ensuring we remain an employer of choice in the years ahead. Based on Company data as at 31 December. 2023: n=12 (2022: n=9). Defined as those running major divisions of departments, but not part of the Board and Senior Leadership Team; 2023: n=25 (2022: n=29). Includes NEDs and fixed-term contractors. Progress in 2023: Implemented our new HR Information System. Maintained GPTW certification in the UK, US, China and Singapore. Continued our early careers programmes. Launched our Employee Code of Conduct. Implemented a comprehensive programme of Lunch and Learn events for colleagues on a diverse range of topics. Focus for 2024: Continue to increase and improve communication throughout the business. Continue to embed a culture of wellbeing. Further the development and implementation of our reward and recognition proposition. Develop a comprehensive three-year People strategy to support Alliance’s growth ambitions and business strategy. EMPLOYEES BY GENDER: BOARD & SENIOR LEADERSHIP TEAM: 75% MALE, 25% FEMALE (2022: 78% Male, 22% Female). SENIOR MANAGERS: 64% MALE, 36% FEMALE (2022: 69% Male, 31% Female). ALL EMPLOYEES: 41% MALE, 59% FEMALE (2022: 42% Male, 58% Female). Alliance Pharma plc Annual Report and Accounts 2023."
"Company overview, Governance, Financial Statements, Additional Information, Strategic Report. Contents Generation – Page, Contents Generation – Sub Page, Contents Generation – Section. KEY PERFORMANCE INDICATORS: We set out here our key financial performance indicators. These are the primary measures used by management to monitor business performance against both short-term budgets and forecasts and longer-term plans. £182.7m, £172.0m, £169.6m, £137.5m. 2023, 2022, 2021, 2020. SEE-THROUGH REVENUE: £182.7m +6% (2022: £172.0m). UNDERLYING BASIC EPS: 4.55p +6% (2022: 4.28p). DIVIDEND PER SHARE: Nil (2022: 1.776p). LEVERAGE: 2.05x (2022: 2.57x). UNDERLYING PROFIT BEFORE TAX: £31.5m +4% (2022: £30.3m). FREE CASH FLOW: £21.3m +35% (2022: £15.8m). NET DEBT: £91.2m -11% (2022: £102.0m). £31.5m, £21.3m, £15.8m, £30.2m, £34.1m. 4.55p, 4.28p, 6.39p, 5.11p. 2.05x, 2.57x, 1.73x, 2.43x. 1.691p, 1.610p. £102.0m, £109.4m. 2023, 2022, 2021, 2020. UNDERLYING EBITDA: £45.0m +15% (2022: £39.2m). £45.0m, £39.2m, £48.6m, £38.6m. 2023, 2022, 2021, 2020. 2023, 2022, 2021, 2020. £30.3m, £42.2m, £33.5m. 57.5%, 59.1%, 64.5%, 60.2%. 2023, 2022, 2021, 2020. GROSS MARGIN: 57.5% -160bp (2022: 59.1%). These measures constitute Alternative Performance Measures, as defined in note 30 to the financial statements. Leverage is defined as: Adjusted net debt/enlarged Group EBITDA, calculated using proforma EBITDA on a trailing 12-month basis for acquired entities, in line with our banking covenants. Basis points. 0p, 1.776p, £91.2m, £87.0m. Financial KPIs. Company overview, Governance, Financial Statements, Additional Information, Strategic Report. Alliance Pharma plc Annual Report and Accounts 2023. Contents Generation – Page, Contents Generation – Sub Page, Contents Generation – Section. KEY PERFORMANCE INDICATORS CONTINUED: Other indicators: In addition to these indicators, we also employ a broad range of other measures to help us manage business performance, including but not limited to: Brand revenues, margins and contribution, by management region and relative to marketing and innovation investment. Post-acquisition performance evaluation measures. On-time in-full delivery and out-of-stocks to ensure continuity of product supply. Additional detail around inventory levels, provisioning and ageing profile; trade receivables and payables levels and ageing profiles (working capital management). We do not disclose the related metrics associated with these measures, on the basis that they are commercially sensitive and/or intended for internal use only. RESOURCING: 292, 74%, 285, 79%, 245, 76%, 79%, 245. 2023, 2022, 2021, 2020. TOTAL HEADCOUNT: 292 +2% (2022: 285). EMPLOYEE ENGAGEMENT: GPTW Trust Index: 74% -5pp (2022: 79%). PORTFOLIO EVOLUTION: 75%, 73%, 72%, 68%. 2023, 2022, 2021, 2020. REVENUE: CONSUMER HEALTHCARE BRANDS: £136.4m +9% (2022: £125.2m). CONSUMER HEALTHCARE AS A % OF TOTAL REVENUE: 75% +2pp (2022: 73%). £136.4m, £125.2m, £121.8m, £93.0m. 2023, 2022, 2021, 2020. 1 Month-end value of trade payables relative to the trailing 12 months’ cost of goods expressed as a days’ equivalent, averaged over the year. 2 Month-end value of trade receivables relative to the trailing 12 months’ sales expressed as days’ equivalent, averaged over the year. 3 Month-end value of inventory relative to the trailing 12 months’ cost of goods expressed as a days’ equivalent, averaged over the year. 4 On a See-through basis. 5 As at 31 December. 6 Percentage Point. SUPPLIER PAYMENT DAYS: 60 +2 days (2022: 58). WORKING CAPITAL MANAGEMENT: 60, 58, 46, 52. 2023, 2022, 2021, 2020. DAYS SALES OUTSTANDING: 74 +3 days (2022: 71). 74, 71, 55, 61. 2023, 2022, 2021, 2020. DAYS INVENTORY ON HAND: 152 -2 days (2022: 154). 152, 154, 169, 138. 2023, 2022, 2021, 2020. Additional KPIs. Alliance Pharma plc Annual Report and Accounts 2023. Company overview, Governance, Financial Statements, Additional Information, Strategic Report. Contents Generation – Page, Contents Generation – Sub Page, Contents Generation – Section. SUSTAINABILITY: Prioritising people, planet and product. OUR APPROACH: We are committed to operating our business in a responsible way, minimising our negative impacts and maximising our positive contribution while promoting the sustainability of our business for the longer term. OUR SUSTAINABILITY FRAMEWORK: Our sustainability framework identifies the key areas we are focusing on to deliver on our purpose and to assure the future of our business for the longer term. PURPOSE: We empower people to make a positive difference to their health and wellbeing. PRODUCT: Read about Our Product Story on page 33. PLANET: Read about Our Planet Story on page 32. PEOPLE: Read about Our People Story on page 31. PURPOSE: Read about Our Purpose on page 30. Visit our Sustainability hub. Learn more on our website and in our Online Sustainability Report at alliancepharmaceuticals.com/sustainability. PEOPLE: We are working to improve the quality of life for all people we interact with. PLANET: We seek to minimise our carbon emissions and reduce our environmental impact."
"PRODUCT: We deliver products that meet the highest standards of quality, safety and supply chain ethics. Company overview, Governance, Financial Statements, Additional Information, Strategic Report. Alliance Pharma plc Annual Report and Accounts 2023. Contents Generation – Page, Contents Generation – Sub Page, Contents Generation – Section. SUSTAINABILITY CONTINUED: Overview: We made good progress against our sustainability agenda in 2023 – below is a summary of our key achievements in the year and our main areas of focus for 2024. Further detail, including relevant metrics for all the areas of focus forming part of our sustainability framework, can be found in our Online Sustainability Report. PEOPLE: To increase our organisational agility – developing the requisite capabilities through a combination of talent acquisition, training, and cultural change. To maintain and enhance our high levels of employee engagement. To launch our Employee Code of Conduct, setting the benchmark for the ethical behaviours we expect from colleagues. Implemented our new global Human Resources Information System. Maintained Great Place to Work certification in the UK, US, China and Singapore. Introduced new ethical and legal compliance training with new modules on issues such as unconscious bias. Launched and rolled out our Employee Code of Conduct. Continued our early years career programme. Implemented a comprehensive programme of Lunch and Learn events for colleagues on a diverse range of topics. Progress in the year: Continue to increase and improve communication throughout the business. Continue to embed a culture of wellbeing. Further the development and implementation of our reward and recognition proposition. Develop a comprehensive three-year People strategy to support Alliance’s growth ambitions and business strategy. Focus for 2024: Scope 1 and 2 emissions up 13% versus 2022 as more colleagues. Return to the office, but there is a 76% reduction in market-based emissions through the use of green energy suppliers. There is a 48% reduction in location-based emissions versus the 2018 baseline. We offset these emissions, and those for 2022, through the purchase of carbon credits. We commenced a project to install photovoltaic panels onto the roof of our headquarters in Chippenham. We set a Scope 3 emissions target to achieve a 25% reduction versus the 2022 baseline by 2030 and to achieve net zero by 2044. We continued to develop our packaging strategy and initiated an agreement with Valpak to create and maintain a database of all our packaging. We began to generate our own electricity through the PV panels and continued to engage with our CMOs and LSPs to improve the calculation of our Scope 3 emissions. We developed a sustainable packaging strategy with appropriate KPIs. We launched new packaging for Nizoral Derma Daily with 35% post-recycled plastic and removed the primary carton box. We published a travel policy for employees to encourage more sustainable modes of transport. To continue to work towards developing our Scope 3 emissions reduction targets, we are embedding ownership of product-related emissions within the appropriate functional areas of the business and continuing methodology improvements to increase the accuracy of emissions measurement across all categories. We moved Nizoral API manufacture from Belgium to India and China. We moved Nizoral finished good production from Belgium to Thailand. Ninety-eight percent of CMOs managed by our sourcing team have either signed up to our Partner Code of Conduct or provided us with a copy of their equivalent code. We carried out a strategic gap analysis and developed a three-year anti-slavery strategy and action plan. We introduced a modern slavery module into our compliance training. We carried out a tender assessment on third-party warehouse and logistics partners. We continue to provide modern slavery training to relevant colleagues, including senior leaders. We undertook a supply chain human rights risk assessment and supplier lifecycle due diligence review. We developed a comprehensive human rights strategy and a procurement framework including sustainability criteria. To obtain formal confirmation from our CMOs that they comply with our ethical standards, we are tightening our processes around modern slavery in our supply chain. Alliance's purpose is to empower people to make a positive difference to their health and wellbeing. Kerry’s story provides an example of how our products improve lives. Following an accident, Kerry was left with a life-changing scar under her arm. As a personal trainer and keen swimmer, she was concerned about how the scar might impact her freedom of movement and draw attention. The scar knocked Kerry’s confidence and was very red and painful."
"Kerry reported that Kelo-Cote significantly leveled and flattened the scar, which reduced discomfort and gave her enough confidence to take part in a marathon open water swim. We are proud to be a certified Great Place to Work and are always looking for ways to improve by listening and responding to feedback from our colleagues. The changes we made during the year in response to this feedback delivered improved results in the 2023 survey. Throughout 2023, the HR team worked closely with all country leaders and cross-departmental focus groups to help interpret feedback from the 2022 GPTW survey and create meaningful action plans, with a particular focus on health and wellbeing. The subsequent changes implemented included improvements to the working environment, an increase in social events, and greater opportunities to celebrate successes. People are our most important asset. By collaborating with colleagues, we have put in place changes to drive meaningful improvement in our work environment. We are committed to operating our business in a responsible way, which minimizes negative impacts on the planet. Our goal is to achieve net zero Scope 1 and 2 emissions by 2030 and Scope 3 by 2044. In 2023, we commenced a project to install photovoltaic panels on the roof of our headquarters in Chippenham. This required planning consent, listed building consent, and landlord approval before building work could begin in August 2023. A separate project will follow to install four electric vehicle charging points. Once the PV panels are on stream, we expect to generate around 25% of our own electrical supply, which is a significant step towards our net zero target. Alliance is leading the field in emissions reductions versus its AIM-listed peers, and our PV panels will help us meet our net zero target. Alliance is committed to ensuring that there is no modern slavery or human trafficking in any part of our business. During 2023, we entered into a three-year partnership with social enterprise Slave-Free Alliance to safeguard those across all of our business, including our supply chain, from modern slavery and human trafficking. Working with SFA, we carried out a strategic gap analysis that included document reviews and multi-stakeholder discussions with employees. We have since strengthened our Modern Slavery Statement and developed a three-year anti-slavery strategy and action plan. As well as providing tailored training to our procurement team, we have carried out a tender assessment on third-party warehouse and logistics candidates. Commitments for 2024 include further training and undertaking a supply chain risk assessment and supplier lifecycle due diligence review. This framework supports Alliance to identify and assess the impact of climate-related risks and opportunities on our business and communicate our ability to manage this impact to our stakeholders. Reporting against the TCFD framework ensures that climate change is considered throughout our main business functions and that we can effectively communicate its impact on our business to our stakeholders. In 2023, as in previous years, we partnered with an external consultancy to support us with the evaluation of our business from a TCFD perspective and to undertake the scenario analysis and risk assessment required to determine our exposure to climate-related risks, considering both our own operations and the location of our key manufacturing and distribution partners. This disclosure outlines our approach to mitigating and addressing physical risks, such as flooding, and transition risks associated with the transition to a decarbonized economy. This financial year, we expanded our reporting to include climate scenario analysis of our largest logistics service providers, in addition to the CMOs we assessed last year, to effectively understand the impact of future projections of our changing climate. While there is no current requirement for us to report against the mandatory requirements of TCFD, we welcome the recommendations and are pleased to report voluntarily on our progress in 2023, integrating climate-related considerations into our existing business strategy and risk management processes. In 2023, we were delighted to have received the award for best communication of sustainability in the small cap category from the IR Society. This demonstrates the Group’s commitment to sustainability and to ensuring we effectively communicate our journey with all stakeholders. In addition to the disclosures that follow, we plan to publish our second voluntary stand-alone TCFD Report on the Sustainability section of our website to provide supplementary information about the risks and opportunities we face as a business as a result of climate change and how we plan to address these."
"At Alliance, we recognize that we have a role to play in reducing our environmental impact and our contribution to climate change. Climate governance has been integrated into our existing corporate governance structures, with the Board having overall responsibility for Alliance’s response to climate change and providing oversight on climate-related risks and opportunities, ensuring suitable management processes are integrated into future financial planning, business strategy, and operations. The ESG Committee is responsible for setting the Group’s overarching sustainability strategy and identifying relevant ESG priorities that most significantly impact the Group, including those relating to climate change. The Committee is responsible for ensuring that climate change priorities are anchored as an integral part of the Company’s business strategy. The ESG Committee and Board consider climate change when guiding the business strategy and developing risk management procedures. Risk assessments of climate risk impacts, such as flooding, have been taken as part of our ESG reviews. In addition, Alliance now focuses on transporting its products by sea rather than air to minimize its carbon footprint and climate impact. During the financial year, the ESG Committee held four scheduled meetings and provided quarterly updates to the Board regarding its activities and progress against goals and targets. Progress has been made in several areas during the financial year, with key activities focused on the scoping and resourcing of sustainable packaging, net zero strategy and roadmap, climate risks, TCFD, carbon action planning, employee engagement, supply chain oversight, and responsible partnering. Climate change is a standing agenda at all ESG Committee meetings. The Committee’s key climate-related ESG priorities in 2023 have been developing a net zero strategy and roadmap that includes a Scope 3 emissions target, presenting mitigation steps to climate risks, and promoting a sustainable packaging plan. Throughout the financial year, members of the ESG Committee, SLT, and wider management team worked with our third-party ESG consultancy to identify and assess the impact of climate change on our operations. Two Climate Risk Management Workshops were held for members of our facilities team, supply chain leads, and SLT, which included climate change training. Following the workshops, we held follow-up calls with members of the team to collect additional information from across the departments, mainly relating to supplier sites. Alliance Pharma plc Annual Report and Accounts 2023. Feel pressure to act due to the physical risks brought on by the inevitable rise in temperatures. As a result, rushed and disorganized policies will be implemented in the long term. The following list outlines the time horizons Alliance used to identify when a risk or opportunity will have the most significant impact on the business. These timeframes were chosen to align with the UK’s target to be net zero by 2050. Short (2023–2027): Greatest changes would be in the proactive scenario over this period. Medium (2028–2037): Physical impacts would start to be experienced, and policies will tighten in the proactive/reactive scenarios. Long (2038–2052): Greatest physical impacts would be experienced in this period in the inactive scenario. The results from the climate scenario analysis were presented to our facilities team, supply chain leads team, Corporate Sustainability Lead, and SLT in our Climate Risk Management Workshops in November 2023, to determine the likelihood and impact of each potential climate-related risk. Through this process, we identified nineteen climate-related risks and three climate-related opportunities. The risks that were deemed to have a high impact and are material to the business are those which have an impact score of 4, and a potential associated cost of £2.5 million or more. The impact of this risk on business strategy and financial planning will be fully considered in 2024. Of the nineteen risks, one was deemed material to the business, which is the increased frequency and severity of flooding. This material risk is outlined in Table 2, with the climate opportunities provided in Table 3. The climate-related metrics that are used to measure and manage our climate-related risks can be found in the carbon emissions on page 40 and additional environmental metrics on page 41 sections of this report. Information on all our climate-related risks can be found in our 2023 TCFD Report, which will be made available on our website shortly."
"Alliance Pharma plc Annual Report and Accounts 2023 Company overview Governance Financial Statements Additional Information Strategic Report Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section TASK FORCE FOR CLIMATE-RELATED FINANCIAL DISCLOSURES TCFD CONTINUED Risk Management – Embedding climate into our risk management framework At Alliance, we have an established and comprehensive risk management framework, which informs how business risks are identified, rated, and monitored. Through our TCFD program and with the support of our third-party ESG consultancy, we have created a stand-alone climate risk management framework to identify and assess our climate-related risks and opportunities. Subsequently, we have integrated this as part of our wider business risk management processes. The creation of our climate risk management framework consists of four key steps: 1. Identify: In 2023, we conducted a climate scenario analysis to identify climate-related risks and opportunities for the business and our key suppliers and distributors. New risks were considered and in total, we identified nineteen climate-related risks, one material to the business, and three climate-related opportunities. 2. Assess: The impact of each risk and opportunity was assessed across three scenarios (less than 2 degrees Celsius, 2 to 3 degrees Celsius, and greater than 3 degrees Celsius) and three time horizons: Short Term (2023–2027), Medium Term (2028–2037), and Long Term (2038–2052). This enabled us to understand where the impact for Alliance would be highest. In 2023, a total of two Climate Risk Management Workshops were held for our facilities team, supply chain leads, and SLT to understand the impact of current climate-related risks across the business, which was used to support our analysis. This was followed by a presentation to the ESG Board Committee in December 2023. 3. Appraise: After assessing the impact of each risk, we appraised a range of risk management options. During the Climate Risk Management Workshops, we evaluated the effectiveness of the current risk mitigation actions for each climate-related risk and opportunity. For example, a key supplier site had been flooded before; however, flood defenses have been implemented, reducing the risk at this site. We developed a climate risk management framework to ensure our business operations remain resilient to climate change. 4. Address: Our main aim is to ensure that we effectively manage and minimize the impact of climate risk on our operations. In the 2022 annual report, the impact of tackling climate change was determined as a principal risk to the business, after being reviewed by the Audit and Risk Committee. In 2023, we engaged with our key suppliers and distributors to understand how they are mitigating the potential impacts of climate change. Key distributors, such as one located in Florida, US, have implemented flood defenses around the building. We plan to review our climate-related risks and opportunities annually to monitor the performance of our mitigation plans and reassess the impact accordingly. The SLT, who are responsible for climate risks in Alliance, will review and update our Climate Risk Register to ensure that any risks, opportunities, or mitigation steps taken are reported with accuracy and transparency. Company overview Governance Financial Statements Additional Information Strategic Report Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section TASK FORCE FOR CLIMATE-RELATED FINANCIAL DISCLOSURES TCFD CONTINUED Table 2: Physical risks identified in 2023 that may impact the business under the most severe scenario analysis and in the longer term Area Climate-related Risk Time Horizon Scenario Exposure Climate-related Target Acute Increased frequency and severity of flooding. Medium–Long Term (2028–2052) Greater than 3 degrees Celsius A total of seven Alliance offices, twenty CMO, and nine Distributor sites are in potential high flood risk zones. Continue to conduct climate scenario analysis annually to understand the sites that are at high risk of flooding and will consider relocation of vulnerable sites. Table 3: The Group’s climate-related opportunities Opportunity Area Opportunity Time Horizon Scenario Potential Impact Energy resources Use of lower-emission sources of energy. Short–Medium Term (2023–2037) Less than 2 degrees Celsius 2 to 3 degrees Celsius Reduction in operating expenses as a result of increased efficiency (energy costs). Technology and changing customer behavior Consumer shift towards sustainable designs and solutions presents a significant market opportunity. Short–Medium Term (2023–2037) Greater than 2 degrees Celsius Increased revenue generation from an increase in demand for sustainable products and services. Reputation Champion Alliance as a market leader in the Consumer Healthcare industry."
"Short–Medium Term (2023–2037) Less than 2 degrees Celsius 2 to 3 degrees Celsius Increased revenue generation as a result of stakeholders and customers being attracted to the business’ proactive agency regarding climate change. Metrics and Targets – Measuring and managing our climate impact During 2023, we remained committed to reducing our environmental impact while delivering sustainable business growth. Alliance’s ESG consultancy has supported us in 2023 for the third year to improve our environmental performance and data collection processes. We continued to work towards our target of achieving net zero absolute Scope 1 and 2 emissions by 2030 and have now set an absolute Scope 3 emissions target of net zero by 2044, versus the 2022 baseline. We are on track to meet our interim target of a 65% reduction in absolute Scope 1 and 2 emissions by 2025, versus the 2018 baseline. The 2030 targets for Scope 1 and 2 differ from the 2044 objectives for Scope 3 due to the complexities associated with mitigating emissions beyond direct operational control. We have analyzed all of Alliance’s operations, entities, and geographies to assess our sustainability performance and resilience against climate-related risks through various metrics including greenhouse gas emissions as outlined below. Carbon emissions As part of our wider sustainability program, we are committed to reducing the greenhouse emissions associated with our business operations. We appreciate that understanding our carbon footprint is the first step in achieving this goal. Alliance Pharma plc Annual Report and Accounts 2023 Company overview Governance Financial Statements Additional Information Strategic Report Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section TASK FORCE FOR CLIMATE-RELATED FINANCIAL DISCLOSURES TCFD CONTINUED We have calculated our UK Scope 1 and 2 carbon emissions since 2018, as part of our Streamlined Energy and Carbon Reporting and in Table 4 we show the last three years’ calculations. Further information can also be found on page 41. In 2021, we began developing our carbon action plan which included widening our data collection process to include the quantification of our Scope 3 carbon emissions, and in subsequent years we have refined the data quality through close collaboration with our partners. Further detail on the data sources and methodologies used for each category of emissions, including the areas of data collection that would benefit from improvement in the future, are provided in the Carbon Balance Sheet Report on our website. Table 4: Group carbon balance sheet Emission type 2023 Calculated Emissions (tonnes of CO2e) 2022 Calculated Emissions (tonnes of CO2e) 2021 Calculated Emissions (tonnes of CO2e) 2018 Baseline Calculated Emissions (tonnes of CO2e) Location-based Market-based Location-based Market-based Location-based Market-based Location-based Market-based Scope 1 (direct) 0 0 2 2 2 2 7 – Scope 2 (indirect) 59 13 50 52 68 16 107 – Scope 3 (indirect) 50,125 50,125 47,973 47,973 37,648 37,648 – – 1. Purchased Goods and Services 43,034 43,034 34,345 34,345 2. Capital Goods 121 121 124 124 3. Fuel-related Emissions 17 17 17 17 4. Upstream Transportation and Distribution 2,894 2,894 6,962 6,962 5. Waste Generated in Operations 1 1 1 1 6. Business Travel 1,014 1,014 825 825 7. Employee Commuting 376 376 499 499 8. Upstream Leased Assets 35 35 42 42 9. Downstream Transportation and Distribution 2,433 2,433 4,972 4,972 10. Processing of Sold Products N/A N/A N/A N/A 11. Use of Sold Products N/A N/A N/A N/A 12. End-of-life Treatment of Sold Products 199 199 187 187 13. Downstream Leased Assets N/A N/A N/A N/A 14. Franchises N/A N/A N/A N/A 15. Investments N/A N/A N/A N/A Total 50,184 50,138 48,025 48,026 37,627 37,575 Emissions intensity defined as tCO2e per £m of revenue. Scope 1 and 2 – Decarbonizing our operations While the environmental impact of our own operations (Scope 1 and 2) is low (0.1% of total emissions for 2023) and considered not material to our longer-term sustainability performance, reducing them is important to us from a broader societal perspective. To decarbonize our own operations, we have taken two main steps in 2023. First, we are installing solar panels on the roof of our head office in Chippenham to be completed in mid-2024. Second, our office uses 100% renewable energy through green tariffs and energy attribute certificates. Most of our global office real estate is leased. Therefore, whenever possible, we work with property owners to optimize sustainability. Outside the UK, our office premises tend to be held on all-inclusive operating leases, which provides limited opportunities to control environmental footprint."
"However, we will seek to increase our understanding on an office-by-office basis to determine potential measures. We continue to identify opportunities to reduce Scope 1 and 2 emissions, which amounted to 59 tonnes of CO2e in 2023, and continue to offset these emissions through regulated carbon market solutions that also deliver positive impact for local communities to achieve carbon neutrality as an interim measure. In September 2022, we set our Scope 1 and 2 emissions targets to achieve net zero in 2030, with an interim target of 65% reduction by 2025, using 2018 as our baseline. For more detail on our Scope 1 and 2 emission calculation methodology, targets, and the progress we have made in delivering these, see our stand-alone 2023 TCFD Report. TASK FORCE FOR CLIMATE-RELATED FINANCIAL DISCLOSURES TCFD CONTINUED Scope 3 – Decarbonizing our value chain Calculating our Scope 3 emissions enables us to understand and evaluate the full impact of our operations on the environment and develop our roadmap to net zero emissions by 2044 at the latest for Scope 3. Given the nature of our business and because we use third-party distributors, CMOs, and LSPs, most of our carbon emissions are classified as Scope 3 (99.9% of total emissions for 2023). The environmental impacts of these activities constitute one of the material focus areas within our sustainability framework. Of the fifteen Scope 3 categories, ten were applicable to the business. We do not have any investments, franchises, downstream leased assets, nor do we process the end-of-life treatment of sold products. In 2023, we worked to improve our Scope 3 data collection processes, following the Greenhouse Gas Protocol Corporate Value Chain Accounting and Reporting Standards. We worked with our largest suppliers, CMOs, and LSPs to understand their emission sources and reduction plans to help improve the methodology used in our Scope 3 calculations. This helped us to identify hot spots and seek opportunities to reduce the Scope 3 emissions in our supply chain as part of our overall carbon reduction plan. Also, we are seeking ways to reduce emissions attributable to the other categories under Scope 3, for example, non-stock purchases, business travel, and employee commuting. Further details can be found on pages 28 and 29 and in our Online Sustainability Report. Additional environmental metrics Waste management Reducing our product packaging is a priority for the Group. We continue to better understand our primary packaging, which is directly in contact with a product, and secondary packaging, which holds all individual units of a batch of products across our estate. We are excited by the potential to bring about positive change through working in partnership with our suppliers to source new and better alternatives to some of our current packaging in furtherance of our ambition to reduce our reliance on single-use plastics. In 2024, we will assess the feasibility of setting waste targets. Water Alliance water consumption is low, with most usage being domestic. However, we still aim to minimize water use. In 2023, we engaged with our key suppliers to understand how they are minimizing their water consumption and discussed their water-related targets. In 2024, we will assess the feasibility of setting water targets. Alliance Pharma plc Annual Report and Accounts 2023 Company overview Governance Financial Statements Additional Information Strategic Report Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section STAKEHOLDER ENGAGEMENT ENGAGING WITH OUR STAKEHOLDERS Overview The Board recognizes the importance of maintaining an engaged and motivated workforce, dependable supply chains, customer confidence in our products, close relationships with healthcare professionals, good returns for our shareholders, and a positive contribution to both our local and wider communities. The Board works closely with the Senior Leadership Team to ensure we continue to understand and meet the evolving needs of all our stakeholders while maintaining our relevance and ability to create long-term sustainable value. On the following pages, we have identified our principal stakeholders, their primary requirements, and how we’ve delivered against these in 2023. Examples of how stakeholder interests have been considered by the Board in their decision-making are provided in the Governance section on pages 67 and 68. Our shareholders are interested in strong financial performance, share price appreciation, dividend income, and ESG and long-term business sustainability."
"How we delivered for our shareholders in 2023: Delivered record revenues, grew EBITDA, strengthened the skills, experience, and expertise on the Board to align with the long-term strategy, sought feedback from shareholders representing 60% of total holdings through a governance roadshow, strengthened infrastructure with new people and skills brought into the business, and made good progress with developing and executing our sustainability strategy. Our employees are interested in competitive reward structures, the opportunity to share in the success of the business, flexible working, meaningful work and connection, and learning and development opportunities. How we delivered for our employees in 2023: Annual pay review in line with industry benchmarks, share options granted to all eligible employees, with a new scheme for senior leaders in 2023, flexible working arrangements maintained, monthly business briefings, lunch and learn sessions arranged to educate colleagues on topics such as financial planning and mental health, and participation in the GPTW survey. Our customers are looking for safe and effective healthcare products, which are widely available at a reasonable cost, reliable sources of information and practical help to manage their and their family’s health and wellbeing, and products and services that have as low as possible an impact on the planet. How we delivered for our customers in 2023: Safety and efficacy standards maintained, 44 million units of product supplied, innovation launches in both of our global priority categories, market and channel expansion for our consumer products, particularly in e-commerce, and consumer healthcare product pricing aligned with competitive positioning. Our supply and distribution partners are looking for continued business growth opportunities, reliable counterparties who share similar values and who act both responsibly and with integrity, strong brands with growth potential and appropriate investment in marketing and innovation, and proactive partnering and regular engagement. How we delivered for our supply and distribution partners in 2023. Global brand protection strategies. Regular quality and sourcing audits. Partnership with Slave Free Alliance. Published our Supplier Code of Conduct. Healthcare professionals are looking for safe and efficacious products, engagement, education, information, and resources, and therapy area expertise. How we delivered for healthcare professionals in 2023: Zero safety actions needed in-market due to defective product. New social media use and control policies published to help ensure only factual and compliance information is provided on Alliance controlled social media platforms. Responses provided to more than 900 enquiries from healthcare professionals. Over 3,300 responses provided directly to customers and patients. Healthcare professional meetings policy updated to ensure we more flexibly meet the needs of healthcare professionals. Our lenders are interested in strong financial performance and the ability to service and repay borrowings. How we delivered for our lenders in 2023: Regular communication and reporting of business performance. £21.3 million of free cash flow generated. Compliance with borrowing covenants maintained. Timely refinancing of the business, introducing a new facility running to June 2026 with two one-year options to extend. Leverage down significantly in the period. The wider community is interested in social impact strategy, local engagement, and charitable and product donations. How we delivered for the wider community in 2023: Promoted the Alliance Volunteering Day, which is one day of paid leave that can be utilized to support a nominated charity or local community. Supported our colleagues to fundraise through initiatives such as bake sales, raffles, and quizzes, then matched the funds raised. Encouraged colleagues to donate clothes and toiletries to the local homeless shelter in the UK. Helped to pack meals for the Rise Against Hunger food bank in the US. Monthly PRAISE Award allows the winner to donate £100 prize money to the charity of their choice. Supply and distribution partners, healthcare professionals, lenders, wider communities. Alliance Pharma plc Annual Report and Accounts 2023. Company overview, governance, financial statements, additional information, strategic report contents generation. Financial review summary income statement year ended 31 December 2023. Growth see-through revenue 182.7 million, statutory revenue 180.7 million, gross profit 105.0 million, operating costs 60.0 million, underlying EBITDA 45.0 million, depreciation and underlying amortization 3.1 million, underlying operating profit 41.9 million, finance costs 10.4 million, underlying profit before taxation 31.5 million, reported profit before taxation (48.8) million, underlying basic earnings per share 4.55 pence, reported basic earnings per share (6.13) pence, proposed total dividend per share nil. Excluding share-based employee remuneration. Restated, see note 2.20 for further detail on prior year adjustment."
"The performance of the group is assessed using alternative performance measures, which are measures that are not defined under IFRS, but are used by management to monitor ongoing business performance against both shorter-term budgets and forecasts and against the group’s longer-term strategic plans. APMs are defined in note 30. Specifically, see-through revenue includes all sales from Nizoral as if they had been invoiced by Alliance as principal. For statutory accounting purposes, the product margin on Nizoral sales made on an agency basis is included within revenue, in line with IFRS 15. Underlying profitability metrics are presented, as we believe this provides investors with useful information about the performance of the business. In 2023 and 2022, underlying results exclude the amortization and impairment of acquired intangible assets. Further detail can be found in note 5. See our financial statements on page 104. Robust control of the costs we can actively manage drove a 5% reduction in operating costs leading to underlying EBITDA up 15% on revenue growth of 6%. Andrew Franklin, Chief Financial Officer. Financial review underlying EBITDA £45.0 million, plus 15%. Revenue summary year ended 31 December 2023. Kelo-Cote franchise 63.2 million, Amberen 11.2 million, Nizoral 21.7 million, other consumer brands 40.3 million, total consumer healthcare 136.4 million, prescription medicines 46.3 million, see-through revenue 182.7 million, LFL consumer healthcare see-through revenue, excluding US acquisition 133.8 million, statutory revenue consumer healthcare 134.3 million, statutory revenue group 180.7 million. The group delivered record see-through revenues in the period of £182.7 million, up 6% versus the prior period and up 7% at constant exchange rates. Excluding sales from ScarAway and the US rights to Kelo-Cote in Q1 23, both acquired in March 2022, like-for-like see-through revenues increased 6% CER. Group revenue was adversely affected by exchange rate movements throughout 2023, principally the strengthening of Sterling against the Hong Kong Dollar and the Chinese Yuan, which decreased see-through revenue by approximately £2.1 million. Statutory revenue increased 8% to £180.7 million and up 9% CER. Consumer healthcare total see-through consumer healthcare revenues for the year were £136.4 million, up 9% on the prior year, benefiting from an additional quarter of sales from the US acquisition. Statutory consumer healthcare revenues were £134.3 million, up 11% from the previous year and up 13% CER. Excluding the impact of the US acquisition, like-for-like see-through consumer healthcare revenue increased 7% to £133.8 million, whilst on a statutory basis, like-for-like consumer healthcare revenues increased 9% to £131.7 million. Kelo-Cote franchise – scar prevention and treatment. Continued strong consumer demand, particularly in China, drove significant recovery in Kelo-Cote franchise revenues in H2, following the previously communicated 4% decline in H1 due to lower order volumes from our China cross-border partner during a period of destocking. Consequently, FY23 revenues increased 29% CER to £63.2 million. Whilst revenues in China make up over 66% of the total Kelo-Cote franchise, we saw strong growth in smaller markets where we are beginning to leverage our global presence to drive targeted consumer activation campaigns. Our first UK outdoor campaign was particularly successful, increasing sales in the UK by 36% for the year versus 2022, and was followed by a multimedia digital marketing campaign. The assets for this campaign were designed to have global appeal and will be used in other geographies this year. Our most recent acquisition of the US rights to ScarAway and Kelo-Cote has created the group’s first fully global brand. The integration of both assets has gone very smoothly with full transition completed in just four months. ScarAway sales reached £9.9 million in 2023, exceeding our expectations to rise 20% CER on a like-for-like basis as we increased marketing investment behind the brand and worked with our CMO partner to bring key SKUs to market that had been discontinued by the previous owner. We continue to see opportunities for further growth and range extensions. Recent new product introductions across the Kelo-Cote franchise are performing well with a second year of strong revenues for Kelo-Cote Kids in APAC. In Q1 24, we launched ScarAway Kids and ScarAway Acne Scar Gel in the US on Amazon, whilst further activation campaigns are planned for recently launched Kelo-Cote Sheets. Starting this year, our ambition is to move towards smaller, more regular order fulfillment, to create a more consistent revenue stream, reducing the stocking and destocking cycles we’ve experienced over the last two years. This is expected to yield mid-single digit revenue growth for the Kelo-Cote franchise in 2024, before returning to double-digit growth from 2025."
"Nizoral – medicated anti-dandruff shampoo. Nizoral revenues increased 3% CER to £21.7 million reflecting both market share and distribution gains. Performance in 2023 showed marked volatility in growth in H1 versus H2 due to the timing of distributor orders received in 2022. H1 revenues grew 40% CER versus H1 22, benefiting from the aforementioned timing and some inventory build ahead of a move in manufacturer, whereas H2 revenues declined 18% CER, limiting overall growth in the year. Having completed the transfer of all the marketing authorizations from Johnson and Johnson to Alliance in 2022, we were able to bring in a new distributor and begin the process to consolidate manufacturing in Asia in 2023. Our new Chinese distributor has identified strong growth opportunities through expanding the brand’s reach, supported by our marketing initiatives. A new out-of-home campaign was launched in the top nine cities in China in August focused on new user recruitment, which was supported by our distributor partner’s in-store promotional activity. The rollout of our strategic brand plan for Nizoral is now well underway, with consumer activation campaigns ongoing across a number of other territories where Nizoral commands a market leading position, including Australia, South Korea, Thailand, and the Philippines. These campaigns are run in partnership with our local distributors, as part of a growth strategy centered around consumer healthcare professional activation, ecommerce, and innovation and development. We launched new, modernized packaging in Thailand, designed to appeal to a younger audience, with marketing focused on social media platforms popular with this demographic. This new packaging will be launched in other markets in 2024. During the year, we also selected a new manufacturer in Thailand and have now completed the transfer of manufacturing from Johnson and Johnson’s site in Belgium. We anticipate that this will deliver advantages through cost of goods sold reductions, improvements in on-time-in-full order fulfillment, and reduced carbon emissions. We expect further reductions in carbon emissions through changes to product packaging. The inventory build in H1 23 to secure supply during the move to the new manufacturer began to unwind in H2 23, and continued to do so through H1 24. Whilst we anticipate a strong H2 24 as we launch new products, sales for FY 2024 are expected to be broadly in line with FY 2023. As part of our annual impairment review, we have adopted a more conservative approach and lowered future growth expectations for Nizoral until we have greater certainty on consumer response to our marketing campaigns and new product launches. We have therefore impaired the carrying value of Nizoral by £10.3 million. Amberen – US vitamin mineral supplement for the relief of menopause symptoms. Amberen revenues declined 25% CER to £11.2 million and fell 6% CER on an underlying basis, excluding the leading discount store account that was lost in 2022. Whilst this performance was below our expectations at the beginning of the year, it reflects challenging conditions in both the wider US consumer market and specific issues with Amazon. These included a change to the billing for Amazon’s warehouse space and its price comparison approach, in addition to the delisting of the perimenopause product, albeit for a few months, due to the incorrect application of an algorithm that screens advertising claims. Despite these challenges, Amberen revenues on Amazon still grew strongly in the period, but lagged total category growth which was driven primarily by new entrants. The bricks and mortar market for VMS menopause relief continues to decline, falling 7% in value terms in 2023 as consumers pivot to ecommerce platforms. As a consequence of 2023 performance, and as part of the annual impairment review, we have assessed the expected future cash flows generated by Amberen, taking into account future planned innovation launches, marketing investment, increased competition, and a higher cost of capital due to the overall increase in borrowing rates. Whilst Amberen continues to remain a profitable and cash generative brand, we have further impaired the carrying value of Amberen by £46.4 million. We remain focused on addressing these brand and marketplace issues through strengthening both our internal and external capabilities in ecommerce and digital marketing. We have also increased the level of marketing support to revert the brand to growth."
"Amberen for menopause remains the largest SKU in value terms across the category in the US and we are focused on developing an innovation pipeline to underpin the growth of the brand in the longer term and widen the product range to cover a multiple set of benefits in line with consumer needs. Other consumer healthcare brands. Our underlying business remains strong, with other consumer healthcare revenues increasing 5% CER to £40.3 million, despite regulatory delays in some products impacting stock availability in H1 23. These issues have now been resolved. We saw particularly strong full year growth from Oxyplastine and Ashton and Parsons. This robust performance in our other consumer healthcare brands clearly illustrates the benefits of a diversified portfolio, and we anticipate mid-single digit growth in this portfolio of products in 2024. Prescription medicines. The prescription medicines business continues to deliver stable revenues with £46.3 million in the year, down 1% on the prior year; reflecting a strong recovery in H2 as expected, as previously out of stock products became available. Our two largest prescription brands Hydromol and Forceval both performed well in the year delivering record sales of £9.0 million and £6.6 million respectively. Operating performance. Whilst see-through revenues increased 6% in the year, gross profit increased at a rate slower than revenues at 3% to £105.0 million due to a less favorable product mix, comprising fewer high margin Amberen sales, and the impact of regulatory delays in some products restricting stock availability in H1 2023, and an increase in warehouse and distribution costs primarily related to Amazon in the US. Gross margin reduced by 160 basis points to 57.5% of see-through revenue and gross margin relative to statutory revenue was 58.1%. However, through robust control of the costs we actively manage, operating costs decreased 5% versus the prior year to £59.1 million. With a £0.8 million increase in share option charges versus prior year, underlying earnings before interest, taxes, depreciation, and underlying amortization increased 15% to £45.0 million, whilst underlying operating profit increased by 17% to £41.9 million. Reported operating loss increased by £20.8 million resulting in a £38.4 million loss, after non-underlying items of £80.3 million. Net finance costs of £10.4 million include a £4.6 million increase in interest payable to £10.0 million, due to an increase in borrowing costs, reflecting the rise in interest rates, together with net exchange losses of £0.5 million. As a result of higher finance costs, underlying profit before tax increased by only 4% to £31.5 million, resulting in a 40 basis point margin reduction to 17.2% of see-through revenues. Reported profit before tax decreased to a £48.8 million loss, primarily due to higher non-underlying impairment charges in 2023. Depreciation and underlying amortization charges for the year were £3.1 million, a reduction of £0.4 million due to lower depreciation charges. Non-underlying items. Non-underlying items in the year principally comprised amortization charges for prescription medicines and certain. Other brand assets, together with impairment charges identified as a result of the annual impairment review. For 2023, impairment charges of £79.3 million include a charge of £46.4 million in relation to Amberen, together with £32.9 million relating to a number of other products, including £10.3 million for Nizoral, driven by out of stock and regulatory issues, and the increased cost of capital for the business as a whole. As noted on page 04, an impairment charge of £46.4 million relating to Amberen was included as a non-underlying item for the year ended 31 December 2023. We have also undertaken a review of the valuation of Amberen in the 2022 accounts to correct for errors noted in the valuation model. Adjusting for these corrections in the prior year, the impairment charge for Amberen would have totalled £32.0 million for the year ended 31 December 2022, compared to the £12.0 million actually reported. Further information on this prior year adjustment is set out on page 78 of the Audit and Risk Committee report and in note 2.20 on page 128 for further details. Post year end and as previously mentioned, we were successful in our appeal of the CMA decision. As this is an adjusting post balance sheet event, we have removed the provision relating to the potential fine of £7.9 million accordingly. This has been recorded as a non-underlying event, consistent with the treatment when the original accrual was made in 2021. Further detail on non-underlying items is provided in note 5."
"Reconciliation of underlying to reported profit before tax 2023 £ million 2022 £ million Underlying profit before taxation 31.5 30.3 Non-underlying items: Amortisation of acquired intangibles (7.2) (7.2) Impairment of intangible assets and goodwill (79.3) (46.5) Other 6.1 0.4 Total (80.3) (53.4) Reported profit before taxation (48.8) (23.1) Alliance Pharma plc Annual Report and Accounts 2023 Company overview Governance Financial Statements Additional Information Strategic Report Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section Financial Review Continued Taxation The underlying tax charge for the year was £6.9 million, equating to an underlying effective tax rate of 22.0%. The reported total tax for the year was a credit of £15.7 million, which included a deferred tax credit of £22.6 million mainly due to the impairment of Amberen and Nizoral. Earnings per share Underlying basic earnings per share, the measure used by the Board to assess earnings performance, increased 6% to 4.55 pence. Reported basic earnings per share was a loss of 6.13 pence due to the impact from non-underlying items on reported earnings in 2023 versus 2022. Dividend As detailed in the interim statement on 26 September 2023, the dividend was paused to allow the Board to develop a new dividend policy with greater emphasis on reinvestment in the business to drive growth. Taking account of shareholder feedback, the Board has decided that no dividend will be declared for 2023 with cash prioritised for investment in innovation, development, brand marketing and reducing debt. The Board expects to provide an update on dividend policy when appropriate. Balance sheet Intangible assets decreased by £93.4 million in the year to £300.0 million, reflecting non-underlying amortisation and impairment charges of £86.5 million, underlying amortisation of £1.9 million and exchange rate-related revaluation adjustments of £5.0 million. Working capital Net working capital at 31 December 2023 was £43.4 million, an increase of £5.4 million on that at the start of the year, primarily reflecting movements in accounts receivable balances. Inventories, net of provisions, increased £1.4 million to £25.7 million at 31 December 2023. Accounts receivable increased by £5.4 million to £54.7 million, reflecting the timing of sales and cash receipts in the second half of the year, versus the equivalent period in 2022. Accounts payable was broadly in line with the prior year, up £1.5 million to £37.1 million. Cash flow and net debt Free cash flow for the year rose 35% to £21.3 million, due to the strong trading performance in the second half. Cash generated from operations increased by 48% to £36.9 million. This solid cash generation supported a reduction in net debt of £10.8 million to £91.2 million at 31 December 2023, with Group leverage decreasing to 2.05 times. Interest rate cover decreased to 4.82 times, reflecting the increase in net interest cost on rising interest rates. Net debt and Group leverage are both expected to fall further during 2024, particularly in the second half, with Group leverage expected to be below 2.0 times by the end of 2024. Prior year adjustments Following a comprehensive review of our brand and intangible assets, we have reassessed the carrying value and identified errors in the impairment review performed in 2022. As a consequence, we increased the 2022 impairment of intangible assets by £28.3 million. Treasury management In August, we successfully completed the refinancing of our Revolving Credit Facility, which was scheduled to mature in July 2024. The facility was agreed with the Group’s existing syndicate of supportive relationship banks. Through the refinancing, we took the opportunity to resize and reduce the total committed facility by £15.0 million to £150.0 million, whilst increasing the Accordion by £15.0 million to £65.0 million. The covenants include a net leverage and interest cover test. The facility is available until August 2026, with two further one-year extension options. Of this RCF, £35.2 million, together with the whole of the Accordion Facility, remained unutilised as at 31 December 2023. Borrowings are denominated in Sterling, Euro and US Dollars. In 2023, the Group also entered into interest rate swaps totalling £90.0 million with staged maturities over three years to hedge the interest rate exposure on the RCF. Looking forward to 2024, Alliance’s clear focus on the core Consumer Healthcare business, in addition to our well-established, scalable platform across EMEA, APAC and the US, is expected to deliver continued modest revenue growth."
"As we continue to refine our strategy, we intend to move towards smaller, more regular order fulfilment, to create a more consistent revenue stream, reducing the stocking and destocking cycles we’ve experienced over the last two years as we’ve changed distributors, moved manufacturing and managed through the COVID environment. In 2024 we will continue to increase investment in sales, marketing, insights and innovation to maintain our leadership position in key categories. The Board continues to anticipate that profits in FY 2024 will be in line with FY 2023. As in previous years, performance is expected to be second half weighted, particularly in Nizoral. We remain confident in our ability to further capitalise on identified organic growth opportunities within the business, and to deliver financial performance which will help drive the deleveraging of our balance sheet. Principal risks and uncertainties During the year, the Board, with the support of the Audit and Risk Committee, reviewed the principal risks and uncertainties facing the Group and has continued to focus on those which could threaten the sustainability of our business model, our reputation, future performance expectations, or, in extreme cases, the solvency or liquidity of our business. The consideration of risks is inherent within decision-making, and throughout the year, Board members have challenged management on key issues faced by the business. The identified risks are not intended to be an exhaustive list of all the risks the Group faces but are the principal risks and uncertainties which the Directors believe include all known material risks in relation to the Group and the markets and industry within which we operate. The environment in which we operate is constantly evolving and can be affected by events that are outside of our control, and which may impact on us both operationally and financially. New risks may emerge, the potential impact of known risks, including how quickly they escalate, and/or our assessment of these risks may need to change. During the review process, risks are identified and categorised into 14 principal areas of risks. Risks will come in and out of focus depending on prevailing circumstances. Some risks are pervasive, and others are active and current. Senior leadership teams, together with their management teams, maintain a careful watch on all risks identified, and review these at least three times a year to ensure that they have been accurately assessed. How we identify, monitor, and review our risks is explained in greater detail on the Company’s website. Analysing our identified risks Strategic risks Organic growth: innovation and competition Inorganic growth – acquisitions Operational risks Product safety Supply disruption Impact of tackling climate change Business systems Cyber-security People Supply chain management Compliance risks Product regulations Legal and compliance Other risks Macro-economic Geopolitical and other worldwide events Risk movement No change Movement New Impact Likelihood Protecting our business Severe Board changes during 2023. With the support of the Nomination Committee, during 2023 we were pleased to introduce new and diverse skills and experience onto the Board to support our strategy as we grow our Consumer Healthcare business. At the start of 2023, we saw Andrew Franklin take on the role of acting CEO, whilst Peter Butterfield took a leave of absence until his return to work in March 2023. On 1 February 2023, we welcomed the appointments of both Martin Sutherland as a Non-Executive Director and Jeyan Heper as Chief Operating Officer. On 6 November 2023, a further two Non-Executive Directors, Eva-Lotta Sjöstedt and Richard McKenzie, were appointed to the Board. You can read more about these appointments and their skills and experience in the Nomination Committee Report on page 70 and in the biographies on pages 60 to 62. I was delighted to join the Board as Chair on 19 February 2024. On 8 May 2024, we announced that Peter Butterfield would be stepping down as CEO on 13 May and would leave the business at the end of June 2024. On behalf of the Board, I would like to thank Peter for everything that he has done for Alliance and we wish him well in his future endeavors. Following a comprehensive search process, Nick Sedgwick was appointed CEO on 13 May 2024 and we look forward to working with him as he leads the Company through the next phase of its growth and development. 2024 Annual General Meeting. This year’s AGM will be held at 10:00 AM on 29 July 2024. Further details can be found in the Notice of AGM accompanying this Annual Report."
"The Board would like to thank all shareholders and colleagues for their continued support, and we look forward to continuing working with them during 2024. Camillo Pane Chair 18 June 2024. Chair’s Introduction. Board discussions center on driving value for our investors as we focus on developing our Consumer Healthcare business within skincare and healthy aging. Company Overview. Strategic Report. Financial Statements. Additional Information. Governance. Alliance Pharma plc Annual Report and Accounts 2023. Our Governance Structure. The Board is responsible for the Group’s vision, business model, risk, and strategy. Together, the Directors are responsible for providing effective leadership to promote the long-term success of the Company. See our Board of Directors on pages 60 to 62. Board Chair. Leadership of the Board and facilitating the effective contribution of all members to meetings. Board Committees. Four Committees operate under delegated powers and with clear Terms of Reference. Chief Executive Officer. Responsible for the day-to-day running of the business and the implementation of the Group’s strategy. Senior Leadership Team. Support CEO and have management responsibility for the business operations and its support functions. ESG Committee. Reviews the overarching ESG vision for the Company and ensures that the priorities are anchored to become an integral part of the overall strategy. Remuneration Committee. Ensures there is a formal process for reviewing salaries, benefits, and other terms of service to determine appropriate levels of remuneration for the Executive Directors and other senior Executives. Nomination Committee. Reviews the leadership needs of the organization and monitors succession planning for both Board and senior Executive roles. Responsible for the selection process and nomination of all Directors to the Board, and reviews the structure, size, and composition of the Board. Audit and Risk Committee. Monitors and reviews the financial results and other reporting, and oversees the effectiveness of risk management and systems of internal control. Provides confidence to shareholders on the integrity of reported financial results and challenges to the external auditors and senior management. Board of Directors. Camillo Pane Independent Non-Executive Chair. Committee Membership. Date Joined. Camillo joined the Board of Alliance as Chair on 19 February 2024. Qualifications. Camillo graduated in Business Administration specializing in marketing from Bocconi University, Milan. Experience. Camillo is a senior Executive with over 30 years of UK and international experience in US, European, and Asian public multinational consumer companies. He has a strong track record for delivering value and growth in multi-channel, multi-cultural, and multi-category consumer businesses through the use of consumer-centric strategies, developing high-performance teams with strong execution and innovation, and operational optimization. During his career, Camillo has held a number of senior positions at Reckitt Benckiser where he spent almost 20 years across both Global and Regional roles, including Senior Vice President and Global Category Officer for Consumer Health, before moving to Coty Inc, one of the largest beauty companies in the world, where, as CEO, he led the merger with Procter & Gamble Specialty Beauty. Most recently, he was Group CEO of Health & Happiness Group, a global Health and Nutrition Company listed on the Hong Kong Stock Exchange with revenues of around $2.0 billion. Peter Butterfield Former Chief Executive Officer. Committee Membership. Date Joined. Peter stepped down as CEO on 13 May 2024 and continues to support the Board until he leaves at the end of June. Peter was previously the Company’s Deputy Chief Executive Officer and was appointed to his office as Chief Executive Officer on 1 May 2018, having joined Alliance in 2010 as an Executive Director. Qualifications. Peter holds an honors degree in Pharmacology from the University of Edinburgh. Experience. Peter has 25 years of experience in the life sciences sector and strong leadership experience gained in a variety of contexts. He joined the Board of Alliance in 2010 and has been CEO at Alliance since 2018. In this time, he has driven the continued and international growth of the business. Prior to 2010, Peter spent five years at Cambridge Laboratories. Peter started his career at GlaxoSmithKline, where he spent six years in a variety of marketing and sales roles. Committee Chair. Committee Membership Key. Audit and Risk Committee View report on page 77. ESG Committee View report on page 83. Nomination Committee View report on page 70. Remuneration Committee View report on page 86. Nick Sedgwick Chief Executive Officer. Committee Membership. Date Joined. Nick joined the Board as Chief Executive Officer on 13 May 2024. Qualifications. Nick has an honors degree in Maths from Loughborough University. Experience."
"He brings 30 years of consumer goods experience across European, US, and global roles at major multinational companies such as Reckitt, Coty, and Nestlé. Most recently, Nick was Regional Director for UK and Ireland Consumer Health at Reckitt during which time he increased revenue and improved profitability in the second largest market for the company. Prior to this, Nick worked at Coty holding several senior roles including Senior Vice President for Global Sales and Commercial Capabilities, Senior Vice President Sales for the US business, and General Manager Consumer Beauty for UK and Ireland. Throughout his career, Nick has worked in multiple countries, always delivering high revenue growth through consumer-centric strategies, high-performance teams, and excellence in execution. Board of Directors Continued. Jeyan Heper Chief Operating Officer. Committee Membership. Date Joined. Jeyan joined Alliance as Chief Operating Officer and Board member on 1 February 2023. He has more than 25 years of diverse experience with a strong track record of strategic leadership in the international Consumer Health market, overseeing a number of global programs and driving growth in flagship brands. Qualifications. Jeyan graduated from Bosphorus University in Istanbul with a Bachelor of Arts degree in Political Science and International Relations. Experience. Jeyan has held senior Executive roles at Procter & Gamble and Danone Group. In addition, Jeyan was President and General Manager of Ansell’s sexual wellness global business before it was spun out to become Lifestyles Healthcare, a private equity/pharma-owned Company where Jeyan became CEO. During his tenure as CEO at Lifestyles Healthcare, Jeyan delivered significant growth through market and category expansion, building a strong e-commerce platform in China and the US, and improving operational effectiveness. Most recently, Jeyan worked as Head of Global Transformation at British American Tobacco plc and held a Non-Executive Director seat on the Board of NASDAQ-listed Organigram Inc. Richard Jones Senior Independent Non-Executive Director. Committee Membership. Date Joined. Richard joined Alliance as a Non-Executive Director on 1 January 2019. Qualifications. Richard has a degree in Engineering from Newcastle University and is a Chartered Accountant. Experience. Richard was appointed as Chief Financial Officer at UK main market listed Medica Group PLC, an international provider of high-quality telemedicine services. Prior to this, Richard gained extensive experience in the healthcare sector in his roles at UK AIM listed Companies Mereo BioPharma Group PLC and Shield Therapeutics PLC. At Mereo, he had a leading role in the merger with US listed OncoMed Pharmaceuticals, Inc and Mereo’s dual listing on Nasdaq in 2019. At Shield, he had a leading role establishing the finance operations and guiding Shield through its 2016 IPO. His prior career in investment banking included senior positions at Investec and Brewin Dolphin Securities, where he advised healthcare clients on a wide range of transactions including IPOs, M&A, and fundraisings. Committee Membership Key. Audit and Risk Committee View report on page 77. ESG Committee View report on page 83. Committee Chair. Nomination Committee View report on page 70. Remuneration Committee View report on page 86. Richard McKenzie Independent Non-Executive Director. Committee Membership. Date Joined. Richard joined Alliance as an Independent Non-Executive Director on 6 November 2023. Qualifications. Richard graduated from Oxford University in Philosophy, Politics, Economics and holds an M.Phil in Latin American Studies. Experience. From 2019 to 2023, Richard was Chief Commercial Officer and latterly President for Ocado Solutions, driving the growth of this leading grocery e-commerce platform globally. During his tenure at Ocado Solutions, Richard led major new deals with partners in Korea, Japan, Spain, and Poland, and redesigned the B2B organization of the business. Prior to this, Richard was a strategy consultant for OC&C in London and China, building the Company’s presence in Asia-Pacific, before becoming a Senior Partner for the Consumer Goods and Retail practice of Oliver Wyman in Asia-Pacific. During this time, he built extensive experience of the retail consumer market in China, and Asia-Pacific more broadly. He is currently a Senior Advisor at McKinsey and Company. Andrew Franklin Chief Financial Officer. Committee Membership. Date Joined. Andrew joined Alliance in September 2015 from Panasonic Europe Ltd, where he was General Manager, European Tax and Accounting. Qualifications. Andrew holds an honors degree in Civil Engineering from the University of Wales, Cardiff. Experience. From 2010 to 2012, Andrew was Finance Director and Company Secretary of Genzyme Therapeutics Ltd, the UK and Ireland subsidiary of Genzyme Corporation. Prior to that, he gained 12 years of pharmaceutical experience with Wyeth in a variety of senior financial positions."
"Andrew is a Fellow of the Institute of Chartered Accountants in England and Wales with extensive experience in financial management of international businesses, including significant experience in life sciences companies. Board of Directors Continued. Martin Sutherland Independent Non-Executive Director. Committee Membership. Date Joined. Martin joined Alliance as an Independent Non-Executive Director on 1 February 2023. Qualifications. Martin graduated from Oxford University with a Master of Arts degree in Physics and University College London with a Master of Science degree in Remote Sensing. Experience. Martin is a senior Executive with more than 30 years of global business experience. He is currently a Non-Executive Director at FTSE listed Forterra plc, a leading UK manufacturer of essential clay and concrete building products, sitting on their Nomination, Remuneration, Audit and Risk, and Sustainability Committees. Martin is also a Non-Executive Director on the Board of XPS Pensions plc, where he sits on the Remuneration and Audit Committees, and is the Chair of Logiq Consulting Limited, a privately held cyber-security business. Previously, Martin was CEO of Reliance Cyber Limited from 2019 to 2022, De La Rue plc from 2014 to 2019, and held a variety of roles at Detica plc, becoming Managing Director in 2008 on its acquisition by BAE Systems plc. He brings experience in delivering growth through new product innovation, market diversification, and international expansion. Eva-Lotta Sjöstedt Independent Non-Executive Director. Committee Membership. Date Joined. Eva-Lotta joined Alliance as an Independent Non-Executive Director on 6 November 2023. Qualifications. Eva-Lotta graduated from IHM Business School in Marketing and Economics. Experience. From 2016 to 2018, Eva-Lotta was CEO of Georg Jensen, the luxury jewelry and Scandinavian design brand. Prior to this, Eva-Lotta was CEO at Karstadt, a chain of premium department stores in Germany with a strong e-commerce presence. She started her career at IKEA, establishing the business in Japan where she worked for four years before becoming CEO of IKEA Netherlands and then Deputy Global Retail Manager. She has in-depth knowledge of global consumer retail, supply chain, and digital transformation and has held leadership roles in consumer-facing industries across Europe, Japan, China, and the US. Eva-Lotta is currently a Non-Executive Director at FTSE250 listed Tritax Eurobox, which operates, manages, and invests in real estate assets across Continental Europe where she chairs the ESG Committee and sits on the Nomination and Management Engagement Committees. She is a member of the Board of ELISA Oyi, a digital services and telecommunications Company listed on Nasdaq Helsinki, and sits on their People and Nomination Committee. She is also a member of the Supervisory Board of Metro AG, a German wholesale food specialist operating in 35 countries. Kristof Neirynck Independent Non-Executive Director. Committee Membership. Date Joined. Kristof joined Alliance as an Independent Non-Executive Director on 1 December 2021. Qualifications. Kristof holds a Master of Science degree in Electronic Engineering from the University of Ghent, Belgium. Experience. Kristof is CEO at Avon Cosmetics where up until recently he was their Global Chief Marketing Officer and Managing Director Western Europe. He brings more than 20 years of experience in General Management, Marketing, Digital Transformation, and Innovation, having carried out roles in Fast Moving Consumer Goods, Luxury, and Retail sectors across multiple geographies. He is well versed in operating across an omnichannel model, combining bricks and mortar retail, e-commerce, and direct-to-consumer experience. Kristof joined Walgreens Boots Alliance in 2015 and in 2017 became their Chief Marketing Officer for their Global Brands division where he had responsibility for a $4.0 billion sales portfolio of more than 20 of their owned brands in Beauty and Consumer Healthcare. Prior to this, Kristof held leadership roles at P&G’s Prestige, Laundry, and Feminine Care global divisions, having started his career in 2002 at Procter & Gamble in Belgium before moving to Procter & Gamble International in Switzerland in 2004. Committee Membership Key. Audit and Risk Committee View report on page 77. ESG Committee View report on page 83. Nomination Committee View report on page 70. Remuneration Committee View report on page 86. Company Overview. Strategic Report. Financial Statements. Additional Information. Governance. Alliance Pharma plc Annual Report and Accounts 2023. The role is to act as a sounding board and intermediary for the Chair and other Board members. His responsibilities include leading the performance evaluation of the Chair and attending meetings with shareholders and analysts to obtain a balanced understanding of any issues or concerns."
"The Non-Executive Directors are required to commit the time necessary to fulfill their role to provide oversight and scrutiny of the performance of the Executive Directors, constructively challenge to help develop and execute on the agreed strategy, satisfy themselves as to the integrity of the financial reporting systems and the information they provide, satisfy themselves as to the robustness of the internal controls, ensure that the systems of risk management are robust and defensible, and review corporate performance and the reporting of such performance to shareholders. Independence on the Board is reviewed and confirmed annually by the Nomination Committee. Each of the Non-Executive Directors sits on at least two of the Committees ensuring that between them they have a role in oversight of the audit and financial processes, determining the pay and benefits of the Executive Directors and in the planning of Board succession, including the appointment and, if necessary, removal of Executive Directors. They are appointed for an initial term of five years, subject to annual re-election by shareholders at the AGM. Their appointment term may be renewed by mutual agreement. The Board currently comprises ten Directors: the Chair, five further Independent Non-Executive Directors and four Executive Directors, although Peter Butterfield will cease to be a Director at the end of June 2024. Supporting the Board are four Committees operating under delegated powers and with clear Terms of Reference. The Nomination Committee reviews the leadership needs of the organization and monitors succession planning for both Board and senior Executive roles. It is responsible for the selection process and nomination of all Directors to the Board, and reviews the structure, size, and composition of the Board. The Audit and Risk Committee monitors and reviews the financial results and other reporting and oversees the effectiveness of risk management and systems of internal control. The Committee provides confidence to shareholders in the integrity of reported financial results and challenges the external auditors and senior management. The Remuneration Committee ensures there is a formal process for reviewing salaries, benefits, and other terms of service to determine appropriate levels of remuneration for the Executive Directors and other senior Executives. The ESG Committee reviews the overarching ESG vision for the Company and ensures that the priorities become an integral part of the overall strategy. Throughout the year, the Board received regular updates and considered strategy, the commercial and financial performance of the business, operational performance, and legal and governance matters. In addition to these standing items, other business considered by the Board and its Committees is set out below. Business strategy includes strategy planning, review of Group strategy, and presentations from business and functions. Director changes involve the role of the CEO, the appointment of COO and Non-Executive Directors, and review of onboarding and Director induction. The 2023 and 2024 budget includes presentations and budget approval. Operational performance covers Mainland Europe, Asia-Pacific specifically, CBEC and performance in China, US, various product and brand reviews, brand protection, Great Place to Work, Innovation and Development, cyber risk and security. Strategic finance includes banking refinance, interest rate hedging, and Group Treasury Policy. Investor engagement and broker presentations involve full and half-year results, webcast presentations, analyst calls, investor and governance roadshows, Private Client Fund Manager meetings, one-to-one calls, AGM, and presentations from brokers. Financial reporting and market include Company results, trading statements and dividends, Annual Report and Accounts, dividend policy and declarations. The Nomination Committee reviews Board composition and Committee membership, Board and senior management succession planning, NED recruitment, and Terms of Reference. The Remuneration Committee reviews salary proposals for 2023, Executive remuneration, 2023 corporate bonus awards, review of incentive plans, 2023 Company share option awards, 2024 corporate bonus scheme, objectives and targets, and Terms of Reference. The Audit and Risk Committee reviews key accounting estimates and judgments, significant accounting policies, annual audit process and fees, external auditor, internal audit function, foreign currency and hedging, risk management, and Terms of Reference. The ESG Committee reviews committee structure, sustainability framework and initiative, investor engagement, disclosure and accounting metrics, carbon action plan and environmental strategy, TCFD reporting and corporate website disclosures. Meeting attendance in 2023 shows that Directors are expected to attend all scheduled Board meetings. This includes a two-day strategy meeting each year which is also attended by all senior Executives of the Group to review progress in delivering the Group’s long-term strategic objectives. The Company Secretary is secretary to the Board and the Board’s Committees."
"On behalf of the Chair, the Company Secretary is responsible for ensuring that all Board and Committee meetings are conducted properly and that the Directors are properly briefed on any item of business to be discussed. He has a direct line into the Chair on all matters relating to governance and is responsible for ensuring governance, legal and regulatory compliance is considered, recorded, and implemented. Procedures are in place for distributing meeting agendas and reports so that they are received in good time, with the appropriate information. Ahead of each Board meeting, the Directors receive written reports updating on strategy, finance, operations, commercial activities, business development, risk management, legal and regulatory matters, people and infrastructure, and investor relations. Meeting papers are distributed via an electronic Board portal. The Directors may have access to independent professional advice, where needed, at the Company’s expense. The Company has effective procedures in place to monitor and deal with conflicts of interest. Directors are required to notify the Company of any situation that could give rise to a conflict or potential conflict thereby compromising their independence and objectivity. Each member is required to disclose any such potential conflicts at the start of every meeting. The Board is fully aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board. Where any such conflict arises, the Board determines whether or not a Director can vote or be a party of the item under consideration in accordance with the Company’s Articles of Association. The Board is satisfied that potential conflicts have been effectively managed throughout the year. The Company Secretary is responsible for ensuring that all newly-appointed Directors receive a thorough formal tailored briefing and induction on joining the Board, aimed at providing Directors with the information to become effective as soon as possible in their role. The induction has the aim of building an understanding of the Company’s business and markets, building a link with the Company’s people and an understanding of the Company’s main relationships, and ensuring an understanding of the Board’s governance framework and Board processes. Each Director receives one-to-one inductions with Board and SLT members and is provided with access to the Directors’ handbook. All four newly appointed Directors received tailored inductions which included meetings with each Board member to discuss their roles and responsibilities on the Board and the Committees, meetings with each SLT member to explain their areas of responsibility within the business, an explanation of the Company’s governance and compliance framework, including Board procedures, an explanation of Directors’ responsibilities under the AIM Rules and other statutory and regulatory rules, and pharmacovigilance and Good Distribution Practice inductions. All the Directors are responsible for ensuring their skills and knowledge are kept up to date. This is done in varying ways but includes professional training, online training, or attending seminars and webinars offered by advisers and consultancies. In addition, regular updates on corporate governance, legal or regulatory changes are also provided via reporting or through presentations to the Board. The Board has overall responsibility for the Group’s sustainability strategy and program which includes climate policy and action and TCFD voluntary reporting. In 2023, we continued to refine our approach to our sustainability framework. The ESG Committee is responsible for setting the Group’s overarching sustainability strategy, including climate change. Our culture is underpinned by a clear set of values, which help guide decision-making at all levels in the business. The Board expects the business to foster relationships and operate high standards of business conduct. We recognize that investors are increasingly looking for socially responsible Companies to invest in; employees are seeking employers with a strong ethics culture that aligns with their own moral code; and customers are conducting enhanced due diligence on their suppliers’ ethical and legal compliance controls. With regular briefings to employees across the Group, training and investment in our people and systems, we ensure that everyone understands the Company’s strategy, goals, and objectives. We empower employees to take ownership of the work that they do and encourage a culture of inclusion to manage risks, deliver results, and drive the business forward. The Board reviews and approves the Group’s policies that have been implemented and communicated internally and externally in the Company’s core languages to those who are expected to adhere to them."
"For example, in addition to the codes of conduct, this includes policies on diversity and inclusion, the prevention of bribery and corruption, fair competition, conflicts of interest, and anti-slavery. Further information about our policies can be found in Sustainability – Policies and Documents on our website. Engaging with the Company’s stakeholders is well embedded in the business as we continue to look after our relationships with shareholders, employees, lenders, customers, suppliers, and consumers and the wider communities. The Board and management seek to understand views from stakeholders and is made aware of and considers their needs and interests and any impact of the decisions it makes. Visibility and awareness are further increased through senior management who have collective responsibility for communicating and engaging with specific stakeholder groups. This includes making sure that the business upholds its values and monitors behavior for acceptability. The Board and its Committees recognize that to meet their responsibilities to shareholders and other stakeholders, it is important to ensure effective engagement with, and encourage participation from, these parties. When engaging with shareholders, the Directors are supported by the Head of Investor Relations and Corporate Communications. The powers and duties of the Directors are determined by legislation and the Company’s Articles of Association. Collectively, they have a duty to promote the success of Alliance for the benefit of its members over the long term. The Directors are aware and mindful of their duties and obligations under s.172 of the Companies Act 2006. They are required to act in good faith and their discussions give due consideration to the impact of those decisions on the Group’s strategy, values, and the interests of the Company’s various stakeholders. Each Director is responsible for weighing up all the relevant factors and how these ultimately promote the long-term success of the Company for the benefit of its shareholders as a whole. To help them reach well-informed decisions they are provided written reports, market reviews, guidance, and presentations and briefings from both internal members of staff and external advisers which assists them when assessing any risks. The likely consequences of any decision in the long term include the interests of the Company’s employees, the need to foster the Company’s business relationships with suppliers, customers, and others. The Board considers the long-term consequences on the business and its stakeholder Group when setting and approving the strategy and the annual budget. For this purpose, the Directors consider the assessment of risks and opportunities and how these might benefit shareholders, and impact, for example, consumers, suppliers, and employees. A long-term approach ensures the Directors take decisions that mean a more sustainable business. The strategy is explained in detail. The Board considers the activities and welfare of the Company’s employees at its meetings and from time to time, employees are invited to attend Board and Committee meetings to present on key operational, financial, and strategic matters. There is regular dialogue between the SLT and all employees through Breakfast Briefings at which employees are briefed on matters such as the outcome of surveys, organizational changes, and other positive initiatives to support their health and wellbeing. This helps to ensure our employees remain engaged. They are also able to participate in the Company’s employee share option schemes to ensure they feel aligned with the Company’s plans for growth over the longer term. When the Board reviews the Company’s strategy, the annual budget, and risks, due consideration is given to business relationships to ensure that they support the long-term objectives. In addition, the Board reviews policies and codes of conduct that govern these relationships and takes into consideration some elements of the Strategic Report and Sustainability sections, such as anti-bribery and corruption, human rights, as well as supply chain resilience. More on the Company’s engagement with its stakeholders can be found in the relevant sections. The impact of the Company’s operations on the community and the environment, the desirability of the Company maintaining a reputation for high standards of business conduct, and the need to act fairly as between members of the Company are all considered. The work of the ESG Committee helps the Directors consider their responsibilities in relation to the environment and wider communities. They receive updates on climate risk and the impact of the business on the environment. All employees are also encouraged to participate in the process to drive positive change."
"When the Board is discussing consumer products, it discusses the benefits and timings of transitioning towards sustainable packaging and considers solutions that help drive the sustainability agenda. The Board’s commitment in this area is demonstrated by approval of the Alliance environment strategy and carbon action plan. The Board ensures that the right culture is embedded throughout the business and is in part attributable to the Company’s values, attitudes, and behaviors when conducting its business and engaging with stakeholders. Maintaining high standards promotes the reputation of the Company, which is clearly communicated via the Partner Code of Conduct. Shareholders are kept informed of Company news via stock exchange announcements, website, and hard copy communications. With the support of Investor Relations, all shareholders receive information by their chosen method. In addition, the Company sets up investor roadshows to meet with shareholders and discuss any concerns they have. More recently, the Board took the decision to appoint a Senior Independent Director to assist the Chair with shareholder engagement. All shareholders are also encouraged to attend the Company’s AGM each year, where they can ask questions freely. The Board continues to focus on brand growth in its strategic locations. When reviewing and approving the strategy and business plans for the long-term growth of the business, the Board considers the interests of its shareholders and the need to create value. The Board receives and considers the current and medium- to long-term economic landscape in its key markets as well as product-specific trends and analysis to frame the Group’s strategy and ensure it is focused on the right categories and markets. The Board also considers the risks and opportunities and does so in the context of how the strategy would also impact patients, consumers, employees, and its relationships with suppliers and distributors, and arrangements in place with lenders. To support the strategy, building relationships is important to the Board. Members of the Board and/or members of the Senior Leadership Team meet with key suppliers and distributors. This helps to strengthen partnerships and align opportunities for growth. The Great Place to Work survey and groupwide monthly Breakfast Briefings help us to gather feedback. Review the outcomes of the Board evaluation insofar as these relate to composition and time commitment of Directors. The Committee reviewed the outcomes from the annual evaluation of the Board insofar as these relate both to composition and time commitment from Non-Executive Directors. The Committee keeps under review the Board’s composition to ensure it provides a sufficiently wide range of skills and experience to enable it to pursue its strategic goals and to address anticipated issues in the foreseeable future. This process includes reviewing the mix of skills, sector experience and financial, public markets and international experience. The Committee also reviewed the merits of conducting an external Board Effectiveness review. Recommend annual re-election of Directors at AGM. The Committee reviewed and recommended to the Board that six Directors, being eligible, put themselves forward for re-election at the 2024 AGM and that Richard McKenzie, Eva-Lotta Sjöstedt and Camillo Pane be proposed for election following their first appointment to the Board. Activities of the Committee Continued Nomination Committee Report Continued Company overview Strategic Report Financial Statements Additional Information Governance Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section Spotlight Feature Richard McKenzie Independent Non-Executive Director Eva-Lotta Sjöstedt Independent Non-Executive Director The Alliance strategy moving forward. The Companies I have led have grown organically, but also used mergers and acquisitions to accelerate strategic objectives. Finally, I have extensive international experience, doing business in the Americas, Europe, Middle East, Southeast Asia and China, all territories relevant to Alliance Pharma’s ambitions. Eva-Lotta Sjöstedt: Being a CEO and having worked internationally, I am able to provide a rounded perspective to support building and achieving the strategy. I am passionate about the environment, social impact, and good governance. I am looking forward to bringing my ESG experience to the ESG Committee of Alliance. Q: What are your first impressions of Alliance thus far? Richard McKenzie: The first thing that struck me is the real quality of the products that Alliance produces, and how they offer real benefits to the end consumer. It feels good to be involved with a Company that is making a positive difference. Q&A with... Eva-Lotta Sjöstedt: The purpose statement of the Company, its international reach and outlook, as well as its desire to continue to grow in the Consumer Health and wellbeing markets."
"Q: Given your background and experience, where do you think you will add most value to the Company? Richard McKenzie: Having lived and worked in China and Asia for 10 years, I have seen both the huge opportunity that China and Asia, more broadly, can offer to consumer goods companies, as well as some of the pitfalls that they face. I hope that I can work with Alliance’s talented teams that look after Asia to help create even more success for the Asian business in the future. Martin Sutherland: In my Executive career, I helped shape and then implement strategies to grow and diversify businesses through market diversification, product innovation and geographic expansion. All these elements form part of Q: What first attracted you to the Board of Alliance? Richard McKenzie: I was hugely attracted to the highly international nature of Alliance’s business, and the potential to further grow the great portfolio of products that it has built. Martin Sutherland: As I transitioned from Executive to Non-Executive roles, I was keen to do two things: work with businesses in situations where there is clearly scope for growth, diversification and ultimately value creation but also, work with interesting people. Alliance ticks both these boxes. The business has a strong track record of growth over many years but finds itself at an interesting point in its evolution. Our product portfolio, market position and geographic focus all give us opportunities to significantly grow the business in the coming years. And the people, the Executive team and the Board are clearly focused on doing just that. Martin Sutherland Independent Non-Executive Director We Are Alliance Alliance Pharma plc Annual Report and Accounts 2023 Company overview Strategic Report Financial Statements Additional Information Governance Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section Spotlight Feature Continued Martin Sutherland: The most striking impression is from the people and the culture they create. Alliance has a strong culture. Everyone you meet is clearly passionate about the business, proud of its heritage and historical achievements and ambitious for the future. Eva-Lotta Sjöstedt: I am impressed with Alliance’s strong legacy of growth and international outlook. This is crucial at a time where health and wellbeing is becoming increasingly important for many people. This all adds to Alliance’s strong sense of purpose. Q: What was your experience of the onboarding process? Richard McKenzie: The Alliance team has been very welcoming and generous with its time in helping me get up to speed and understand the business. I have enjoyed spending time with all the team and seeing what makes the business tick. Martin Sutherland: The onboarding process was very thorough. When you join a new Board, especially in a new sector, there is a lot to learn and a lot of information to assimilate. I wanted to be able to contribute as quickly as possible, so it was excellent being introduced to all the key Executives and other Board members in short order and being given access to historical documents and talked through key decisions that the Company had made in recent history. Eva-Lotta Sjöstedt: The onboarding process was very personable followed by an induction to the business that demonstrated professionalism, and an in-depth knowledge of the business, its people and culture. This all helped equip me for my role as a Non-Executive Director on the Alliance Board. Q: What excites you about the year ahead? Richard McKenzie: There is a lot to be excited by at Alliance and I hope 2024 will bring more growth in the star brands. I am particularly excited to see the new innovative products in these brands come to market this year. Martin Sutherland: We are at an interesting point in our evolution as a business. We have a clear strategy for growth and can see how this will create shareholder value. In the next year, we need to focus on execution of the first steps of that strategy. It is a year of consolidating our position in key markets for our key brands, Kelo-Cote, Nizoral and Amberen to name just three. We need to focus on aligning resources behind these key Consumer Healthcare brands, getting our go-to-market approach and distribution channels working effectively, whilst also making sure that our Prescription Medicines business maintains its strong market position."
"Eva-Lotta Sjöstedt: Being a positive person, I hope that the world economy has a slightly better outlook than in recent years and that this helps propel plans to grow our products in relevant markets and segments promoting our strong value proposition. Q: Where do you see Alliance in 5 years’ time? Richard McKenzie: I see Alliance as a leading, innovative, and global Consumer Healthcare business, which has fully taken advantage of the digital channel shift we are in the middle of now. Martin Sutherland: The business will be substantially bigger than it is today, through strong organic growth and discerning acquisitions. We will have a greater focus on Consumer Healthcare, our products will have become household names in our chosen geographies and we will have a stronger presence in North America and China. Eva-Lotta Sjöstedt: There is no crystal ball, but I would like to see an Alliance that has grown strong brands in our target market segments demonstrating our ability to focus on our objectives in health and wellbeing. Chair’s Statement On behalf of the Audit and Risk Committee, I am pleased to introduce this year’s Audit and Risk Committee Report. As a Company admitted to trading on AIM, we are guided by the QCA’s Audit Committee Guide and, when appropriate to do so, look to investor guidelines for best practice. This report is intended to provide shareholders with information about the Committee’s responsibilities and report on the activities of the Committee during the year and our approach to overseeing further improvements to our internal controls. As you will have seen from recent announcements to the market, this year’s audit process has not been without its challenges from which we have learned valuable lessons. We provide a full explanation below but I, on behalf of the Committee and the wider Board, want to assure shareholders that we have engaged actively, and collaboratively, with management and our auditors throughout the audit process to ensure a successful conclusion to the audit and the accurate reporting of the 2023 results in as timely a manner as possible in the circumstances. I want to reassure shareholders that the delay in the audit, whilst unsatisfactory, has allowed time for a thorough review of our processes and more detailed work, specifically in respect of impairments and this additional work, which the Committee has had regular and detailed oversight of, has enabled the Committee to conclude that the FY2023 financial statements are not materially misstated. Regular meetings were held by the Committee in the first half of 2024 to discuss the audit process and the technical accounting matters that have arisen, particularly in respect of impairments. The Committee would like to thank Deloitte for their diligent and positive approach to the audit. As noted in Deloitte’s audit report, there is much still to do, and the Committee is now conducting a comprehensive review, particularly in respect of the weaknesses identified in our internal control environment regarding in particular impairment reviews, balance sheet reconciliations and IT environment. Management, assisted by external advisors, will create a detailed action plan to address any issues, and to ensure sufficient controls are in place to conclude that the 2024 financial statements contain no material errors. The Committee has also initiated the creation of an internal audit function, which will report to the Audit Chair and to be in place by the end of 2024 in order to support management in the delivery of this plan. Audit and Risk Committee Report Audit and Risk Committee The Committee is focused on improving the quality and effectiveness of internal controls building on the work already undertaken during the extended recent audit process. Richard Jones Audit and Risk Committee Chair Committee Members Committee Meetings Richard Jones (Chair) Martin Sutherland Alliance Pharma plc Annual Report and Accounts 2023 Company overview Strategic Report Financial Statements Additional Information Governance Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section Chair’s Statement Continued In terms of the composition of the Committee, Martin Sutherland was welcomed to the Committee on 10 February 2023 and David Cook stepped down following his resignation from the Board in May 2023. Following the appointment of Camillo Pane as Chair of the Board in February 2024, the Board are discussing further changes to the Committee which are intended to be completed during 2024. FY2023 audit and impairment."
"As noted above, during the early stages of the audit process, following challenges from our auditors, it became clear that our processes and controls, including balance sheet reconciliations, the IT environment and, in particular our processes for reviewing impairments, were not effective. This resulted in a number of misstatements some of which required correction. The Committee therefore asked management, assisted by external advisors, to undertake a thorough review of the testing for impairments of its intangible assets which led to a consequential delay in the reporting of the Company’s 2023 financial results, a material impairment in FY2023 and also a prior year adjustment in respect of impairments, as follows: Total restatements in respect of FY2022 of £28.3 million of which £20.0 million related to a restatement of the impairment reported for Amberen for which further explanation is included in note 2.20 to the financial statements on page 128. Total impairment charges for FY2023 of £79.3 million including a further impairment to Amberen of £46.4 million, Nizoral £10.3 million and to a number of our other pharma and consumer brands. Further explanation is provided in note 1.1 on page 138. Whilst the Committee is focusing on improving processes and controls for FY2024, management engaged external expertise to support and challenge the financial team and their work, testing the impairment modeling in respect of FY2022 and FY2023. The Committee met regularly to review the outcome of not only this work but also wider financial reporting, has enabled the Committee to conclude that the FY2023 financial statements are not materially misstated. Richard Jones Audit and Risk Committee Chair 18 June 2024 Audit and Risk Committee Report Continued The role of the Committee The Committee assists the Board with monitoring and reviewing the Company’s financial results and other reporting and has oversight of the effectiveness of risk management and systems of internal control. Its role is to provide confidence to shareholders on the integrity of our reported financial results and provide challenge to the external auditors and senior management. The framework of duties is set out in its Terms of Reference, which are available on the Company’s website. Each year, the Committee reviews its own performance and its Terms of Reference. Duties of the Committee The duties of the Committee include: reviewing the management and reporting of financial matters, including key accounting policies; reviewing the Annual Report and Accounts and advising the Board on whether, when taken as a whole, it is fair, balanced, and understandable and provides shareholders with the information necessary to assess the Company’s performance, business model and strategy; considering the appointment of external auditors and the frequency of re-tendering and rotation of the audit; overseeing the relationship with, and the independence and objectivity of, the external auditors; setting policy in relation to the use of the external auditors for non-audit services; advising the Board on the Company’s appetite for, and tolerance of, risk and the strategy in relation to risk management and reviewing any non-conformances with these; reviewing the Company’s risk management and internal control systems and their effectiveness; and reviewing the Company’s procedures for detecting fraud, bribery and corruption and ensuring arrangements are adequate for employees to raise concerns. Members of the Committee have access to the Company Secretary, who attends and minutes all meetings. To enable the Committee to discharge its duties effectively, the Company Secretary is responsible for ensuring the Committee receives high-quality, timely information. The Chair of the Committee works closely with the CFO and the Finance department to ensure papers for meetings are comprehensive and comprehensible. When appropriate to do so, the Committee seeks the support of external advisers and consultants. The Committee reports to the Board which includes reporting on any matters where it considers action or improvement is needed, including recommendation of remedial actions. The Chair of the Committee reports to the Board on its proceedings after each meeting on all matters, including any reporting issues and on estimates and judgments made in the preparation of financial statements. Membership and Meeting Attendance During the year, the Committee held a total of six meetings: four scheduled and two unscheduled meetings, reporting on its activities to the Board. Members who are not able to attend unscheduled meetings offer their apologies and provide feedback to the Chair of the Committee in advance of meetings. Directors who, during the year, were unable to attend meetings, provided comments and feedback on business to the Chair of the Committee."
"The Committee comprised a maximum of four Independent Non-Executive Directors during 2023, and have the right to attend meetings. Member Status Attendance Richard Jones Independent 6/6 Martin Sutherland Independent 6/6 David Cook Independent 3/3 Jo LeCouilliard Independent 4/6 Committee membership and attendance Appointments to the Committee are made by the Board following any recommendations from the Nomination Committee. Only members of the Committee have the right to attend meetings. During 2023, with two Non-Executive Directors having an accountancy qualification, the Committee has a mix of knowledge and skills gained through their experience of business, management practices including risk, industry and sector, and their recent and relevant financial experience. They have a direct relationship with the external auditor and review internal controls and financial reporting matters. The CEO, CFO, Group Head of Finance and Group Financial Controller are invited to attend all meetings, while other senior financial managers attend as appropriate. The external auditor also attends the meetings to discuss the planning and conclusions of their work and meets with the members of the Audit and Risk Committee without any members of the Executive team present after each meeting. The Audit and Risk Committee can call for information from management and consults with the external auditor directly if required. Alliance Pharma plc Annual Report and Accounts 2023 Company overview Strategic Report Financial Statements Additional Information Governance Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section Activities of the Committee Areas of focus Key duties and responsibilities Activities of the Committee Financial statements and narrative reporting The content and integrity of financial statements and any formal announcements relating to financial performance, including review of the significant financial reporting judgments contained therein. Review of the financial statements and narrative reporting in the Annual Report and Accounts for 2022 and 2023 with reference to the reports being fair, balanced and understandable. This included a review of the appropriateness of the disclosures considering requirements and guidance under IFRS, the AIM Rules for Companies, requirements under the Companies Act 2006, FRC guidance and the QCA Corporate Governance Code 2018. Review of the preliminary results for the financial year ended 31 December 2022 and 2023. Review of the unaudited half-year results to 30 June 2023. Consideration of reports from the external auditor in respect of the Annual Report and Accounts from 1 January 2023 to the date of this report. Going concern Matters that have informed the Board’s assessment of whether the Company is. We are a going concern. The review of the going concern includes methodology and assessment in support of the going concern assumption, which included consideration of downside scenarios, concluding the expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accounting policies and standards key accounting estimates and judgments. In respect of the preparation of the financial statements for the year ended 31 December 2022 and 2023, the Committee reviewed key accounting judgments and estimates, including a review of the Group’s weighted average cost of capital. Review of the outcome of an Audit Quality inspection on Deloitte. Review of intangible assets, including consideration of impairment of assets under IAS 36. This included the oversight of the adoption of a new intangible asset impairment process for the review of all of the company’s intangible assets and included a review of the prior year. Specific review of the impairment of Amberen, with regard to the findings of the Audit Quality inspection. This included challenges to management on the key assumptions used in the valuation model, including marketing reinvestment rate, discount rate, revenue growth rates, and the prior year restatement. Review of Alternative Performance Measures. Continued review and assessment under IFRS 15 and the revenue recognition in relation to a major cross-border ecommerce distribution agreement. Risk management and internal controls financial and other internal controls and risk management systems, including the Group’s Principal Risks and Uncertainties. Response to challenges raised during the 2023 audit process relating to the effectiveness of the internal control environment and control weaknesses in impairment reviews, balance sheet reconciliation, and IT environment. Meetings Martin Sutherland (Chair) Kristof Neirynck Richard McKenzie Chair’s Statement On behalf of the Remuneration Committee, I am pleased to introduce my first Remuneration Committee Report since becoming Chair of the Committee in early 2023. As a company admitted to AIM, we are guided by the QCA’s Remuneration Committee Guide and, when appropriate to do so, look to investor guidelines for best practice."
"This year, we held several meetings to review our remuneration policy to ensure it remains appropriate for the size and complexity of our business. Guiding this review were the three principles that underpin our remuneration approach, namely: encouraging broader share ownership throughout our employee base, so that all employees are aligned with creating shareholder value; rewarding our staff and executives at median against market benchmarks for their roles, so we are able to attract and retain the talent we need to drive the business forward; and only paying for delivery against performance measures, so we reward success. The review of the remuneration policy was to ensure that our arrangements satisfy the above principles and continue to support the business strategy, align with market norms, and meet the governance expectations of our shareholders. Following this review, and in consultation with our largest shareholders, we have now changed the way in which we grant long-term share awards. To date, the company has operated two share-based incentive schemes being market-value options under the Company Share Option Plan and nil-cost options under the Long Term Incentive Plan. All Alliance employees were eligible to receive market-value CSOP options, whilst awards of performance-based LTIPs were also used for the Senior Leadership Team, including the Executive Directors. With the growth in headcount that Alliance has undergone in the last few years, the granting of market-value CSOP options to all employees had created significant pressure on our dilution limits, which restrict the number of shares that can be issued to cover employee share scheme awards. Having carefully considered various alternatives, we decided that a move away from market value options was the best way to tackle this pressure. As such, share awards are now made entirely in the form of nil-cost options. The vesting of awards to the SLT, including Executive Directors, remains subject to performance targets, ensuring reward is only delivered in line with performance. This change has enabled us to continue to deliver on our approach of widespread equity ownership, whilst driving strong performance and remaining within our dilution limits at an acceptable accounting cost. Following consultation with major shareholders, the Committee also approved a revision to the vesting conditions for the LTIP awards granted to the Executive Directors in 2023, with ROCE introduced as a third measure alongside EPS and TSR. The remuneration policy review also revealed a material gap between the pay levels of our executives and the median level amongst our benchmark companies, comprising companies of similar size and similar sector. While recent salary increases for both the CEO and CFO have begun to close the gap, the main difference in pay between Alliance and its peers was in the relatively low long-term incentive opportunities available to our executives. As such, following consultation with shareholders, we have increased the maximum LTIP opportunity under the policy to 120% of salary and lowered the proportion of the award that vests for achieving threshold performance to 25% of maximum from 50%, ensuring that the increased LTIP opportunities only become available for outstanding performance and the continued growth of the business. The first LTIP awards under the new policy were granted in October 2023 at a share price of 45p; the Committee approved annual awards of 100% of salary to the Executive Directors, a discount to the normal award of 120% of salary given the decline in the share price over recent months. Other key activities of the Committee during the year included monitoring and making recommendations with respect to the level and structure of remuneration for senior management; reviewing the 2023 annual corporate bonus scheme to ensure it is appropriate across all levels in the organization; reviewing data to support the appropriate level of remuneration following changes to roles and responsibilities of Directors during the year; assessing the achievement of performance conditions and extent of vesting relating to share awards which matured in 2023; approving the grant of awards under the Company’s Long-Term Incentive Plan to the Executive Directors and employees; and reviewing the holding requirements and level of holdings under the Company’s Share Ownership Policy. On 21 November 2023, we were pleased to welcome Richard McKenzie to the Committee. The Committee continues to monitor trends and developments in relation to remuneration market practices and corporate governance, and welcomes views from its shareholders."
"This year for the first time, and in keeping with good practice, we are pleased to give shareholders a say on pay and will be putting forward the Remuneration Report to a shareholder advisory vote at the AGM. I will also be available at that meeting to answer any shareholder questions on the Committee’s activities. In the meantime, I would like to thank our shareholders for their continued support. Martin Sutherland Remuneration Committee Chair 18 June 2024 Alliance Pharma plc Annual Report and Accounts 2023 The Role of the Remuneration Committee The role of the Committee is to ensure there is a formal process for considering Executive remuneration. On behalf of the Board, it reviews the pay, benefits, and other terms of service of the Executive Directors of the Company and the broad pay strategy with respect to other senior executives. The framework of duties is set out in its Terms of Reference which are available on the Company’s website. Each year, the Committee reviews its own performance and its Terms of Reference. Members of the Committee have access to the Company Secretary who attends and minutes all meetings. To enable the Committee to discharge its duties effectively, the Company Secretary is responsible for ensuring the Committee receives high-quality, timely information. The Chair of the Committee reports to the Board on its proceedings after each meeting and will make any recommendations to the Board it deems appropriate. The Committee will also engage with the Nomination Committee when considering, for example, the appointment of Directors or contractual terms on termination. Membership and Meeting Attendance Appointments to the Committee are made by the Board following recommendations from the Nomination Committee. Only members of the Committee have the right to attend meetings. However, where appropriate, the CEO, CFO, and the Chief People Officer are also invited to attend certain meetings of the Remuneration Committee. During the year, the Committee held a total of seven meetings, three scheduled and four unscheduled, and reported on its activities to the Board. During the year, the Remuneration Committee comprised the following Independent Non-Executive Directors and their attendance was as follows: Member Status Attendance Martin Sutherland Independent 6/6 Kristof Neirynck Independent 6/7 Richard McKenzie Independent David Cook Independent 3/3 Jo LeCouilliard Independent 7/7 Martin Sutherland was appointed to the Committee on 10 February 2023 and became Chair of the Committee on 1 April 2023. Richard McKenzie was appointed to the Committee on 21 November 2023. David Cook resigned from the Board on 25 May 2023. Jo LeCouilliard stepped down as Chair of the Committee but continued to remain a member of the Committee until her resignation from the Board on 19 February 2024. Directors who were unable to attend meetings provided comments and feedback on business to the Chair of the Committee. Activities of the Committee During the year, matters reviewed and considered by the Remuneration Committee included reviewing policies on remuneration, the external environment, market comparators, increases to annual base salaries, short-term and long-term reward structures, and assessing the extent to which targets have been achieved under the performance-related incentive schemes. When appropriate to do so, the Remuneration Committee seeks the support of its external advisers, Ellason LLP. They are members of the Remuneration Consultants Group, which sets out guidelines to ensure that any advice received is independent. Ellason provides no other services to the Company and the Committee is satisfied that the advice received is objective and independent. No Directors or senior managers are involved in any decisions as to their own remuneration. Remuneration Policy Advisory Vote This year, in keeping with good practice, shareholders will be given a say on pay on the Remuneration Report by virtue of an advisory vote at the AGM. Remuneration Policy Tables As the Company is admitted to AIM, it is not required to produce a formal remuneration policy or seek shareholder approval of that policy. However, we set out below additional information that the Committee believes will be most useful to shareholders and reflects remuneration practices that are appropriate for an AIM Company of our size. The policy is designed to ensure our Executive Director pay arrangements remain supportive of, and drive the strategy. Base Salary Base salaries are reviewed annually to ensure they remain in line with other pharmaceutical, healthcare, and other AIM Companies and reflect the size and scope of the individual’s role. Within that frame of reference, the Company aims to be at or near the median level. Annual base salaries increase from May each year."
"The Committee is committed to ensuring that salaries remain competitive relative to the AIM 100. Levels are set to attract and retain individuals to lead and drive forward the agreed strategy for the Company. Pension and Other Benefits Executive Directors can participate in the Company’s defined contribution pension scheme. In line with all employees, only their base salaries are pensionable. The Company contributes twice the amount contributed by the employee up to a maximum of 10% of salary. When appropriate to do so, Executive Directors may take benefits as a salary cash supplement, which will ordinarily be reduced to take account of the employer National Insurance Contributions. Other benefits in kind include life assurance, healthcare, and the provision of a cash allowance in lieu of a company car. Annual Bonus Executive Directors are eligible to participate in the all-employee cash-settled Annual Bonus scheme which reinforces the delivery of the Group’s short-term corporate goals, typically linked to two factors: the achievement of budgeted levels of underlying profit before tax, which is the key metric the Board considers in monitoring corporate performance; and personal performance of each Executive. The level of bonus is determined by first assessing the level of financial performance, and then applying a further multiplier which is determined by assessment of the Executive’s personal performance for the year. Targets are set at the start of each financial year and are determined with the approval of the Remuneration Committee to ensure they incentivise the Executives and align with delivery of the Group’s strategy. Personal performance is measured using various factors, including delivery of pre-set personal targets. The Annual Bonus that each of the Executives can earn is as follows: Chief Executive Officer A bonus of 14% of base salary, increasing on a sliding scale up to a maximum of 100% of base salary, is payable upon the achievement of financial performance targets. The bonus payable can be increased further by applying a personal performance multiplier. The maximum personal performance multiplier is 1.5 times, meaning up to an additional 50% of salary. The CEO’s potential maximum Annual Bonus opportunity is therefore 150% of base salary. Chief Financial Officer and Chief Operating Officer A bonus of 11% of base salary, increasing on a sliding scale up to a maximum of 80% of base salary, is payable upon the achievement of financial performance targets. The bonus can be increased further by applying a personal performance multiplier. The maximum personal performance-related multiplier is 1.5 times, meaning up to an additional 40% of salary. The potential maximum Annual Bonus opportunity is therefore 120% of base salary for the CFO and COO. Share Incentive Schemes The Company operates share-based incentive schemes to encourage a culture of long-term growth and performance that aligns with shareholders. In recent years, the Executive Directors have participated in both a market value Company Share Option Plan and a nil-cost Long-Term Incentive Plan. However, as set out on page 99, no further awards will be granted under the CSOP and the LTIP will be the sole long-term incentive vehicle going forward. LTIP awards granted to the Executive Directors are subject to performance metrics assessed over a three-year performance period, and typically include Earnings Per Share, Total Shareholder Return, and Return on Capital Employed. The maximum market value of shares over which LTIP awards may be granted to any participant during any financial year is 150% of the participant’s salary but with the intention that annual awards will not normally exceed 120% of the participant’s salary. However, in exceptional circumstances, the Committee may, at its absolute discretion, grant a higher amount. Award levels are reviewed regularly by the Committee to ensure that aggregate remuneration levels remain competitive. Further information about the Company’s share incentive plans is set out on page 99. Share Ownership To align Directors’ and senior management’s interests with our shareholders, the Company operates a Share Ownership Policy. Relevant employees are required to build a qualifying interest in shares or vested options capable of exercise that is equal to a percentage of their base salary. Ordinary shares are valued at their market value at the time of any calculation carried out to determine whether a qualifying interest has been established or needs to be increased. Vested-but-unexercised options are included based on the implied net-of-tax gain. The CEO is required to build a qualifying interest equal to 200% of his base salary, while the CFO and COO are required to build an interest equal to 150% of their salary."
"Further information can be found on page 96 of this report. Policy Table in Respect of Non-Executive Remuneration Remuneration/Benefit Application Fees Non-Executive Directors of the Company receive a basic fee for their services provided to the Company. These are reviewed by the Board from time to time to ensure levels remain in line with comparable companies. There are no performance measures in relation to fees paid to Non-Executive Directors. Salary or Fees Other Pension Bonus Total remuneration, excluding share options Exercised share option gains Total remuneration, including share options 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Peter Butterfield 37 7,167 356,083 12,369 12,235 31,725 31,514 – – 421,261 399,832 37 38 6 – 458,647 399,832 Andrew Franklin 1256,194 239,200 1 1,663 11,474 21,191 20,846 – – 289,048 271,520 21,134 – 310,182 271,520 Jeyan Heper 2251,731 – 9,337 – 25,173 – – – 286,241 – – – 286,241 – David Cook 336,000 88,000 1,359 – – – – – 37 3 59 88,000 – – 37 3 59 88,000 Richard Jones 57,246 49,458 1,589 – – – – – 58,835 49,458 – – 58,835 49,458 Jo LeCouilliard 476,920 49,458 899 – – – – – 7 7,819 49,458 – – 7 7,819 49,458 Kristof Neirynck 51,951 47,201 847 – – – – – 52,798 47,201 – – 52,798 47,201 Martin Sutherland 347,510 – 706 – – – – – 48,216 – – – 48,216 – Eva-Lotta Sjöstedt 57,265 – – – – – – – – 7,265 – – – 7,265 – Richard McKenzie 57,265 – – – – – – – – 7,265 – – – 7,265 – 1,169,247 829,400 38,770 23,709 78,089 52,360 – – 1,286,106 905,469 58,520 – 1,344,626 905,469 1 Andrew Franklin was paid an uplift of £7,000 per month whilst he was acting as CEO. Peter Butterfield returned to work in March 2023 and earned his fixed pay since taking a leave of absence in November 2022, and then resumed his duties as full-time CEO from 1 July 2023. 2 Jeyan Heper and Martin Sutherland joined the Board on 1 February 2023. 3 David Cook resigned from the Board as a Non-Executive Director and Chairman on 25 May 2023. 4 Jo LeCouilliard was appointed Chair of the Board on 25 May 2023, which saw an increase in fees between 2022 and 2023. 5 Eva-Lotta Sjöstedt and Richard McKenzie joined the Board on 6 November 2023. No Director received any remuneration from a third party in respect of their service as a Director of the Company. Base Salary During the year, the Committee undertook a review of market benchmarks, including companies of similar size and sector, to gauge the pay positioning of the Executive Directors and other senior management; the review concluded that our total remuneration levels remained at median. Ellason assisted the Committee with benchmarking of roles and discussed with the Committee the market data and pay gaps, market sentiment, and the macro-economic environment. The base salaries for the CEO and CFO were increased by 5%, from £365,000 to £383,250 for the CEO and from. The salary range for the CFO is £243,800 to £255,990. These increases took effect on 1 May 2023 and were in line with the average increase for other UK employees. In addition, the Committee agreed to a further increase to the CFO’s base salary, effective 1 November 2023, in recognition of his additional responsibilities for Information Technology, bringing his total base salary to £281,589. Jeyan Heper was appointed COO on 1 February 2023, with an annual base salary of £275,000. Pension and Benefits: All three Executive Directors received an employer pension contribution of twice the amount contributed by the Director, up to a maximum of 10% of salary. The column headed ""Other"" in the table above shows the value of benefits provided to each Executive Director, including car and healthcare allowance. The Executive Directors accrue retirement benefits through defined contribution pension schemes. The Company does not operate a defined benefit pension scheme. No Director or former Director received any benefits from a retirement benefits scheme that were not otherwise available to all members of the scheme. Annual Bonus: The Committee reviewed the achievement of actual underlying profit before tax against budgeted levels, which is the key metric for monitoring corporate performance. In addition, the Committee considered the personal performance of the Executive Directors as measured against various factors, including pre-set personal objectives."
"No annual bonus payments have been paid to the Executive Directors in respect of the year ending 31 December 2023, as the required threshold level of profit before tax was not achieved. Non-Executive Directors’ Fees: An increase to Non-Executive Directors’ fees was approved during the year and took effect on 1 May 2023. The annual fee payable to David Cook as Chair of the Board was £90,000 pro rata to his tenure during the year. Jo LeCouilliard was appointed Chair of the Board with effect from the 2023 Annual General Meeting, with a contractual fee of £94,500. The Chair and Non-Executive Directors may be reimbursed for any reasonable business expenses, including any taxes payable thereon. Each Non-Executive Director is paid an annual base Board fee of £48,431. Richard Jones, Kristof Neirynck, and Martin Sutherland each receive an additional annual Committee Allowance of £5,000 for chairing the Audit and Risk, ESG, and Remuneration Committees, respectively. No Committee Allowance is paid for chairing the Nomination Committee. Richard Jones was appointed Senior Independent Director with effect from 1 February 2023, for which he receives an additional annual allowance of £5,000. Company Share Plans: The Company operates two share incentive schemes under which shares can be awarded to Executive Directors and senior management. More details on our share plans can be found in the Directors’ Report. Awards Under the Alliance Long-Term Incentive Plan 2019: During the year, the Committee approved awards granted under the Company’s Long-Term Incentive Plan in the form of nil-cost options. These were granted on 4 October 2023, with a face value of 100% of base salary, equal to 851,666 nil-cost options to the CEO, 568,866 to the CFO, and 861,111 to the COO. The share price used to calculate the number of shares awarded was 45p, being the closing mid-market price on 3 October 2023. The award levels were set below the normal policy maximum of 120% of salary to reflect the recent decline in the share price. The COO was also awarded an additional 250,000 nil-cost options in 2023, equivalent to approximately 40% of salary, pursuant to his joining the Board earlier in the year and as a means to help ensure a more rapid alignment with shareholders. These awards will vest on the third anniversary from the date of grant, 4 October 2026, subject to meeting the EPS, TSR, and ROCE performance targets set out below. Malus and Clawback: All Long-Term Incentive Plan awards are subject to standard malus and clawback provisions, which allow the Company, in certain circumstances, to either terminate outstanding options or seek repayment of the after-tax value of options that have been exercised by an Executive who has been dismissed as a result of a set of prescribed irregularities, including the discovery of a material misstatement of results of the Company or Group, a serious breach of the Company’s code of ethics, or a serious regulatory or health and safety issue. Remuneration Committee Report Continued: During 2023, the Committee undertook a review of the use of appropriate performance conditions as part of the proposals to grant share awards only under the Long-Term Incentive Plan. In recent years, the vesting of Long-Term Incentive Plan awards has been linked to EPS and relative TSR, weighted equally. Having consulted with shareholders as part of the governance roadshow, the Committee determined it appropriate to introduce underlying Return on Capital Employed as a third measure for the 2023 awards, weighted at 20%, to help reinforce a focus on capital efficiency. In addition, revisions were made to the vesting curves such that achievement of the threshold performance level for all three Long-Term Incentive Plan measures would permit vesting of only 25% of maximum, reduced from 50% used for prior awards, reflecting market practice. Lastly, the Committee determined that the benchmark to be used under the TSR condition would be the AIM All Share Index to better reflect the Company’s market placing. As such, the vesting of Long-Term Incentive Plan awards granted in 2023 to the Executive Directors is based 40% on EPS, 40% on TSR, and 20% on ROCE. Underlying Earnings Per Share: EPS percentage of award that vests (40% of overall award) is as follows: Less than 5% CAGR is 0%, 5% to 10% CAGR is calculated on a straight-line basis between 25% and 100%, and greater than 10% CAGR is 100%. CAGR means compound annual growth rate. EPS means the underlying diluted earnings per share as presented in the Company’s published Annual Reports."
"EPS Compound Annual Growth Rate means the percentage of increase in the EPS of the Company calculated by reference to the difference between the EPS as presented in the published Annual Report for the financial year ending 31 December 2022 and the EPS as presented in the published Annual Report for the financial year ending 31 December 2025. EPS Performance Period means the period from 1 January 2023 to 31 December 2025. Total Shareholder Return: TSR percentage of award that vests (40% of overall award) is as follows: Less than the Index is 0%, equal to the Index is 25%, and between the Index but less than 15% out-performance of the Index on a cumulative basis over the TSR performance period is calculated on a straight-line basis between 25% and 100%. Equal to or greater than 15% out-performance of the Index on a cumulative basis over the TSR performance period is 100%. Index means the AIM All-Share Index. TSR means total shareholder return calculated by reference to the Company’s share price appreciation plus all dividends per share paid during the TSR Performance Period, as determined by the Company’s Nominated Adviser at the end of the TSR Performance Period. TSR Performance Period means the period starting on the Grant Date and ending on the third anniversary of the Grant Date. Underlying Return on Capital Employed: ROCE percentage of award that vests (20% of overall award) is as follows: Equal to 90% of Target ROCE is 25%, 90% Target ROCE to 125% of Target ROCE is calculated on a straight-line basis between 25% and 100%, and Vesting ROCE greater than 125% Target ROCE is 100%. Target ROCE is 10.2%, calculated on the basis of the 5-year average ROCE up to and including 31 December 2022. ROCE is calculated by dividing underlying operating profit before tax by capital employed. Underlying operating profit before tax is profit before tax, interest, and non-underlying items, as set out in the audited accounts for the relevant periods. Shareholders’ equity is total equity at the relevant balance sheet date, which is to be defined as net of non-underlying items. Awards Under the Alliance Company Share Option Plan 2015: No awards were granted to employees under the Company Share Option Plan in the year under review. In previous years, market value Company Share Option Plan share options have been granted to the Executive Directors and members of the Senior Leadership Team, and where appropriate, may attract HMRC tax advantages. Details of Company Share Option Plan awards granted to the Executive Directors can be found in the relevant pages. Awards Vesting During the Year: Awards granted under the Company Share Option Plan and the Long-Term Incentive Plan to Peter Butterfield and Andrew Franklin on 23 September 2020 lapsed in full, as neither the EPS nor TSR targets were met. Details of the number of shares vesting and the relevant exercise prices for these option awards are set out in the relevant tables. The closing mid-market price of Ordinary shares on 29 December 2023 was 40.5p, and the range during the year was from 34.5p to 71.8p. Share Incentive Awards: Executive Directors hold options through the Company’s share option and Long-Term Incentive Plan. Details of all options held under the Company’s employee share schemes by the Directors as of 31 December 2023 and who served during the year are shown in the relevant pages. Shares are retained as required to comply with the Company’s Share Ownership Policy. Peter Butterfield: Type of award, date of grant, exercise price, performance condition, number of options granted, vested, exercised during the financial year, lapsed, number of options capable of exercise, exercisable from, and exercisable to are detailed in the relevant table. Andrew Franklin: Type of award, date of grant, exercise price, performance condition, number of options granted, vested, exercised during the financial year, lapsed, number of options capable of exercise, exercisable from, and exercisable to are detailed in the relevant table. Jeyan Heper: Type of award, date of grant, exercise price, performance condition, number of options granted, vested, exercised during the financial year, lapsed, number of options capable of exercise, exercisable from, and exercisable to are detailed in the relevant table. Contents Generation - Page Contents Generation - Sub Page Contents Generation - Section Directors' Interests, Shareholdings and Share Ownership Policy."
"The Company operates a Share Ownership Policy under which the Executive Directors and certain other employees are required, when exercising options, to acquire and maintain an interest in Alliance Pharma shares up to a percentage of base salary. The policy requires Executive Directors, when they exercise options, to retain shares in the Company with a value equal to 50% of the net gain (post costs and settlement of tax liabilities) until such time as the required level of shareholding is achieved. Once an Executive Director has built a stake in the Company equal to the required level, they are free to exercise without having to retain shares. Interests may also be maintained as a result of a Director acquiring Ordinary shares in the open market. The Company Secretary maintains a record of individual required levels and qualifying interests, based on notified information, and reports periodically to the Remuneration Committee regarding compliance. Pursuant to the policy, 50% of the value of any vested but unexercised awards count towards the holding requirements. Ordinary shares are valued at their market value at the time of any calculation carried out using the previous day's closing middle market quotation. Directors' interests, shareholdings and Share Ownership Policy. As at 31 December 2023, the Executive Directors hold the following interests in Ordinary shares of the Company: Director Ownership requirement (percentage of salary) Base salary Shareholding (number of shares) Vested but unexercised awards (number of shares) Value of holdings Ownership level (percentage of salary) Peter Butterfield CEO 200% £383,250 466,103 1,818,750 £188,772 49% Andrew Franklin CFO 150% £281,589 192,911 1,450,499 £78,129 28% Jeyan Heper COO 150% £275,000 Nil Nil Nil 0%. At the closing market price on 31 December 2023: 40.5p. The following table shows the interests of the Directors (and their spouses and dependent children) in the shares of the Company. At 31 December 2022 At 31 December 2023 Director Beneficial Non-beneficial Total Beneficial Non-beneficial Total Peter Butterfield 442,104 - 442,104 466,103 - 466,103 Andrew Franklin 128,384 - 128,384 192,911 - 192,911 Jeyan Heper - - - - - - Richard Jones 15,000 - 15,000 68,000 - 68,000 Jo LeCouilliard - - - 40,957 - 40,957 Kristof Neirynck - - - - - - Martin Sutherland - - - - - - Eva-Lotta Sjöstedt - - - - - - Richard McKenzie - - - - - - David Cook resigned from the Board on 25 May 2023 at which point his shareholdings in the Company totalled 234,129 Ordinary shares. Remuneration Committee Report Continued. Company overview Strategic Report Financial Statements Additional Information Governance Alliance Pharma plc Annual Report and Accounts 2023. Contents Generation - Page Contents Generation - Sub Page Contents Generation - Section Directors' Service Contracts. All Executive Directors are employed under a service contract. The services of all Executive Directors may be terminated (i) by the Company or individual giving the applicable notice or (ii) immediately in the event that the Director is not re-elected by shareholders at an AGM. Executive Director Date of appointment Date of current contract Notice period (Company) Notice period (Director) Peter Butterfield CEO 22/02/2010 05/08/2010 12 months 12 months Nick Sedgwick CEO 13/05/2024 07/05/2024 6 months 6 months Andrew Franklin CFO 28/09/2015 25/06/2015 12 months 12 months Jeyan Heper COO 01/02/2023 11/01/2023 12 months 12 months. Peter Butterfield stepped down as CEO on 13 May 2024 and will resign from the Board on 30 June 2024. Nick Sedgwick joined the Board as CEO with effect from 13 May 2024. The Non-Executive Directors are employed under letters of engagement which may be terminated by the Company by (i) giving the appropriate notice, or (ii) immediately in the event that the Director is not re-elected by shareholders at an AGM. Non-Executive Director First date of appointment Current term Unexpired term Camillo Pane Chair and Independent NED 19/02/2024 5 years 59 months Richard Jones Independent NED 01/01/2019 4 years 45 months Kristof Neirynck Independent NED 01/12/2021 5 years 46 months Martin Sutherland Independent NED 01/02/2023 5 years 46 months Eva-Lotta Sjöstedt Independent NED 06/11/2023 5 years 55 months Richard McKenzie Independent NED 06/11/2023 5 years 55 months. Richard Jones entered terms of appointment for an initial term of five years starting from 1 January 2019. In November 2023, the Board approved to extend his term of appointment by a further four years to 31 December 2027."
"The Executive Directors' service contracts and Chair and Non-Executive Directors' letters of appointment are available for inspection by shareholders at the Company's registered office or by emailing the Company Secretary at Company.Secretary@AlliancePharma.co.uk. Remuneration Committee Report Continued. Alliance Pharma plc Annual Report and Accounts 2023. Company overview Strategic Report Financial Statements Additional Information Governance. Contents Generation - Page Contents Generation - Sub Page Contents Generation - Section Directors' Report Scope of this Report. The Directors present their Annual Report, together with the audited financial statements of the Company and the Group, for the year ended 31 December 2023. The Directors' Report, required under the Companies Act 2006, includes and comprises the Strategic Report on pages 09 to 56, the Governance section including the Directors' biographies and the Remuneration Committee Report on pages 57 to 97. Principal activities. The principal activity of the Company is to act as a holding company. The principal activity of the Group is the acquisition, marketing and distribution of Consumer Healthcare and pharmaceutical products. Branches. A list of the Group's subsidiaries and associated undertakings can be found on pages 165 to 166 under note c to the Company financial statements. There are no branches of the Company outside the UK, however, Alliance Pharmaceuticals GmbH, a company within the Alliance Group, has a Swiss branch which operates under the name Alliance Pharmaceuticals GmbH Düsseldorf, Zweigniederlassung Uster. Directors. Names and biographical details of the Directors of the Company at the date of this report are shown on pages 60 to 62. The rules setting out the powers of Directors, their appointment and replacement are set out in the Company's Articles of Association. Further information on the associated processes can be found on page 72 of the Nomination Committee Report. Details of Executive Directors' service contracts and letters of appointment for Non-Executive Directors can be found in the Remuneration Report on pages 97. All Directors put themselves forward for annual re-election at the Company's AGM. Directors' indemnities. The Company's Articles of Association contain provisions for Directors to be indemnified (including the funding of defence costs) to the extent permitted by the Companies Act 2006. This indemnity would only be available if judgement was given in the individual's favour, they were acquitted, or relief was granted under the Companies Act 2006 was granted by the Court. There were no qualifying pension scheme indemnity provisions in force during the year. Share capital and shareholders' rights. The Company's issued share capital as at 11 June 2024 is 540,399,740 Ordinary shares of 1p each. Each Ordinary share carries one vote at general meetings of the Company. There are no restrictions on the transfer of Ordinary shares other than restrictions which may from time to time be imposed by law. The Company is not aware of any agreements between shareholders that may restrict transfer of securities or voting rights. The Company has no shareholder authority to acquire its own shares. Dividends. As detailed in the interim statement on 26 September 2023, the dividend was paused to allow the Board to develop a new dividend policy with greater emphasis on reinvestment in the business to drive growth. Taking account of shareholder feedback, the Board has decided that no dividend will be declared for 2023 with cash prioritised for investment in innovation, development, brand marketing and reducing debt, and expects to provide an update on dividend policy at some point in the future. Substantial shareholdings. As at 11 June 2024, as required under AIM and certain disclosure rules, the Company has been notified of the major shareholdings in the table below. Both the number of shares held, and the percentage holding, are stated as at the latest date of notification to the Company. Details of all major shareholdings can also be found in the Investor section of the Company's website. Shareholder Number of shares held Percentage of issued share capital DBAY Advisors Limited 141,696,240 26.22% Slater Investment 66,595,656 12.32% Van Lanschot Kempen 41,947,101 7.76% Fidelity Investments 20,115,527 3.72% Artemis Investment Management 19,474,565 3.60%. Company overview Strategic Report Financial Statements Additional Information Governance Alliance Pharma plc Annual Report and Accounts 2023. Contents Generation - Page Contents Generation - Sub Page Contents Generation - Section Directors' Report Continued. Company Share Incentive Plans. The Company operates two incentive share plans. The Alliance Company Share Option Plan 2015. For many years, the Company has operated a CSOP under which all employees are eligible to receive awards in the form of market value options."
"At the discretion of the Remuneration Committee, awards are typically granted subject to a three-year vesting period. On maturity, participants have a seven-year period in which to exercise their options. Historically, these options were awarded based on one share for every £2 of salary and, where appropriate, may attract HMRC tax advantages. Employees based outside of the UK receive non-tax advantaged share option awards and, where this is not possible, the Committee considers awards in the form of share appreciation rights. There were no awards granted under this plan in 2023. The Company does not currently have any intention of granting further options pursuant to the CSOP. The Alliance Long-Term Incentive Plan 2019. In 2019, the Company introduced the LTIP which, up until 2023, was utilised as part of the remuneration strategy for the Executive Directors and members of the Senior Leadership Team only. In 2023, as part of proposals to widen remuneration strategy across the Group and to help manage dilution levels, and following consultation with various shareholders, awards were granted to all employees in the form of nil-cost share options based on a percentage of base salary. All awards granted to Executive Directors and other senior employees under the LTIP are subject to performance conditions and malus and clawback provisions. Subject to achieving the performance conditions set by the Committee, all awards will vest three years from the date of grant and participants will have 12 months in which to exercise any vested award. Employees based outside of the UK also received nil-cost options and, where this is not possible, the Remuneration Committee considers awards in the form of share appreciation rights, also granted on a nil-cost basis. Further information on the Company's share incentive plans and on awards granted to the Executive Directors can be found in the Remuneration Committee Report on pages 91 to 93. Employee Benefit Trust and management of dilution. The Company manages dilution rates within the standard guidelines. In 2017, the Group established the Alliance Pharma Employee Benefit Trust to facilitate the acquisition of Ordinary shares in the Company for the purpose of satisfying awards granted under share option schemes. The Group has been operating the Trust to help manage dilution limits in line with good practice. The Trust is administered by an independent Trustee, operating the Trust independently of the Group. The EBT is a discretionary trust, the sole beneficiaries being employees (including Executive Directors) of the Group who have received applicable awards. The Trustees must act in the best interests of the beneficiaries as a whole and will exercise their discretion in deciding whether or not to act on any recommendations proposed by the Company. Any assets held by the Trust would be consolidated into the Group's financial statements. The Company may grant awards on the basis that it is the Company's intention to settle the exercise of awards through shares purchased in the open market on an arm's length basis. Awards granted and settled in this way are not included in the Company's headroom and dilution calculation. The Company may fund the EBT to purchase, on the EBT's own account, shares in the Company on the open market, however, to date the Company has not needed to. This is in return for the EBT agreeing to use the shares in the Company that it holds to satisfy certain outstanding awards made under the Company's share option schemes. The purchasing of shares in the market to satisfy the exercise of options places a cash requirement on the business. To date, no shares have been purchased by the Trust for satisfaction of outstanding or future share option awards. To further help manage dilution limits, and where appropriate, permitted and agreed with the Committee, share options are net settled upon exercise. Alliance Pharma plc Annual Report and Accounts 2023. Company overview Strategic Report Financial Statements Additional Information Governance. Contents Generation - Page Contents Generation - Sub Page Contents Generation - Section Directors' Report Continued. Employee share dealing and share ownership. In accordance with AIM Rule 21, all employees are made aware of, and are required to comply with, the Company's Share Dealing Policy when dealing in the Company's shares or exercising options over shares. The Dealing Code sets out the rules relating to close periods, clearance procedures, time frames and disclosure requirements."
"The Company operates a Share Ownership Policy under which the Executive Directors and certain other employees are required, when exercising options, to acquire and maintain an interest in Alliance Pharma shares up to a percentage of base salary; details of which in relation to the Executives can be found on page 96. Stakeholder engagement. Details of how we engage with our stakeholders can be found on pages 24, 25, 31, 42 and 43, and on pages 67 to 69. Accounting policies, financial instruments and risks. Details of the Group's financial instruments and financial risk management disclosures can be found in note 20 of the Group financial statements on pages 148 to 151. Charitable donations. During the year ended 31 December 2023, the Group contributed £9,487 to charitable causes. Political donations. No political donations or contributions were made, or political expenditures incurred, during the period. Research and development activities. Alliance does not directly undertake pharmaceutical research and development. The innovation and development team in the UK undertakes the development of new products and line extensions, as requested by the commercial teams, as well as generating new product ideas for commercial evaluation. Likely future developments of the business. Details of the likely future developments of the business are contained in the Strategic Report on page 48. Post balance sheet events. As discussed in notes 5, 19 and 31 to the accompanying financial statements, on 23 May 2024, the CAT upheld Alliance's appeal against the Infringement Decision, finding that there was no agreement to exclude competition from the market and no breach of competition law and that the CMA's decision and £7.9 million penalty imposed on Alliance have been set aside. As such, the £7.9 million provision which was recorded at 31 December 2021 has now been released in full as a credit in the consolidated income statement for the year ended 31 December 2023, and presented as non-underlying. There are no other reportable events after the date of the balance sheet. Directors' obligations to the auditor. The Directors confirm that: (a) insofar as each of the Directors is aware, there is no relevant audit information of which the Company's auditor is unaware; and (b) they have each taken all the steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. This statement is given in accordance with section 418 of the Companies Act 2006. Company's auditor Deloitte LLP has expressed its willingness to be formally reappointed as the Company's auditor and a resolution will be proposed at the AGM. Further information on the Company's Auditor can be found in the Audit and Risk Committee Report on page 82. Annual General Meeting. This year's AGM will be held on 29 July 2024, the business of which is set out in the Notice of Meeting. A circular containing the Notice of Meeting, together with an explanatory letter from the Chair, accompanies the Annual Report and is also available on the Company's website. Please note that, following the Company's move to electronic communications, we are no longer producing hard copy forms of proxy. These are available on request from the Company's Registrars. Electronic communications. Shareholders are encouraged to move away from hard copy Company communications. This means that, instead of being obliged to send Annual Reports, notices of shareholder meetings and other documents to shareholders in hard copy by post, the Company can instead elect to publish them on its website. Using email and the website allows us to reduce printing and postage costs; it is also better for many shareholders who can elect to access just the information they need, from the website, at any time. Shareholders still have the right to ask for paper versions of shareholder information, but we strongly encourage all shareholders to consider the electronic option. Shareholders can also vote electronically using the following link, www.signalshares.com. Registering your details on Link's share portal also gives shareholders easy access to information about their shareholdings and the ability to vote at general meetings or appoint a proxy to vote. Company overview Strategic Report Financial Statements Additional Information Governance Alliance Pharma plc Annual Report and Accounts 2023. Contents Generation - Page Contents Generation - Sub Page Contents Generation - Section Directors' Report Continued. Compliance with the Streamlined Energy and Carbon Reporting Requirements. Consumption and greenhouse gas emissions totals."
"The following figures show the consumption and associated emissions for this reporting year for our operations, with figures from the previous reporting period included for comparison. Scope 1 consumption and emissions relate to direct combustion of natural gas and fuels utilized for transportation operations, such as company vehicle fleets. Scope 2 consumption and emissions relate to indirect emissions resulting from the consumption of purchased electricity in day-to-day business operations. Scope 3 consumption and emissions relate to emissions resulting from sources not directly owned by us. This relates to grey fleet, which is business travel undertaken in employee-owned vehicles only. 5.1 Valuation of Amberen Cash Generating Unit CGU continued Key audit matter description continued Note 2.3 to the financial statements provides details of the key sources of estimation uncertainty and the key assumptions used in discounted cash flow projections for impairment testing of Amberen intangible assets. Note 2.9 to the financial statements sets out the group’s accounting policy. Note 11 to the financial statements outlines sensitivity analysis for reasonably possible changes in the key assumptions used in the discounted cash flow projections for impairment testing of Amberen intangible assets which could cause further impairment. The company overview on page 4 and Financial Review on page 44 provide details on the impairment of the Amberen brand and the commercial background including challenging market conditions. How the scope of our audit responded to the key audit matter We completed the following audit procedures: obtained an understanding of the key controls in the impairment process, including the review controls performed by the Group; assessed that the fair value less costs to dispose was higher than the value in use and therefore was determined to be the recoverable amount; assessed the mechanical accuracy of the impairment models; engaged valuation specialists to assess the methodology applied for consistency with the requirements of IAS 36 Impairment of Assets; evaluated and challenged underlying assumptions relating to short-term capsule revenue growth and margins through comparison to independent market forecasts, historical trading trends and assessing verified orders and listings; assessed short-term capsule cost of sales growth assumptions, including warehousing and distribution costs by comparison to historical evidence, current run rates and known contracted rates, determining whether the allocated costs were directly attributable to the Amberen CGU; evaluated and challenged underlying assumptions relating to short-term and long-term marketing spend by comparison to market benchmarking, historical spend and comparison to alternative similar products; engaged valuation specialists to assess the discount rate and long-term growth rate; determined that the mechanical errors identified relating to the prior year were not repeated within the current year impairment model; recalculated the 31 December 2022 Amberen CGU impairment after the errors were corrected and performed procedures to confirm the errors did not impact earlier periods, including assessing the impact of the errors identified against headroom for 31 December 2021; How the scope of our audit responded to the key audit matter continued engaged valuation and tax specialists to consider the impact of tax amortisation benefit, which was previously included erroneously in the prior period impairment model; with the assistance of our valuation specialists, performed a stand back assessment, including consideration of enterprise value compared to management’s fair value less costs to dispose model through comparison to the potential sales multiples benchmarked against market transaction data; performed an assessment of indicators of bias; assessed the impact of events after the reporting period up to and including the date of approval of the annual report and accounts; assessed sensitivities to calculations prepared by management for contradictory and confirmatory evidence, to determine the impact of reasonably possible changes in the key assumptions; and assessed the completeness and accuracy of disclosures in the financial statements. Key observations Our work highlighted that there was a lack of review and challenge of the significant assumptions, data, estimation uncertainty and model used by management in forming their estimate as to the valuation of the Amberen CGU. As a result of these observations and in particular deficiencies relating to management’s significant assumptions included in the model and consideration of prior year errors, management’s initial assumptions for short-term revenue growth rates, short-term cost of sales growth rates and terminal value marketing spend and related disclosures for the years ended 31 December 2023 and 31 December 2022 were not supported with sufficient appropriate audit evidence. Correcting for this resulted in a further impairment being recorded against Amberen goodwill and acquired intangible assets in the years ended 31 December 2023 and 31 December 2022."
"Following the correction of the current and prior period errors, we are satisfied that the judgements applied, impairment charges recorded and the disclosures within the financial statements are appropriate. Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section INDEPENDENT AUDITOR’S REPORT CONTINUED 5. Key audit matters continued 5.2 Carrying value of the Nizoral brand intangible asset Key audit matter description The Group holds a Nizoral indefinite life brand intangible asset with a carrying value of £50.0m 2022: £60.3m which is subject to an annual impairment review. Following the challenges and errors identified in the Amberen valuation model, management reassessed each of their other impairment models, resulting in further impairment of £29.4m, of which the largest individual impairment was £10.3m related to the Nizoral brand intangible asset. Management has assessed the recoverable amount of the Nizoral brand intangible asset by reference to a fair value less costs of disposal calculation, a change from the previous approach of considering value in use only following our challenge. The valuation model is dependent upon a number of key estimates, including short-term China revenue growth assumptions, short-term China cost of sales growth assumptions, marketing spend assumptions and discount rate. Management’s valuation model shows the recoverable amount for the Nizoral brand intangible asset is lower than the carrying value. As a result, an impairment charge has been recorded against the brand intangible assets relating to Nizoral for the year ended 31 December 2023. Note 2.3 to the financial statements provides details of the key sources of estimation uncertainty and the key assumptions used in discounted cash flow projections for impairment testing of Nizoral intangible assets. Note 2.9 to the financial statements sets out the group’s accounting policy. Note 11 to the financial statements outlines sensitivity analysis for reasonably possible changes in the key assumptions used in the discounted cash flow projections for impairment testing of Nizoral brand intangible assets which could cause further impairment. The company overview on page 4 and Financial Review on page 44 provide details on the impairment of the Nizoral brand including external macroeconomic factors. How the scope of our audit responded to the key audit matter We completed the following audit procedures: obtained an understanding of the key controls in the impairment process, including the review controls performed by the Group; assessed that the fair value less costs to dispose was higher than the value in use and therefore was determined to be the recoverable amount; assessed the mechanical accuracy of the impairment model; engaged valuation specialists to assess the methodology applied for consistency with the requirements of IAS 36 Impairment of Assets; evaluated and challenged underlying assumptions relating to short-term China revenue growth and margins through comparison to independent market forecasts, historical trading trends and inspecting the distributor agreement to assess price and volume assumptions; assessed short-term China cost of sales growth assumptions, including warehousing and distribution costs by comparison to historical evidence, current run rates and known contracted rates, determining whether the allocated costs were directly attributable to the Nizoral brand intangible asset; How the scope of our audit responded to the key audit matter continued evaluated and challenged underlying assumptions relating to marketing spend by comparison to market benchmarking, historical spend and comparison to alternative similar products; engaged valuation specialists to assess the discount rate and long-term growth rate; engaged valuation and tax specialists to consider the impact of tax amortisation benefit; performed procedures to assess whether the impairment identified in the year ended 31 December 2023 impacted previous periods; evaluated and challenged underlying assumptions relating to the allocation of overheads within the impairment model; with the assistance of our valuation specialists, performed a stand back assessment, including consideration of enterprise value compared to management’s fair value less costs to dispose model through comparison to the potential sales multiples benchmarked against market transaction data; performed an assessment of indicators of bias; assessed the impact of events after the reporting period up to and including the date of approval of the annual report and accounts; assessed sensitivities to calculations prepared by management for contradictory and confirmatory evidence, to determine the impact of reasonably possible changes in the key assumptions; and assessed the completeness and accuracy of disclosures in the financial statements."
"Key observations Our work highlighted that there was a lack of review and challenge of the significant assumptions, data, estimation uncertainty and model used by management in forming their estimate as to the valuation of the Nizoral brand intangible asset. As a result of these observations and in particular deficiencies relating to management’s significant assumptions included in the model, management’s initial assumptions for short-term China revenue growth rates, short-term China cost of sales growth rates, marketing spend assumptions and related disclosures for the year ended 31 December were not supported with sufficient appropriate audit evidence. Correcting for this resulted in an impairment being recorded against Nizoral brand intangible assets in the year ended 31 December 2023. Following the correction of the current period errors, we are satisfied that the judgements applied, impairment charges recorded and the disclosures within the financial statements are appropriate. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section INDEPENDENT AUDITOR’S REPORT CONTINUED 6. Our application of materiality 6.1 Materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Group financial statements Parent company financial statements Materiality £1.2m 2022: £1.5m £0.7m 2022: £0.6m Basis for determining materiality 3.9% 2022: 6.4% of profit before tax adjusted for impairment. Materiality equates to 1.1% 2022: 0.9% of revenue. 0.5% 2022: 0.5% of net assets, capped at 58% 2022: 40% of group materiality. Rationale for the benchmark applied Adjusted profit before tax is a key metric for the principal users of the financial statements as it drives the prediction of future share price, the ability to pay dividends, and is therefore of particular importance to both shareholders and potential investors. Impairment of non-current assets are also excluded for banking covenant calculations. The company is non-trading and operates primarily as a holding company. As such, we believe the net asset position is the most appropriate benchmark to use. 6.2 Performance materiality We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group financial statements Parent company financial statements Performance materiality 65% 2022: 70% of group materiality 65% 2022: 70% of parent company materiality Basis and rationale for determining performance materiality In determining performance materiality, we considered the following factors: Our understanding of the group and its environment, together with changes in the business. The overall quality of the control environment. The nature, size and number of uncorrected misstatements identified in the prior year. The identification of prior year adjustments within the impairment model. The combination of the above factors led us to reduce our performance materiality threshold by 5% to 65%. 6.3 Error reporting threshold We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £59,500 2022: £75,000, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. 7. An overview of the scope of our audit 7.1 Identification and scoping of components Our audit scoping considered the significance of each component, including the nature of the group and its environment and an assessment of the risks of material misstatement across the group. The group is headquartered in Chippenham and operates in UK, US, France, Italy, China, Spain, Thailand, Philippines, India, Republic of Ireland, Germany, Switzerland, Singapore and Hong Kong. Based on our assessment we focused our group audit scope on six components, including the parent company, which were subject either to full scope audits or audits of specified account balances. This is consistent with the approach taken in the previous year, with the only change being one additional component in the current year subject to audits of specified account balances."
"PBT adjusted for impairment £30.4m Group materiality £1.2m Component materiality range £0.3m to £0.7m Audit Committee reporting threshold £0.1m PBT adjusted for impairment Group materiality Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section INDEPENDENT AUDITOR’S REPORT CONTINUED 7. An overview of the scope of our audit continued 7.1 Identification and scoping of components continued The six components represent the principal business units with the group’s reportable segments and account for 94% of the group’s revenue, 94% of the group’s profit before tax and 95% of the group’s net assets. They were also selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified above. Our audit work at these components were executed at levels of materiality applicable to each individual entity, which were lower than group materiality ranging from £0.3m to £0.7m FY22: £0.4m to £1.4m. At the group level we also tested the consolidation process and carried out analytical procedures on the aggregated financial information of the remaining components not subject to full scope audit or audits of specified account balances. None of these components represented more than 2% of revenue or 5% profit before tax individually. The group is audited by one audit team, led by the senior statutory auditor. The audit for the year ended 31 December 2023 identified a number of control deficiencies. The nature of these deficiencies primarily related to management review controls including but not limited to impairment reviews, balance sheet reconciliations and consolidation journals. In addition, GITC deficiencies relating to access controls were also identified. The current year audit has identified a large number of errors that have affected both the current and prior years. As reported at Sections 5.1 and 5.2 above, a number of these relate to impairment considerations, where there was initially insufficient appropriate audit evidence to support significant assumptions. The misstatements identified are indicative of the control deficiencies within the group. The group is in the process of updating its controls and processes, specifically to improve the extent and quality of management challenge and review and supporting evidence. In planning our audit our expectation was that there would be deficiencies in the group’s control environment, however the large number of errors and control deficiencies identified has resulted in the need to adjust our audit plan to fully respond to the increased risk of material misstatement in the financial statements. The control environment will continue to be a significant area of focus of the Audit Committee in the forthcoming year as discussed in its Report on page 81. 7.3 Our consideration of climate-related risks The group has assessed that climate did not have a material impact on the group’s carrying value of assets and liabilities at the balance sheet date. Refer to financial review report on page 44. We assessed the climate related risk of material misstatement and concur with management’s assessment. With support from our climate specialists we read the related narrative in the annual report to consider whether it is materially consistent with the financial statements and our knowledge obtained in the audit. 8. Other information The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Full audit scope Specified audit procedures Review at group level Profit before tax 6% 8% 86% Revenue 13% 6% 81% Net assets 5% 2% 93% 7.2 Our consideration of the control environment For all in scope components we obtained an understanding of the relevant controls associated with the financial reporting process, accounting estimates and revenue recognition. The group operates a diverse IT infrastructure. With the involvement of IT specialists, we obtained an understanding of the relevant IT environment and key General IT Controls GITC. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section INDEPENDENT AUDITOR’S REPORT CONTINUED 8."
"Other information continued Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 9. Responsibilities of directors As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. 10. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs UK will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on The FRC's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report. Extent to which the audit was considered capable of detecting irregularities, including fraud. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. Identifying and assessing potential risks related to irregularities. In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following: the nature of the industry and sector, control environment and business performance including the design of the group's remuneration policies, key drivers for directors' remuneration, bonus levels and performance targets; results of our enquiries of management, the directors and the audit committee about their own identification and assessment of the risks of irregularities, including those that are specific to the group's sector; any matters we identified having obtained and reviewed the group's documentation of their policies and procedures relating to: identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance including the UK's Competition and Market Authority's infringement decision, as described within the financial review section of the annual report and note 19 of the financial statements; detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; the matters discussed among the audit engagement team and relevant internal specialists, including tax, valuations, pensions, IT, climate, analytics, modelling and impairment specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. We also involved a forensic specialist as part of our initial fraud risk assessment consideration to assist in identifying any additional potential fraud risk factors. Alliance Pharma plc Annual Report and Accounts 2023. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section INDEPENDENT AUDITOR'S REPORT CONTINUED."
"Extent to which the audit was considered capable of detecting irregularities, including fraud continued. As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas: Revenue recognised, for a significant distributor; Carrying value of the Amberen Cash Generating Unit and completeness and accuracy of the prior year restatement; Carrying value of the Nizoral brand intangible asset. In common with all audits under ISAs, we are also required to perform specific procedures to respond to the risk of management override. We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the AIM rules, UK Companies Act and tax legislation. In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the group's ability to operate or to avoid a material penalty. This includes the group's ability to obtain relevant approvals for the sale of products. Audit response to risks identified. As a result of performing the above, we identified carrying value of the Amberen Cash Generating Unit and completeness and accuracy of the prior year restatement and the carrying value of Nizoral brand intangible asset as key audit matters related to the potential risk of fraud. The key audit matters section of our report explains the matters in more detail and also describes the specific procedures we performed in response to those key audit matters. In addition to the above, our procedures to respond to risks identified included the following: reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; enquiring of management, the audit committee and in-house or external legal counsel concerning actual and potential litigation and claims; performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; reading minutes of meetings of those charged with governance, and reviewing correspondence with HMRC; engaging with fraud specialists to consider the risk of fraud within the group and to establish appropriate and suitable substantive audit procedures; in relation to the potential fraud risk in revenue, we obtained a confirmation letter from the significant distributor confirming value of goods purchased in the 12 months ended 31 December 2023; obtained a breakdown of sales to the distributor in the year and traced these through to signed delivery notes and cash receipts in the year and post year-end; and in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS. Opinions on other matters prescribed by the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors' report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors' report. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023. Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section INDEPENDENT AUDITOR'S REPORT CONTINUED. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS continued. Corporate Governance Statement."
"Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit: the directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 80; the directors' explanation as to its assessment of the group's prospects, the period this assessment covers and why the period is appropriate set out on page 80; the directors' statement on fair, balanced and understandable set out on page 80; the board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 49; the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 80; and the section describing the work of the audit committee set out on page 77. Opinion on other matter prescribed by our engagement letter. In our opinion the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the provisions of the Companies Act 2006 that would have applied were the company a quoted company. Matters on which we are required to report by exception. Adequacy of explanations received and accounting records. Under the Companies Act 2006 we are required to report to you if, in our opinion: we have not received all the information and explanations we require for our audit; or adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns. We have nothing to report in respect of these matters. Directors' remuneration. Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors' remuneration have not been made. We have nothing to report in respect of these matters. Use of our report. This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Andrew Wright, FCA Senior statutory auditor For and on behalf of Deloitte LLP Statutory Auditor Bristol, United Kingdom 18 June 2024. Alliance Pharma plc Annual Report and Accounts 2023. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section CONSOLIDATED INCOME STATEMENT. Year ended 31 December 2023. Year ended 31 December 2022. Underlying Non-underlying Total Underlying Non-underlying Total Revenue 180,680 0 180,680 167,416 0 167,416 Cost of sales (75,661) 0 (75,661) (65,733) 0 (65,733) Gross profit 105,019 0 105,019 101,683 0 101,683 Operating expenses Administration and marketing expenses (60,366) 6,147 (54,219) (63,955) 369 (63,586) Amortisation of intangible assets (1,903) (7,198) (9,101) (1,964) (7,238) (9,202) Impairment of goodwill and intangible assets 0 (79,252) (79,252) 0 (46,492) (46,492) Share-based employee remuneration (889) 0 (889) (92) 0 (92) Operating profit or loss 41,861 (80,303) (38,442) 35,672 (53,361) (17,689) Finance expense (10,471) 0 (10,471) (5,433) 0 (5,433) Finance income 113 0 113 72 0 72 Net finance expense (10,358) 0 (10,358) (5,361) 0 (5,361) Profit or loss before taxation 31,503 (80,303) (48,800) 30,311 (53,361) (23,050) Taxation (6,915) 22,579 15,664 (7,234) 9,076 1,842 Loss for the period attributable to equity shareholders 24,588 (57,724) (33,136) 23,077 (44,285) (21,208) Earnings per share Basic (pence) 4.55 (6.13) 4.28 (3.93) Diluted (pence) 4.54 (6.13) 4.23 (3.93) All of the activities of the Group are classed as continuing. The accompanying accounting policies and notes form an integral part of these financial statements. See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023."
"Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME. Year ended 31 December 2023. Year ended 31 December 2022. Loss for the year (33,136) (21,208) Other comprehensive income. Items that may be reclassified to profit or loss. Foreign exchange translation differences (gross) (6,221) 16,438. Foreign exchange translation differences (deferred tax) 1,202 (3,589). Interest rate swaps – cash flow hedge (gross) (1,771) 0. Interest rate swaps – cash flow hedge (deferred tax) 443 0. Foreign exchange forward contracts – cash flow hedge (gross) 497 111. Foreign exchange forward contracts – cash flow hedge (deferred tax) (122) (28). Total comprehensive deficit for the year (39,108) (8,276). See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. Alliance Pharma plc Annual Report and Accounts 2023. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section CONSOLIDATED BALANCE SHEET. Note 31 December 2023. 31 December 2022. Assets. Non-current assets. Goodwill and intangible assets 299,978 393,372. Property, plant and equipment 5,721 5,578. Deferred tax asset 4,648 4,117. Derivative financial instruments 77 17. Other non-current assets 404 588. Total non-current assets 310,828 403,672. Current assets. Inventories 25,711 24,286. Trade and other receivables 54,716 49,324. Derivative financial instruments 1,232 157. Cash and cash equivalents 22,436 31,714. Total current assets 104,095 105,481. Total assets 414,923 509,153. Equity. Ordinary share capital 5,404 5,400. Share premium account 151,684 151,650. Share option reserve 11,159 10,141. Other reserve (329) (329). Cash flow hedging reserve (822) 131. Translation reserve 7,411 12,430. Retained earnings 43,366 86,094. Total equity 217,873 265,517. Note 31 December 2023. 31 December 2022. Liabilities. Non-current liabilities. Loans and borrowings 113,646 133,744. Derivative financial instruments 1,771 0. Other liabilities 3,200 3,415. Deferred tax liability 37,863 59,455. Total non-current liabilities 156,480 196,614. Current liabilities. Corporation tax 2,454 2,984. Trade and other payables 37,066 35,616. Derivative financial instruments 413 0. Provisions 637 8,422. Total current liabilities 40,570 47,022. Total liabilities 197,050 243,636. Total equity and liabilities 414,923 509,153. See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. The financial statements were approved by the Board of Directors on 18 June 2024. Peter Butterfield Andrew Franklin Director Director. The accompanying accounting policies and notes form an integral part of these financial statements. Company number 04241478. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023. Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section CONSOLIDATED STATEMENT OF CHANGES IN EQUITY. Note Ordinary share capital Share premium account Other reserve Cash flow hedging reserve Translation reserve Share option reserve Retained earnings Total equity. Balance 1 January 2022 5,382 151,328 (329) 48 (419) 10,058 116,418 282,486. Issue of shares 18 322 0 0 0 0 0 340. Dividend paid 0 0 0 0 0 0 (9,116) (9,116). Share options charge (including deferred tax) 0 0 0 0 0 83 0 83. Transactions with owners 18 322 0 0 0 83 (9,116) (8,693). Loss for the year (restated) 0 0 0 0 0 0 (21,208) (21,208). Other comprehensive income. Foreign exchange forward contracts – cash flow hedge (net of deferred tax) 0 0 0 83 0 0 0 83. Foreign exchange translation differences (net of deferred tax) 0 0 0 0 12,849 0 0 12,849. Total comprehensive income for the year (restated) 0 0 0 83 12,849 0 (21,208) (8,276). Balance – 31 December 2022 (restated) 5,400 151,650 (329) 131 12,430 10,141 86,094 265,517. Balance 1 January 2023 (restated) 5,400 151,650 (329) 131 12,430 10,141 86,094 265,517. Issue of shares 4 34 0 0 0 0 0 38. Dividend paid 0 0 0 0 0 0 (9,592) (9,592). Share options charge (including deferred tax) 0 0 0 0 0 1,018 0 1,018. Transactions with owners 4 34 0 0 0 1,018 (9,592) (8,536)."
"Loss for the year (33,136) (33,136) Other comprehensive income Interest rate swaps cash flow hedge net of deferred tax (1,328) (1,328) Foreign exchange forward contracts cash flow hedge net of deferred tax 375 375 Foreign exchange translation differences net of deferred tax (5,019) (5,019) Total comprehensive deficit for the year (953) (5,019) (33,136) (39,108) Balance 31 December 2023 5,404 151,684 (329) (822) 7,411 11,159 43,366 217,873 See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section CONSOLIDATED CASH FLOW STATEMENT Note Group Year ended 31 December 2023 £000s Year ended 31 December 2022 £000s Cash flows from operating activities Cash generated from operations 36,934 24,929 Tax paid (5,524) (3,957) Cash flows from operating activities 31,410 20,972 Investing activities Acquisitions and deferred consideration (222) (16,618) Purchase of intangible assets (249) Purchase of property plant and equipment (696) (358) Proceeds from reimbursement of property costs 200 Net cash used in investing activities (918) (17,025) Financing activities Interest paid and similar charges (9,433) (4,804) Capital lease payments (867) (961) Proceeds from exercise of share options 341 Dividend paid (9,592) (9,116) Loan issue costs (1,338) Proceeds from borrowings 14,925 Repayment of borrowings (18,000) (1,261) Net cash used in financing activities (39,193) (876) Net movement in cash and cash equivalents (8,701) 3,071 Cash and cash equivalents at 1 January 31,714 29,061 Exchange losses on cash and cash equivalents (577) (418) Cash and cash equivalents at 31 December 22,436 31,714 The accompanying accounting policies and notes form an integral part of these financial statements. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section 1. General information Alliance Pharma plc the Company and its subsidiaries together the Group acquire market and distribute consumer healthcare products and prescription medicines. The Company is a public limited Company limited by shares registered incorporated and domiciled in England and Wales in the UK. The address of its registered office is Avonbridge House Bath Road Chippenham Wiltshire SN15 2BB. The Company is listed on the AIM Stock Exchange. These consolidated financial statements have been approved for issue by the Board of Directors on 18 June 2024. 2. Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented unless otherwise stated. 2.1 Basis of preparation These financial statements have been prepared and approved by the Directors in accordance with UK-adopted international accounting standards UK-adopted IFRS. The financial statements have been prepared under the historical cost convention with the exception of derivatives which are included at fair value. In the current year the Group has applied a number of amendments to IFRS Accounting Standards issued by the International Accounting Standards Board IASB that are mandatorily effective for an accounting period that begins on or after 1 January 2023. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements. Transactions eliminated on consolidation Intra-Group balances and transactions and any unrealised income and expenses arising from intra-Group transactions are eliminated. 2.3 Judgements and estimates The preparation of the consolidated financial statements requires the Directors to make judgements estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the relevant circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed by the Directors on an ongoing basis. Judgements The following are the critical judgements apart from those involving estimates which are dealt with separately below that the Directors have made in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the Group’s financial statements."
These are as follows: Identification and presentation of non-underlying items IFRS 17 Insurance Contracts including the June 2020 and December 2021 Amendments to IFRS 17 Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements Disclosure of Accounting Policies Amendments to IAS 12 Income Taxes Deferred Tax related to Assets and Liabilities arising from a Single Transaction Amendments to IAS 12 Income Taxes International Tax Reform Pillar Two Model Rules Amendments to IAS 8 Accounting Policies Changes in Accounting Estimates and Errors Definition of Accounting Estimates. Further narrow scope amendments have been issued which are mandatory for periods commencing on or after 1 January 2024. The application of these amendments will not have any material impact on the disclosures net assets or results of the Group. 2.2 Consolidation The Group financial statements consolidate those of the Company and its subsidiaries together referred to as the Group and equity account the Group’s interest in joint ventures. The Parent Company financial statements present information about the Company as a separate entity and not about the Group. Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control the Group takes into consideration potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated NOTES TO THE FINANCIAL STATEMENTS Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. Summary of significant accounting policies continued 2.3 Judgements and estimates continued Identification and presentation of non-underlying items In 2020 the Group updated its classification policy for non-underlying items. Following the update all amortisation and impairment charges for acquired intangible assets are included as non-underlying items in line with the majority of peer companies of the Group. Significant restructuring costs for example relating to office or business closures one-off project costs and the revaluation of deferred tax balances following substantial tax legislation changes may also be included as non-underlying items. The Directors believe that this classification of underlying and non-underlying items when considered together with total statutory results provides investors analysts and other stakeholders with helpful complementary information to understand better the financial performance and position of the Group from period to period and allows the Group’s performance to be more easily compared against the majority of its peer Companies. These measures are also used by management for planning and reporting purposes. Estimates IAS 1 requires the disclosure of assumptions and estimates at the end of the current reporting period that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The Directors consider these estimates to be as follows: Key assumptions used in discounted cash flow projections for impairment testing of the Amberen CGU and Nizoral brand intangible asset. 2.4 Revenue recognition Identification of performance obligations Revenue comprises consideration received or receivable for the sale of goods in the ordinary course of the Group’s activities namely the distribution of pharmaceutical products. The Group has assessed the performance obligations as being each unit of good sold by the Group. The Group receives royalties in relation to certain agreements with distributors in exchange for the licensed use of intellectual property and trademarks owned by the Group which are generally based on sales volumes. The Group also receives product margin generated by third parties on its behalf under certain transitional arrangements. The Group has assessed the performance obligations as being each unit of good sold by the third parties. Transaction price The transaction price for each performance obligation comprises the stand-alone selling price for the product excluding value-added tax and net of rebates and discounts. Royalty income and the deductions relating to rebates and discounts are based on the Group’s contractual obligations. Certain rebate arrangements also include elements of variable consideration. The Group does not consider these elements to be significant; however an estimate of variable consideration is included where appropriate. The IFRS 15 exemption from estimating variable consideration has been applied to the Group’s sales-based royalties.
The Group has considered whether it is an agent or principal under IFRS 15 for each commercial arrangement and accounted for these accordingly. The Group is considered the principal for all key commercial relationships relating to sale of goods except the relationship with certain supply partners as described in full under Specific revenue streams. This is because the Group controls each specified good before transfer to customers. Where consideration is payable to a customer this is evaluated by the Group to determine whether the amount represents a reduction of the transaction price a payment for distinct goods or services or a combination of the two. The fair value of the good or service is also evaluated to assess whether the payment should be accounted for as a payment to suppliers or a reduction in transaction price. Timing of recognition Under IFRS 15 an entity recognises revenue when it satisfies a performance obligation by transferring a good to a customer. An entity transfers a good to a customer when the customer obtains control of that good. Control may be transferred either at a point in time or over time. For the Group revenue is recognised at a point in time when customers have control of the sold goods or on an appropriate basis where royalty or other arrangements are in place with third parties. To determine the point in time control is transferred for sale of goods the Group considers all relevant indicators. Revenue is recognised net of a provision for the expected level of returns. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2.5 Foreign currency The consolidated financial statements are presented in Sterling which is the presentational currency of the Group and the functional currency of the Company. Foreign currency transactions by Group Companies are booked at the exchange rate ruling on the date of the transaction. Foreign currency monetary assets and liabilities are retranslated into Sterling at the rate of exchange ruling at the balance sheet date. Foreign exchange differences arising on translation are recognised in the Income Statement except for differences arising on the retranslation of a financial liability designated as a hedge of the net investment in a foreign operation that is effective or qualifying cash flow hedges which are recognised directly in other comprehensive income. The assets and liabilities of foreign operations including goodwill and fair value adjustments arising on consolidation are translated to the Group’s presentational currency Sterling at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from translation of foreign operations are reported in other comprehensive income and accumulated in the translation reserve. Foreign currency differences arising on the retranslation of a hedge of a net investment in a foreign operation are reported in other comprehensive income and accumulated in the translation reserve to the extent that the hedge is effective. A review of the useful economic life of brands is performed annually to ensure that these lives are still appropriate. If a brand is considered to have a finite life its carrying value is amortised over that period. Patents Where an acquired intangible asset includes a definite period of patent protection and the value attributed to the patent is considered material the Group has accounted for the value of the patent separate to the underlying brand. The patent is amortised over the period to patent expiry. Distribution rights Payments made in respect of product registration and distribution rights are capitalised where the rights comply with the above requirements for recognition of acquired brands. If the registration or distribution rights are for a defined time period the intangible asset is amortised over that period. If no time period is defined the intangible asset is treated in the same way as acquired brands with an indefinite life. If the licence period can be extended the useful life of the intangible asset shall include the renewal period only if there is evidence to support renewal by the entity without disproportionate cost.
"Rights to royalties from intellectual property Payments made in respect of rights to royalties from intellectual property are capitalised where the rights comply with the above requirements for recognition of acquired brands. If the rights to royalties are for a defined time period the intangible asset is amortised over that period. If no time period is defined the intangible asset is treated in the same way as acquired brands with an indefinite life. Cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the Group’s incremental borrowing rate. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the Income Statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment. 2.9 Intangible assets and goodwill Goodwill Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units CGUs and is not amortised but is tested annually for impairment. Acquired intangible assets Brands Separately acquired brands are shown at cost less accumulated amortisation and impairment. Brands acquired as part of a business combination are recognised at fair value at the acquisition date where they are separately identifiable. Brands are amortised over their useful economic life except when their life is determined as being indefinite. Applying indefinite lives to certain acquired brands is appropriate due to the stable long-term nature of the business and the enduring nature of the brands. Indefinite life brands are tested at least annually for impairment. 2. Summary of significant accounting policies continued 2.6 Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s Chief Operating Decision-Maker CODM. The Group’s Board of Directors the Board is the Group’s Chief Operating Decision-Maker as defined by IFRS 8 and all significant operating decisions are taken by the Board. 2.7 Property, plant and equipment. Computer equipment, fixtures, fittings, and equipment, and plant and machinery are stated at the cost of purchase less any provisions for depreciation and impairment. Depreciation of an asset starts when the asset is available for use. The rates generally applicable are: Computer equipment 20% to 33.3% per annum, straight-line; Fixtures, fittings, and equipment 12% to 25% per annum, straight-line; Plant and machinery 20% to 25% per annum, straight-line. 2.8 Leases. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 2.10 Inventories. Inventories are included at the lower of cost, less any provision for impairment, or net realisable value. Inventory cost for the Group is determined on a first-in-first-out basis. Inventory provisions have been made for slow-moving and obsolete stock. These provisions are estimates and the actual costs and timing of future cash flows are dependent on future events."
"The difference between expectations and the actual future liability will be accounted for in the period when such determination is made. 2.11 Taxation. Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. The recoverable amount is the higher of fair value less costs to sell and value in use. Development costs not meeting the recognition criteria are expensed as incurred. Impairment. The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. For intangible assets with an indefinite life, assets with a finite life that show indicators of impairment, and goodwill, this includes estimation of the recoverable amount. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing the recoverable amount, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. The Directors have determined that the cash-generating units are at product-group level. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units. For the purposes of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of cash-generating units that are expected to benefit from the synergies of the combination. 2. Summary of significant accounting policies continued. 2.9 Intangible assets and goodwill continued. (iv) Computer software. Computer software comprises software purchased from third parties, as well as the cost of internally developed software. Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and are probable of producing future economic benefits, are recognised as intangible assets. Direct costs of software development include employee costs and directly attributable overheads. Software integral to an item of hardware equipment is classified as property, plant, and equipment. Costs associated with maintaining software programs are recognised as an expense when they are incurred. Amortisation is charged to the Income Statement on a straight-line basis over the estimated useful life from the date the software is available for use, generally eight years. Development costs. Research expenditure is charged to the Income Statement in the period in which it is incurred. Development expenditure is capitalised when it can be reliably measured and the project it is attributable to is separately identifiable, technically feasible, demonstrates future economic benefit, and will be used or sold by the Group once completed. The capitalised cost is amortised over the period during which the Group is expected to benefit and begins when the asset is ready for use. Development costs are reviewed at least annually for impairment by assessing the recoverable amount of each cash-generating unit to which the development costs relate. Alliance Pharma plc Annual Report and Accounts 2023. If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the cash flow hedging reserve and the cost of hedging reserve are immediately reclassified to profit or loss. Translation risk. Exchange differences arising from the translation of the net investment in foreign operations are reported in other comprehensive income and accumulated in the translation reserve. Gains and losses on those hedging instruments designated as hedges of the net investment in foreign operations are recognised to the extent that the hedging relationship is effective; these amounts are included in exchange differences on translation of foreign operations as stated in the statement of comprehensive income. Gains and losses relating to hedge ineffectiveness are recognised immediately in the Income Statement for the period."
"Gains and losses accumulated in the translation reserve are reclassified to the Income Statement when the foreign investment is disposed of. Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. The Group designates certain derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates. At inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the hedge. The Group also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other. Cash flow hedges. When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and accumulated in the cash flow hedging reserve. The effective portion of changes in the fair value of the derivative that is recognised in other comprehensive income is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated, or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the cash flow hedging reserve remains in equity until it is reclassified to profit or loss in the same period or periods as the hedged expected future cash flows affect profit or loss. 2. Summary of significant accounting policies continued. 2.11 Taxation continued. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investment and loans to subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. 2.12 Derivative financial instruments and hedging activities. The Group holds derivative financial instruments to hedge its foreign currency risk exposures. Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognised in profit or loss unless designated as cash flow hedges. The cost of equity-settled transactions with employees is measured, where appropriate, with reference to the fair value at the date on which they are granted. Where options need to be valued, an appropriate valuation model is applied. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of exercise restrictions and behavioural considerations. The cost of equity-settled transactions is fully recharged to subsidiaries. The cost of cash-settled transactions is measured with reference to the fair value of the liability, which is taken to be the closing price of the Company’s shares. Until the liability is settled, it is remeasured at the end of each reporting period and at the date of settlement, with any changes in the fair value being recognised in the Income Statement. The cost of equity-settled transactions is recognised, along with a corresponding increase in equity, over the years in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award. The cost of cash-settled transactions is recognised, along with a provision for expected cash settlement, over the vesting period."
"At each reporting date, the cumulative expense recognised for equity-settled transactions reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of management, will ultimately vest. Management’s estimates are based on the best available information at that date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. Trade and other payables. Trade and other payables are recognised initially at fair value. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. Cash and cash equivalents. Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement. Dividends and interest received are included in investing activities. Dividends and interest paid are included in financing activities. Interest-bearing borrowings. Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method. 2.14 Employee benefits – share-based payment transactions. Employees, including Executive Directors, of the Group receive part of their remuneration in the form of share-based payments, whereby, depending on the scheme, employees render services in exchange for rights over shares or entitlement to a future cash payment, the amount of which is determined with reference to the Company’s share price. 2. Summary of significant accounting policies continued. 2.13 Non-derivative financial instruments. Modifications of financial instruments, including loans and borrowings, are reviewed quantitatively and qualitatively to determine if the modification is substantial. Substantial modification of a financial liability results in derecognition of the original balance and recognition of a new financial liability at fair value. The difference between the carrying amount of the original financial liability and the fair value of the new financial liability is charged to the Income Statement. A non-substantial modification of financial liability does not result in the derecognition of the original balance; however, it may also result in a gain or loss recognised in the Income Statement. Trade and other receivables. Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method, less any impairment losses. The Group’s trade receivables are subject to the IFRS 9 expected credit loss model. The Group has applied the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance based on historic default rates. The expected credit loss rate varies depending on whether and the extent to which settlement of the trade receivables is overdue. Accrued income represents amounts owed unconditionally to the Group which have not been invoiced at the year end. For these assets, only the passage of time is required before payment becomes due. Alliance Pharma plc Annual Report and Accounts 2023. In assessing whether an acquired set of assets and activities is a business or an asset, management will first elect whether to apply an optional concentration test to simplify the assessment. Where the concentration test is applied, the acquisition will be treated as the acquisition of an asset if substantially all of the fair value of the gross assets acquired, excluding cash and cash equivalents, deferred tax assets, and related goodwill, is concentrated in a single asset or group of similar identifiable assets. Where the concentration test is not applied or is not met, a further assessment of whether the acquired set of assets and activities is a business will be performed. 2.18 Going concern. On 15 August 2023, the Group agreed a new £150.0 million fully Revolving Credit Facility, together with a £65.0 million Accordion. The facility was agreed with its existing syndicate of lenders, replacing the previous Revolving Credit Facility which ran through to July 2024. This new facility is available until August 2026, with two further one-year extension options. The Revolving Credit Facility is drawn in short- to medium-term tranches of debt which are repayable within 12 months of draw-down. Under the terms of the facility agreement, the lenders are obliged to revolve maturing loans and the Group is not obliged to make any loan repayments, provided certain conditions are met, including covenant compliance."
"Consequently, the Directors have presented the Revolving Credit Facility as a non-current liability. The translation reserve represents gains and losses arising on translation of the net assets of overseas operations into the Group’s presentation currency of Sterling. 2.16 Provisions. Provisions are recognised when there is a present legal or constructive obligation as a result of a past event, for which it is probable that a transfer of economic benefits will be required for settlement and where a reliable estimate can be made of the amount of the obligation. Where material, provisions have been discounted to their present value. Restructuring provisions are recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity. 2.17 Business combinations. Business combinations are accounted for using the acquisition accounting method. Identifiable assets and liabilities acquired are measured at fair value at acquisition date. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. The Group also engages in acquisitions of product-specific assets, such as brands. 2. Summary of significant accounting policies continued. 2.15 Equity. The provision of shares to satisfy certain of the Group’s share option schemes can be facilitated by purchases of own shares by the Group’s Employee Benefit Trust. The costs of operating the Trust are borne by the Group but are not material. To date, no shares have been purchased by the Trust for satisfaction of outstanding or future share option awards. The Employee Benefit Trust is considered to be controlled by the Group. The activities of the Trust are conducted on behalf of the Group according to its specific business needs in order to obtain benefits from its operation and, on this basis, the assets held by the Trust are consolidated into the Group’s financial statements. Share capital represents the nominal value of equity shares. Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. Share option reserve represents equity-settled share-based employee remuneration. Retained earnings represent retained profit. Other reserve represents the difference between the fair value and nominal value of shares issued on a reverse takeover. Cash flow hedging reserve represents the fair value of derivative financial instruments at the balance sheet date that are designated as cash flow hedges, net of deferred tax, less amounts reclassified through other comprehensive income. Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2.19 Alternative Performance Measures The performance of the Group is assessed using Alternative Performance Measures APMs. The Group’s results are presented both before and after non-underlying items. Adjusted profitability measures are presented excluding non-underlying items as we believe this provides both management and investors with useful additional information about the Group’s performance and aids effective comparison of the Group’s trading performance from one period to the next and with similar businesses. In addition, the Group’s results are described using certain other measures that are not defined under IFRS and are therefore considered to be APMs. These measures are used by management to monitor ongoing business performance against both shorter-term budgets and forecasts but also against the Group’s longer-term strategic plans. Some of these APMs also form the basis upon which incentive and rewards are structured. APMs are presented in note 30. The Group does not consider adjusted profitability measures or APMs to be a substitute for or superior to IFRS measures. 2."
"Summary of significant accounting policies continued 2.18 Going concern continued The Directors have prepared cash flow forecasts for a period of 12 months from the date of approval of these financial statements the going concern period and these forecasts indicate that the Group will have sufficient funds, given the RCF financing available, to meet its liabilities as they fall due for that period. Also, the Directors have considered severe but plausible downside scenarios, including a scenario that models a 25% reduction in the Group’s gross profit in Q4 2024. Even under this severe but plausible downside scenario, forecasts indicate that the Group will have sufficient funds to meet its liabilities as they fall due and will continue to comply with its loan covenants throughout the forecast period. The Directors also considered a reverse stress test scenario which indicates that a decline in monthly EBITDA against forecast from July 2024 of over 30% would be needed to result in a breach of loan covenants. The Directors consider this remote. In addition, there are mitigating actions that management can take in order to maintain covenant compliance in even more extreme downside scenarios. Consequently, the Directors consider that it is highly unlikely it would be unable to exercise its right to roll over the debt and are confident that the Group will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements. The Directors have therefore determined it is appropriate to adopt the going concern basis in preparing the financial statements. Alliance Pharma plc Annual Report and Accounts 2023 12 7 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. Summary of significant accounting policies continued 2.20 Prior year restatement Amberen The impairment review undertaken for Amberen as at 31 December 2023 identified errors in the valuation model used for the prior year impairment assessment, the correction of which requires a prior year restatement as at 31 December 2022. This adjustment is regarded as an error in the impairment review performed as at 31 December 2022, rather than a change in estimate, as the model did not include information that was available when the financial statements were authorised for issue and which could reasonably be expected to have been obtained and taken into account in the Directors’ assessment of impairment. Due to the materiality of this error, the carrying value of the Amberen intangible asset and goodwill have been restated as at 31 December 2022. The error arises from a combination of information that was available or could reasonably be expected to have been obtained at 31 December 2022, and prior to the date when the financial statements were authorised for issue, in relation to cash flow assumptions, together with mechanical and methodology errors within the model. This included errors within key assumptions that are disclosed in note 11, including short-term revenue growth rates, short-term cost of sales growth rates and terminal value marketing spend. In addition to this, there were errors relating to long-term growth rates and warehouse and distribution costs. Under IAS 36, the valuation methodology should also have reflected the fair value less costs of disposal, including tax benefits that are not entity specific, since that was higher than the value in use. Following adjustment for the net impact of these corrections, the impairment charge and associated deferred tax credit for Amberen in the prior year would have totalled £27.6 million for the year ended 31 December 2022, compared to the impairment charge of £12.0 million previously recognised. This prior year adjustment of £15.6 million net of deferred tax comprises impairment of goodwill of £5.0 million, impairment of brand intangible asset of £14.9 million and deferred tax credit of £4.3 million and has been written off to the consolidated income statement for the year ended 31 December 2022. We have also considered the impact on the 2022 opening position and concluded the reported goodwill and intangible asset figures for 31 December 2021 are free from material error. Additionally, there was a material disclosure deficiency in the 2022 Annual Report and Accounts, in that there was a failure to disclose the significant judgements made in respect of short-term revenue growth rates, short-term cost of sales growth rates and marketing spend specifically the terminal value marketing spend."
"See note 11 for further details. Other intangible assets The impairment reviews undertaken for other brand goodwill and intangible assets as at 31 December 2023 identified errors in the valuation models used in the prior year impairment assessment, the correction of which requires a prior year restatement as at 31 December 2022. Errors in these other brand goodwill and intangible assets arose in relation to information that was available or could reasonably be expected to have been obtained at 31 December 2022, and prior to the date when the financial statements were authorised for issue, in relation to cash flow assumptions. Following adjustment for the net impact of these corrections, the impairment charge in the prior year would have been £8.3 million higher and the related deferred tax credit £1.8 million higher for the year ended 31 December 2022 net impact £6.5 million. This prior year adjustment has been written off to the consolidated income statement for the year ended 31 December 2022. We have also considered the impact on the 2022 opening position and concluded the reported intangible asset figures for 31 December 2021 are free from material error. See note 11 for further details. The £8.3 million impairment charge impact is summarised by brand below: Brand Impact of restatement £000s Flamma 3,444 Opus Range 1,849 Prochlorperazine 1,100 Others 1,912 Total 8,305 Additionally, there was a material disclosure deficiency in the 2022 Annual Report and Accounts in respect of the Nizoral brand intangible asset, in that there was a failure to disclose the significant judgements made in respect of the discount rate, short-term China revenue growth rates, short-term China cost of goods sold growth rates, market participant operating expenses and marketing costs. 12 8 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Impact on the consolidated statement of comprehensive income Year ended 31 December 2022 As previously reported £000s Amberen £000s Other intangible assets £000s Restated £000s Profit loss for the year 936 (15,610) (6,534) (21,208) Other comprehensive income 12,932 – – 12,932 Total comprehensive income deficit for the year 13,868 (15,610) (6,534) (8,276) 2. Summary of significant accounting policies continued 2.20 Prior year restatement continued A summary of the impact of the prior year adjustments on the consolidated income statement and consolidated statement of comprehensive income for the year ended 31 December 2022 and consolidated balance sheet as at 31 December 2022 is as follows: Impact on the consolidated income statement Year ended 31 December 2022 As previously reported £000s Amberen £000s Other intangible assets £000s Restated £000s Gross profit 101,683 – – 101,683 Operating expenses Administration and marketing expenses (63,586) – – (63,586) Amortisation of intangible assets (9,202) – – (9,202) Impairment of goodwill and intangible assets (18,234) (19,953) (8,305) (46,492) Share-based employee remuneration (92) – – (92) Operating profit loss 10,569 (19,953) (8,305) (17,689) Total finance costs (5,361) – – (5,361) Profit loss before taxation 5,208 (19,953) (8,305) (23,050) Taxation (4,272) 4,343 1,771 1,842 Profit loss for the period attributable to equity shareholders 936 (15,610) (6,534) (21,208) Earnings per share Impact on Basic pence 0.17 (2.88) (1.22) (3.93) Impact on Diluted pence 0.17 (2.88) (1.22) (3.93) Alliance Pharma plc Annual Report and Accounts 2023 12 9 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED 2. Summary of significant accounting policies continued 2.20 Prior year restatement continued Impact on the consolidated balance sheet As at 31 December 2022 As previously reported £000s Amberen £000s Other intangible assets £000s Restated £000s Assets Goodwill and intangible assets 421,630 (19,953) (8,305) 393,372 Other assets 115,781 – – 115,781 Total assets 537,411 (19,953) (8,305) 509,153 Equity Retained earnings 108,238 (15,610) (6,534) 86,094 Other equity 179,423 – – 179,423 Total equity 287,661 (15,610) (6,534) 265,517 Liabilities Deferred tax liability 65,569 (4,343) (1,771) 59,455 Other liabilities 184,181 – – 184,181 Total liabilities 249,750 (4,343) (1,771) 243,636 Total equity and liabilities 537,411 (19,953) (8,305) 509,153 Impact on the consolidated cash flow statement There is no impact on cash generated from operations and the subsequent consolidated cash flow statement. The impact on the operating cash reconciliation is shown below."
"Year ended 31 December 2022 As previously reported £000s Amberen £000s Other intangible assets £000s Restated £000s Profit loss for the year 936 (15,610) (6,534) (21,208) Taxation 4,272 (4,343) (1,771) (1,842) Amortisation and impairment of intangibles 27,436 19,953 8,305 55,694 Other movements (7,715) – – (7,715) Cash generated from operations 24,929 – – 24,929 3. Revenue and segmental information The Group’s reportable segments are the strategic business units that represent different parts of the overall product portfolio, these being Consumer Healthcare brands and Prescription Medicines. The business units are managed separately as each portfolio requires different expertise to deliver the corresponding product offering as a result of the inherently different characteristics of these product types. Operating segments reflect the way in which information is presented to and reviewed by the CODM for the purposes of making strategic decisions and assessing Group-wide performance. The Group’s Board of Directors the Board is the Group’s CODM. The Group evaluates performance of the operational segments on the basis of revenue and gross profit. Underlying gross profit is consistent with that reported on a statutory basis. Other than intangible assets, disclosed in note 11, assets and liabilities are reported to the Board at Group level and are not separated segmentally. Further evaluation of the performance of the Group’s operating segments is given in the Financial Review on page 44. 130 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Operating segment results Year ended 31 December 2023 Consumer Healthcare £000s Prescription Medicines £000s Total £000s Revenue 134,332 46,348 180,680 Cost of sales (51,605) (24,056) (75,661) Gross profit 82,727 22,292 105,019 Year ended 31 December 2022 Consumer Healthcare £000s Prescription Medicines £000s Total £000s Revenue 120,622 46,794 167,416 Cost of sales (43,019) (22,714) (65,733) Gross profit 77,603 24,080 101,683 Major customers The net revenues from the Group’s largest customers in the year ended 31 December 2023 customers separately comprising more than 10% of the Group’s revenue are as follows. Year ended 31 December 2023 £000s Year ended 31 December 2022 £000s Major customer 1 Consumer Healthcare sales in APAC 21,201 17,898 Major customer 2 Consumer Healthcare sales in APAC 20,200 14,342 3. Revenue and segmental information continued Revenue Revenue information by brand Year ended 31 December 2023 £000s Year ended 31 December 2022 £000s Consumer Healthcare brands Kelo-Cote franchise 63,209 50,039 Amberen 11,218 14,909 Nizoral 19,648 17,231 MacuShield 9,199 9,080 Aloclair 7,959 9,272 Vamousse 4,407 4,602 Other Consumer Healthcare brands 18,692 15,489 Total revenue Consumer Healthcare brands 134,332 120,622 Prescription Medicines Hydromol 9,042 8,070 Flamma Franchise 5,990 6,548 Forceval 6,606 5,872 Other prescription medicines 24,710 26,304 Total revenue Prescription Medicines 46,348 46,794 Total revenue 180,680 167,416 Nizoral statutory revenue includes revenue generated on an agency basis. Nizoral revenue presented on a See-through Income Statement basis is included as an Alternative Performance Measure in note 30. Classification by geography is based on customer location. Year ended 31 December 2023 £000s Year ended 31 December 2022 £000s Europe, Middle East and Africa EMEA 79,199 78,920 Asia Pacific and China APAC 72,422 59,186 Americas AMER 29,059 29,310 Total revenue 180,680 167,416 Alliance Pharma plc Annual Report and Accounts 2023 131 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Year ended 31 December 2023 £000s Year ended 31 December 2022 restated £000s Amortisation of acquired intangible assets (7,198) (7,238) Impairment of goodwill and intangible assets (79,252) (46,492) CMA provision release 7,900 – Other (1,753) 369 Total non-underlying items before taxation (80,303) (53,361) Taxation on non-underlying items 22,579 9,076 Total non-underlying items after taxation (57,724) (44,285) See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. Amortisation of intangible assets The amortisation costs of acquired intangible assets are a significant item considered unrelated to trading performance, and as such have been presented as non-underlying. This classification is in line with the majority of peer companies of the Group. Impairment of goodwill and intangible assets The impairment reviews for the Group’s intangible assets resulted in impairment losses as the carrying value of certain cash-generating units exceeded estimated recoverable amounts. Further details are provided in note 11."
"The impairment losses are significant items resulting from changes in assumptions for future recoverable amounts. As such, they are considered unrelated to 2023 trading performance, and have been presented as non-underlying. CMA provision release The provision of £7.9 million relating to the CMA Infringement Decision has been released following the announcement that the Group’s appeal had been upheld. This is detailed further in note 19. This is considered unrelated to 2023 trading performance, and has been presented as non-underlying. 4. Profit before taxation Profit before taxation is stated after charging crediting: Year ended 31 December 2023 £000s Year ended 31 December 2022 restated £000s Amounts receivable by the Company’s auditor and its associates in respect of: The audit of these financial statements 1,388 480 The audit of the financial statements of subsidiaries 269 220 Other assurance services covenant compliance and other regulatory compliance services 21 17 Amortisation of intangible assets 9,101 9,202 Impairment of intangible assets 79,252 46,492 CMA provision release 7900 – Share options charge 889 92 Depreciation of plant, property and equipment 1,225 1,558 Loss or gain on foreign exchange transactions 480 (56) See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. Non-underlying items The Group presents a number of non-IFRS measures which exclude the impact of significant non-underlying items. This is to provide investors with a view of the measures used by management to monitor the ongoing business performance and can exclude items such as amortisation and impairment of acquired intangible assets, restructuring costs, significant gains or losses on disposal, one-off project costs, remeasurement and accounting for the passage of time in respect of contingent considerations, and the revaluation of deferred tax balances following substantial tax legislation changes. This assessment requires judgement to be applied by the Directors as to which transactions are non-underlying and whether this classification enhances the understanding of the users of the financial statements. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Directors and employees Employee benefit expenses for the Group including Executive Directors during the year were as follows: Year ended 31 December 2023 £000s Year ended 31 December 2022 £000s Wages and salaries 20,946 18,777 Social security costs 2,272 2,040 Other pension costs note 27 1,506 1,345 Share-based employee remuneration note 23 889 92 25,613 22,254 The average number of employees of the Group including Directors during the year was: Year ended 31 December 2023 Number Year ended 31 December 2022 Number Management and administration 284 249 Key management of the Group is the Board of Directors including Non-Executive Directors and the Senior Leadership Team. Benefit expenses in respect of the key management were as follows: Year ended 31 December 2023 £000s Year ended 31 December 2022 £000s Key management remuneration 1,930 1,699 Pension contributions 137 114 2,067 1,813 During the year, contributions were paid to defined contribution schemes for three Executive Directors 2022: two. Non-underlying items continued Other non-underlying items Other non-underlying costs relate to one-off legal and professional costs. These costs are significant items considered unrelated to trading performance and as such have been presented as non-underlying."
"Finance income and expense Year ended 31 December 2023 £000s Year ended 31 December 2022 £000s Finance expense Interest payable on loans and overdrafts (9,418) (4,668) Amortised finance issue costs (461) (648) Interest on lease liabilities (112) (117) Net exchange losses (480) – (10,471) (5,433) Finance income Interest income 113 16 Net exchange gains – 56 113 72 Finance expense – net (10,358) (5,361) Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED The difference between the total tax charge shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows: Year ended 31 December 2023 £000s Year ended 31 December 2022 restated £000s Loss before taxation (48,800) (23,050) Loss before taxation multiplied by the blended standard rate of corporation tax in the United Kingdom of 23.50% 2022: 19.00% (11,468) (4,380) Effect of Non-deductible expenses (587) 3,777 Adjustment in respect of prior periods 188 (560) Differences between current and deferred tax rates (2,963) (2,043) Differing tax rates on overseas earnings (274) (266) Unrecognised losses (13) (6) Foreign exchange (869) 1,427 Share options 262 315 Movement in other tax provisions 60 (106) Total taxation (15,664) (1,842) See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. A change to UK corporation tax was announced in the Budget on 3 March 2021, increasing the main rate of UK corporation tax from 19% to 25% with effect from 1 April 2023. Non-deductible expenses primarily relate to the release of the provision for the CMA fine, offset by the impairment or amortisation of certain intangible assets which do not qualify for tax relief and so represent a permanent difference. The Group has calculated underlying effective tax rate as an Alternative Performance Measure in note 30. Directors and employees continued Gain on share options exercised by Executive Directors during the year was £76,000 2022: £90,000. The amounts set out above include remuneration in respect of the highest-paid Director as follows: Year ended 31 December 2023 £000s Year ended 31 December 2022 £000s Emoluments for qualifying services 427 368 Pension contributions 32 32 459 400 The notional non-cash IFRS 2 share-based payment expense in respect of the highest-paid Director was £59,000 2022: £160,000. Average number of members of the Board of Directors including Non-Executive Directors for the year ended 31 December 2023 was seven 2022: six. Taxation Analysis of the charge for the period is as follows: Year ended 31 December 2023 £000s Year ended 31 December 2022 restated £000s Corporation tax In respect of current period 4,810 5,669 Adjustment in respect of prior periods 193 110 5,003 5,779 Deferred tax see note 21 Origination and reversal of temporary differences (20,662) (6,951) Adjustment in respect of prior periods (5) (670) Taxation (15,664) (1,842) Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED A reconciliation of the weighted average number of Ordinary shares used in the measures is given below: Year ended 31 December 2023 Year ended 31 December 2022 Weighted average undiluted shares 540,144,706 539,480,306 Employee share options 1,210,980 5,800,317 Weighted average diluted shares 541,355,686 545,280,623 As the Group made a reported loss in the current and prior periods, the dilutive potential Ordinary shares have not been included in the calculation for Diluted EPS as the exercise of share options would have the effect of reducing the loss per share and therefore is not dilutive. The underlying basic EPS is intended to demonstrate recurring elements of the results of the Group before non-underlying items."
"A reconciliation of the earnings used in the different measures is given below: Year ended 31 December 2023 £000s Year ended 31 December 2022 restated £000s Earnings for basic and diluted EPS (33,136) (21,208) Non-underlying items note 5 57,724 44,285 Earnings for underlying basic and diluted EPS 24,588 23,077 The resulting EPS measures are: Year ended 31 December 2023 Pence Year ended 31 December 2022 restated Pence Basic EPS (6.13) (3.93) Diluted EPS (6.13) (3.93) Underlying basic EPS 4.55 4.28 Underlying diluted EPS 4.54 4.23 See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. Dividends Year ended 31 December 2023 Pence per share £000s Amounts recognised as distributions to owners in 2023 Interim dividend for the 2022 financial year 0.592 3,197 Final dividend for the 2022 financial year 1.184 6,395 Total dividend 1.776 9,592 The interim dividend for 2022 was paid on 19 January 2023. The final dividend for 2022 was paid on 18 July 2023. Year ended 31 December 2022 Pence per share £000s Amounts recognised as distributions to owners in 2022 Interim dividend for the 2021 financial year 0.563 3,030 Final dividend for the 2021 financial year 1.128 6,086 Total dividend 1.691 9,116 The interim dividend for 2021 was paid on 7 January 2022. The final dividend for 2021 was paid on 7 July 2022. Earnings per share EPS Basic EPS is calculated by dividing the earnings attributable to Ordinary shareholders by the weighted average number of Ordinary shares in issue during the year. For diluted EPS, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all dilutive potential Ordinary shares. There are no differences in earnings used to calculate each measure as a result of the dilutive employee share options. Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED The Group Goodwill £000s Consumer Healthcare brands and distribution rights £000s Prescription Medicines brands, royalties and distribution rights £000s Computer software £000s Total £000s Cost At 1 January 2022 32,382 260,080 151,544 15,043 459,049 Additions 16,386 249 16,635 Exchange adjustments 2,244 15,296 1,147 18,687 At 31 December 2022 34,626 291,762 152,691 15,292 494,371 Amortisation and impairment At 1 January 2022 1,144 8,185 34,614 1,362 45,305 Non-underlying impairment for the year restated 18,784 16,474 11,234 46,492 Non-underlying amortisation for the year 226 7,012 7,238 Underlying amortisation for the year 1,964 At 31 December 2022 restated 19,928 24,885 52,860 3,326 100,999 Net book amount At 31 December 2022 restated 14,698 266,877 99,831 11,966 393,372 At 1 January 2022 31,238 251,895 116,930 13,681 413,744 See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. Goodwill and intangible assets The Group Goodwill £000s Consumer Healthcare brands and distribution rights £000s Prescription Medicines brands, royalties and distribution rights £000s Computer software £000s Total £000s Cost At 1 January 2023 34,626 291,762 152,691 15,292 494,371 Exchange adjustments (211) (4,410) (394) (26) (5,041) At 31 December 2023 34,415 287,352 152,297 15,266 489,330 Amortisation and impairment At 1 January 2023 restated 19,928 24,885 52,860 3,326 100,999 Non-underlying impairment for the year 63,010 16,242 79,252 Non-underlying amortisation for the year 438 6,760 7,198 Underlying amortisation for the year 1,903 At 31 December 2023 19,928 88,333 75,862 5,229 189,352 Net book amount At 31 December 2023 14,487 199,019 76,435 10,037 299,978 At 1 January 2023 restated 14,698 266,877 99,831 11,966 393,372 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED For Prescription Medicines brand assets, finite useful lives of up to 20 years were adopted prospectively from 1 January 2020. The determination of this lifespan considered all relevant factors for each individual asset, including typical pharmaceutical asset life cycles and the potential development of alternative treatments over time and the remaining useful lives of these brands are considered to remain appropriate. Certain brands were acquired with patent protection, which lasts for a finite period of time."
"It is the opinion of the Directors that these patents do not provide any incremental value to the brand and therefore, no separate value has been placed on these patents. This assessment is based on a view of future profitability after patent expiry and past experience with similar brands. The Prescription Medicines brand assets have a weighted average remaining life of 16 years at 31 December 2023 2022: 17 years. The net book value of intangible assets and goodwill which are considered to have indefinite useful lives are allocated to individual asset level and for Amberen only CGU level in the following table. Goodwill relating to the acquisition of certain assets and businesses from Sinclair IS Pharma plc is allocated to the group of related Consumer Healthcare and Prescription Medicines product assets. Other goodwill amounts are allocated to the product CGU or individual brand asset with which they were originally acquired. Intangible assets that are considered to have indefinite lives all relate to the Consumer Healthcare segment, except for Sinclair Prescription Medicines goodwill. Goodwill and intangible assets continued Acquisitions Included in additions in 2022 is £15.2 million relating to the purchase of the ScarAway brand asset which completed in March 2022 and £1.2 million relating to the purchase of an Aloclair brand asset which completed in October 2022. Useful economic lives The Group segregates its portfolio of assets into two areas: Consumer Healthcare brands and Prescription Medicines. The Directors have considered the continuing appropriateness of the useful economic lives assigned to the assets and for certain assets have made changes, reducing useful economic lives and moving from indefinite life to finite life where appropriate. For the majority of Consumer Healthcare brand assets, indefinite useful lives have been judged to remain appropriate. This is due to the expected long-term growth profile of the Consumer Healthcare business and the enduring nature of the brands, which are supported by continuing marketing spend. It is the opinion of the Directors that the indefinite life assets meet the criteria set out in IAS 38. This assessment is made on an asset-by-asset basis taking into account how long the brand has been established in the market and subsequent resilience to economic and social changes, stability of the industry in which the brand is used, potential obsolescence or erosion of sales, barriers to entry, whether sufficient marketing and promotional resourcing is available, and dependency on other assets with defined useful economic lives. Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Impairment Goodwill and other intangible assets with indefinite lives are allocated to individual asset level and for Amberen CGU level as set out in the useful economic lives table to the left. As explained in note 2.9, all intangible assets are stated at cost less accumulated amortisation and impairment. For all intangible assets with an indefinite life, assets with a finite life that show indicators of impairment and goodwill, the carrying amounts of the Group’s non-financial assets are assessed annually for impairment; this includes estimation of the recoverable amount, being the higher of the value in use basis and the fair value less costs of disposal basis. Amberen is tested at CGU level as the directors believe this CGU generates largely independent cash inflows. All other brands are tested at the individual asset level. Value in use calculations have been used to determine the recoverable amount for all individual assets and CGUs other than Amberen and Nizoral. The calculations use the latest approved five-year forecasts, extrapolated for the individual assets and CGUs remaining useful life or into perpetuity for assets with indefinite useful lives, using long-term market decline or growth rates between -2.0% to 2.0% 2022: -5.5% to 2.0%. Cash flows are discounted at an appropriate rate based on the Group’s post-tax discount rate, adjusted where appropriate for country-specific risks, of between 9.8% to 14.5% or pre-tax 13.1% to 19.3% 2022: 7.0% to 12.4% or pre-tax 9.4% to 14.5%. A fair value less costs of disposal calculation has been used to determine the recoverable amount of £25.9 million for the Amberen CGU, including tax benefits that are not entity specific and overhead and marketing expense to operate the brand by a market participant."
"When applying the fair value less costs of disposal methodology, it has been difficult to assess a sale value using observable market inputs or inputs based on market evidence in the current environment and so unobservable inputs have been used. A discounted. Cash flow has been used to establish the fair value to a market participant, based on the latest approved five-year forecast, extrapolated into perpetuity using a long-term US market growth rate of 3.0% and discounted at an appropriate rate based on the Group’s post-tax discount rate, adjusted for country-specific risks, of 9.2%, or pre-tax 12.5%. Goodwill and intangible assets continued Useful economic lives continued 31 December 2023 Goodwill £000s Consumer healthcare brands and distribution rights £000s Total £000s Amberen – 25,880 25,880 Nizoral – 50,003 50,003 Kelo-Cote (US rights and ScarAway) – 15,202 15,202 Vamousse – 6,870 6,870 MacuShield 1,748 8,740 10,488 Ashton and Parsons – 1,562 1,562 Aloclair (non-Sinclair) – 1,184 1,184 Lefuzhi – 1,607 1,607 Anbesol – 988 988 Cambridge intangibles 598 – 598 Products acquired from Sinclair Kelo-Cote (non EU, excluding US) – 43,743 43,743 Kelo-Cote (EU) – 17,800 17,800 Aloclair (Sinclair) – 14,000 14,000 Goodwill – Sinclair Prescription Medicines 1,694 – 1,694 Goodwill – Sinclair Consumer Healthcare 10,447 – 10,447 Assets with indefinite lives 14,487 187,579 202,066 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED The correction of prior period errors in relation to other intangible assets resulted in a further £8.3 million increase in the 2022 impairment charge. The aggregated prior year error increases the 2022 impairment charge by £28.3 million to £46.5 million. This was offset by a deferred tax credit of £6.1 million, resulting in a net adjustment of £22.1 million to the income statement. No impairment was required at 1 January 2022 as re-performance of impairment analysis at that date identified sufficient headroom between the recoverable amount and the capital employed. Results of goodwill and other intangible assets impairment test As a result of the impairment review for the year ended 31 December 2023, the following impairment charges were identified: Goodwill and Consumer Healthcare brand relating to Amberen impaired by £46.4 million, gross of £13.5 million deferred tax credit following reassessment of the expected future cash flows generated, taking into account past performance, contractual arrangements and cost estimates, including marketing spend, and a higher cost of capital due to the overall increase in borrowing rates. Consumer Healthcare brand relating to Nizoral impaired by £10.3 million, following reassessment of the expected future cash flows generated, taking into account past performance, contractual arrangements and cost estimates, including marketing spend, and a higher cost of capital due to the overall increase in borrowing rates. Following impairment indicators identified, Prescription Medicine brand and distribution rights assets with a finite life and associated goodwill have been impaired by £16.2 million due to viability of future sales in the current market, increasing costs resulting from changes in the regulatory framework, and a higher cost of capital due to the overall increase in borrowing rates. Following impairment indicators identified, Other Consumer Healthcare brand and distribution rights assets with a finite life have been impaired by £6.3 million due to viability of future sales in the current market. Assumptions applied in financial forecasts for fair value less costs of disposal The Group prepares five-year cash flow forecasts derived from approved financial budgets, taking into account management’s past experience, expected market conditions and industry growth rates. A fair value less costs of disposal calculation has also been used to determine the recoverable amount of £50.0 million for the Nizoral individual asset, including overhead and marketing expense to operate the brand by a market participant. When applying the fair value less costs of disposal methodology, it has been difficult to assess a sale value using observable market inputs or inputs based on market evidence in the current environment and so unobservable inputs have been used. A discounted cash flow has been used to establish the fair value to a market participant, based on the latest approved five-year forecast, extrapolated into perpetuity using a long-term growth rate of 2.0% and discounted at an appropriate rate based on the Group’s post-tax discount rate, adjusted for country-specific risks, of 11.3%, or pre-tax 15.1%."
"Discount rates reflect the current market assessments of the time value of money and the territories in which the CGUs or individual brand assets operate. In determining the cost of equity, the Capital Asset Pricing Model has been used. CAPM assesses the expected cost of equity by reference to the risk-free rate, the expected market return, and the industry’s beta. Beta is a measure of the industry’s volatility compared to the overall market. Pre-tax discount rates applied to the cash flow forecasts are derived from our post-tax weighted average cost of capital. With the exceptions of the Amberen CGU and the Nizoral indefinite life asset, the directors do not consider there to be any other reasonably possible changes in estimates that would result in further impairment to goodwill and other intangible assets. Prior year errors As disclosed in note 2.20 the correction of a number of prior period errors in the Amberen CGU impairment assessment relating to projected future business performance including short-term revenue growth rates, short-term cost of sales growth rates, terminal value marketing spend, warehouse and distribution costs, mechanical errors, including certain tax cash flows, within the model, and the valuation methodology not reflecting the higher of fair value less costs of disposal and value in use, resulted in the restatement of the Amberen goodwill impairment charge from £12.0 million to £16.9 million and the restatement of Amberen intangible assets impairment charge from £nil to £15.0 million. The total restatement in respect of the Amberen CGU is £20.0 million. Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation – Page Contents Generation – Sub Page Contents Generation – Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Estimation uncertainty: The assumptions included in the compilation of the CGU/asset-specific discount rates are designed to approximate the cost of capital that a potential market participant would expect. Given the nature of the Group’s business model, the discount rate necessarily includes estimation uncertainty. Short-term capsule revenue growth rates in fair value less costs of disposal valuation models Methodology: Approved budgets and forecasts for five years, based on management’s best estimate of cash flows, taking into account historical capsule revenue, contracted revenue and expected market growth. The overall capsule revenue short-term revenue growth is modeled at a five-year compound average growth rate of 1.4%, split into bricks and mortar CAGR of -3.8% and ecommerce CAGR of 5.8%. The reduction in the capsule short-term revenue CAGR is a result of launching substitute innovation products. Estimation uncertainty: The capsule revenue growth rates assumed in the Group’s budgets and forecasts inherently include estimation uncertainty relating to the achievement of commercial initiatives and external factors. Short-term capsule cost of sales growth rates in fair value less costs of disposal valuation models Methodology: Approved budgets and forecasts for five years, based on management’s best estimate of cash flows, taking into account historical capsule costs and expected market growth. The overall capsule cost of sales short-term growth is modeled at a five-year CAGR of 0.5%. The reduction in the capsule short-term cost of sales CAGR is a result of launching substitute innovation products. Estimation uncertainty: The capsule cost of sales growth rates assumed in the Group’s budgets and forecasts inherently include estimation uncertainty relating to the achievement of commercial initiatives and external factors. Amberen The key assumptions used in forecasting cash flows relate to discount rate, short-term revenue growth, short-term cost of sales growth and terminal value marketing spend. Revenue is made up of capsule and innovation revenue streams. The short-term revenue and short-term cost of sales growth key assumptions are pinpointed to the capsule revenue stream as assumptions on innovation short-term revenue and short-term cost of sales only represent £3.2 million of the Amberen fair value and are therefore not considered key assumptions. Underlying factors in determining the values assigned to each key assumption are shown below: Short-term revenue growth – forecast revenue growth rates are based on past experience adjusted for the strategic direction of the Group and expected market conditions within each of the markets in which the CGU operates. This includes forecasting the proportion of sales between bricks and mortar and ecommerce platforms. Short-term cost of sales growth – cost of sales is forecast based on management’s best estimate of cash flows, taking into account historical costs and expected market growth. This includes forecasting the costs associated with selling on ecommerce and bricks and mortar platforms."
"Terminal value marketing spend – marketing spend is forecasted based on historical experience, product lifecycle expectations and expected market conditions. Amberen CGU – sensitivity analysis The following key assumptions within the Amberen valuation model are significant to the estimate; future changes to these assumptions could lead to significant changes to the carrying value of the Amberen CGU: Discount rates in fair value less costs of disposal models Methodology: Cash flows are discounted at an appropriate rate, based on the Group’s post-tax discount rate adjusted for country-specific risks, in line with those used in the value in use calculations disclosed above. The Group’s discount rate has increased largely as a result of the increase in risk-free rate due to changes in government bond yields and an increase in the equity beta based on sector market data. Terminal value marketing spend in fair value less costs of disposal valuation model Methodology: A key driver of the terminal value within the Amberen impairment model is the marketing spend as a percentage of revenue which is modeled at 20%. This is based on management’s best estimate, taking into account market analysis and historical marketing spend for similar brands at a similar stage of their life cycles. Estimation uncertainty: Marketing spend required in future years and terminal revenue growth rates, the factors which drive the terminal value marketing spend, include inherent estimation uncertainty relating to economic uncertainty as well as the achievement of commercial initiatives and external factors. Sensitivity The following table shows the potential impact of reasonably possible changes to the key assumptions on the estimated recoverable amount of the Amberen CGU. As the carrying value is equal to the recoverable amount at 31 December 2023, any changes would result in a change to the impairment charge recognized. Decrease in CGU recoverable amount 2.0% increase in pre-tax discount rate Terminal value marketing rate increase to 23% Short-term capsule revenue growth CAGR decline to 0.2% Short-term capsule cost of sales growth CAGR increase to 2.2% Amberen £9.2 million £4.8 million £5.2 million £1.0 million Nizoral The key assumptions used in forecasting cash flows relate to growth rate, discount rate and operating expense. Nizoral brand intangible asset – sensitivity analysis The following key assumptions within the Nizoral valuation model are significant to the estimate; future changes to these assumptions could lead to significant changes to the carrying value of the Nizoral asset: Discount rates in fair value less costs of disposal models Methodology: Cash flows are discounted at an appropriate rate, based on the Group’s post-tax discount rate adjusted for country-specific risks. The Group’s discount rate has increased largely as a result of the increase in risk-free rate due to changes in government bond yields and an increase in the equity beta based on sector market data. Estimation uncertainty: The assumptions included in the compilation of the CGU/asset-specific discount rates are designed to approximate the cost of capital that a potential market participant would expect. Given the nature of the Group’s business model, the discount rate necessarily includes estimation uncertainty. Short-term China growth rates Methodology: Approved budgets and forecasts for five years, based on management’s best estimate of cash flows. The overall short-term China growth rate is modeled at 7.5% based on expectations derived from published future category growth rates in China. Estimation uncertainty: The growth rates assumed in the Group’s budgets and forecasts inherently include estimation uncertainty relating to the achievement of commercial initiatives and external factors. Short-term China cost of goods sold growth rate Methodology: A key driver is costs estimates relating to cost of goods sold estimates in China, which assume flat margins in the forecast period and the ability of cost increases to be passed on to customers to maintain product margins. This is based on management’s best estimate, taking into account provisions in the distribution agreement with customers to pass on costs increases. Estimation uncertainty: The short-term China cost of goods sold growth rate assumed in the Group’s budgets and forecasts inherently includes estimation uncertainty relating to the achievement of commercial initiatives and external factors. Market participant operating expense Methodology: A key driver of the terminal value within the Nizoral impairment model is the market participant operating expense which is modeled at 14.2% of net sales. This is based on management’s best estimate, taking into account the transition of the Nizoral brand from the previous owner to Alliance."
"Estimation uncertainty: The market participant operating expense assumed in the Group’s budgets and forecasts inherently includes estimation uncertainty relating to assumptions about the generalized overheads to operate the Nizoral asset by a market participant. Marketing costs Methodology: In addition, a further key driver is cost estimates relating to the marketing spend as a percentage of revenue in China, which is modeled at 12.3% of net sales. This is based on management’s best estimate, taking into account market analysis and historical marketing spend for similar brands at a similar stage of their life cycles. Estimation uncertainty: The marketing spend in China assumed in the Group’s budgets and forecasts inherently includes estimation uncertainty relating to the achievement of commercial initiatives and external factors. Sensitivity The following table shows the potential impact of reasonably possible changes to the key assumptions on the estimated recoverable amount of the Nizoral asset. As the carrying value is equal to the recoverable amount at 31 December 2023, any changes would result in a change to the impairment charge recognized. Decrease in CGU recoverable amount 2.0% increase in pre-tax discount rate £1.0 million increase in annual COGS from 2024 £1.0 million increase in annual operating costs from 2024 £1.0 million increase in annual marketing costs from 2024 Decline in short-term China revenue growth CAGR to 2.0% Nizoral £9.3 million £9.0 million £9.0 million £9.0 million £12.6 million Other brand intangible assets Reasonable possible changes to key assumptions on the estimated recoverable amount of the aggregate of other brands assets would result in changes to the impairment charge recognized as the carrying value of these assets is equal to the recoverable amount at 31 December 2023. In aggregate these 17 brand intangible assets have a carrying value of £45.5 million. Reasonably possible changes to short-term gross margin CAGR would result in an additional £1.8 million of impairment charge recognized. A 2% increase in discount rate would result in an additional £4.2 million of impairment charge recognized. This disclosure has been presented in the aggregate to allow a better understanding of the overall impact on the intangibles balance relative to the materiality of the individual other brands. Property, plant and equipment The Group Computer software and equipment £000s Fixtures, fittings and equipment £000s Plant and machinery £000s Right-of-use lease assets £000s Total £000s Cost At 1 January 2023 2,199 3,944 74 5,230 11,447 Additions 64 776 0 692 1,532 Effects of movements in exchange rates (1) (106) 0 (57) (164) Disposals (2) (64) 0 (142) (208) At 31 December 2023 2,260 4,550 74 5,723 12,607 Depreciation At 1 January 2022 1,857 2,200 49 1,763 5,869 Provided in the year 160 296 10 759 1,225 Effect of movements in exchange rates 0 0 0 0 0 Disposals 2 64 142 208 At 31 December 2023 2,015 2,432 59 2,380 6,886 Net book amount At 31 December 2023 245 2,118 15 3,343 5,721 At 1 January 2023 342 1,744 25 3,467 5,578 The Group Computer software and equipment £000s Fixtures, fittings and equipment £000s Plant and machinery £000s Right-of-use lease assets £000s Total £000s Cost At 1 January 2022 2,037 3,730 73 6,306 12,146 Additions 153 205 1,997 2,355 Transfers 108 (108) Effects of movements in exchange rates (30) 323 (172) 122 Disposals (69) (206) (2,901) (3,176) At 31 December 2022 2,199 3,944 74 5,230 11,447 Depreciation At 1 January 2022 1,670 1,741 36 3,873 7,320 Provided in the year 153 541 13 851 1,558 Transfers 108 (108) Effect of movements in exchange rates (5) 32 (60) (33) Disposals (69) (6) (2,901) (2,976) At 31 December 2022 1,857 2,200 49 1,763 5,869 Net book amount At 31 December 2022 342 1,744 25 3,467 5,578 At 1 January 2022 367 1,989 37 2,433 4,826 Property, plant and equipment of £3.4m is located within the United Kingdom 2022: £3.2m. The remaining balance is located in France, China, Singapore, Spain, Germany and the United States of America. Right-of-use assets relate to the Group’s leased offices. Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Inventories The Group 31 December 2023 £000s 31 December 2022 £000s Finished goods 23,245 21,804 Work in progress 363 416 Raw materials 5,296 5,083 Inventory provision (3,193) (3,017) 25,711 24,286 Inventory costs expensed through the Income Statement during the year were £64,302,000 2022: £59,566,000."
"During the year, £1,980,000 2022: £993,000 was recognised as an expense relating to the write-down of inventories to net realisable value. Trade and other receivables The Group 31 December 2023 £000s 31 December 2022 £000s Trade receivables 49,371 44,764 Other receivables 1,716 2,775 Prepayments 3,029 1,094 Accrued income 600 691 54,716 49,324 Accrued income, which is all classified as not past due, represents amounts owed unconditionally to the Group which have not been invoiced at the year end. For these assets, only the passage of time is required before payment becomes due. Credit risk The ageing of trade receivables of the Group as at 31 December is detailed below: Trade receivables, net of estimated allowances for expected credit losses 31 December 2023 £000s 31 December 2022 £000s Not past due 46,366 41,642 1–30 days past due 1,447 2,514 31–60 days past due 1,102 432 61–90 days past due 142 176 Past 91 days 314 49,371 44,764 Trade receivables, gross of estimated allowances for expected credit losses 31 December 2023 £000s 31 December 2022 £000s Not past due 46,495 41,642 1–30 days past due 1,454 2,514 31–60 days past due 1,151 432 61–90 days past due 164 197 Past 91 days 531 390 49,795 45,175 To manage credit risk, customers are required to pay in accordance with agreed terms. Our settlement terms are generally due within 30 or 60 days from the end of the month of sale. Management has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are carried out on all customers requiring credit above a certain threshold, with varying approval levels set around this depending on the value. The Group maintains an allowance for impairment of receivables where recoverability is considered doubtful, on a forward-looking perspective. As at 31 December 2023, trade and other receivables of £424,000 2022: £411,000 were past due and impaired. Debts are not written off until all avenues for recovery have been exhausted. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Loans and borrowings On 15 August 2023, the Group agreed a new £150.0m fully Revolving Credit Facility, together with a £65.0m Accordion. The facility was agreed with its existing syndicate of lenders, replacing the previous RCF which ran through to July 2024. This new facility is available until August 2026, with two further one-year extension options. This has been classified as a non-current liability. The bank facility is secured by a fixed and floating charge over the Company’s and Group’s assets registered with Companies House. The loan commitments are all investment grade as at the balance sheet date. Pursuant to its terms, the Group is obliged to deliver a copy of its audited annual financial statements to the lenders within 120 days of the year-end. In light of the potential delays caused by the audit process, the Group sought and received an extension from the lenders to this obligation, giving the Group until 21 June 2024 to deliver a copy of its audited annual financial statements to the lenders, and therefore fulfilling its obligations. Non-current The Group 31 December 2023 £000s 31 December 2022 £000s Bank loans: Secured 14,844 134,065 Finance issue costs (1,198) (321) 113,646 133,744 Movement in loans and borrowings 31 December 2023 £000s 31 December 2022 £000s At 1 January 133,744 116,060 Net payments/receipts from borrowing (18,000) 13,664 Additional prepaid arrangement fees (1,338) Amortisation of prepaid arrangement fees 461 648 Exchange movements (1,221) 3,372 At 31 December 113,646 133,744 On renewal of the facility no cash was moved and therefore the net position is presented. Exchange movements on loans and borrowings with effective net investment hedges are reported in other comprehensive income and accumulated in the translation reserve."
"Cash and cash equivalents The Group 31 December 2023 £000s 31 December 2022 £000s Sterling 2,433 10,556 Euros 6,549 8,214 US Dollars 3,086 3,758 Thai Baht 3,960 3,991 Other currencies 6,408 5,195 Cash at bank and in hand 22,436 31,714 Trade and other payables The Group 31 December 2023 £000s 31 December 2022 £000s Trade payables 18,225 18,567 Other taxes and social security costs 1,211 1,546 Accruals 16,155 13,972 Other payables 707 918 Lease liabilities 768 613 37,066 35,616 Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED In a unanimous judgment published on 23 May 2024, the CAT upheld Alliance’s appeal, finding that there was no agreement to exclude competition from the market and no breach of competition law. The CMA’s decision and £7.9m penalty imposed on Alliance have been set aside. As such, the £7.9m provision which was recorded at 31 December 2021 has now been released. The restructuring provision of £0.2m at 31 December 2023 2022: £0.5m relates to the balance of restructuring costs in relation to the closure of the Milan office following a change to the operating model for our direct-to-market business in Italy in 2022. The onerous contract provision of £0.5m at 31 December 2023 2022: £nil relates to a contractual commitment to purchase inventory for which it is uncertain that the necessary licence for sale will be granted. The remaining related outflows are expected to occur in the year ending 31 December 2024. Other non-current liabilities The Group 31 December 2023 £000s 31 December 2022 £000s Lease liabilities 3,001 3,219 Other non-current liabilities 199 196 3,200 3,415 Provisions CMA provision £000s Restructuring provision £000s Onerous contract provision £000s Total £000s At 1 January 2023 7,900 522 8,422 (Credit)/charge to income statement (7,900) 462 (7,438) Provisions utilised during the year (338) (338) Exchange differences (9) (9) At 31 December 2023 175 462 637 On 23 May 2019, the UK’s Competition and Markets Authority CMA issued a Statement of Objection alleging anti-competitive agreement involving the Group and certain other pharmaceutical companies in relation to the sale of prescription prochlorperazine. On 3 February 2022, the CMA announced its finding that four companies, including Alliance, had infringed competition law the Infringement Decision. The Alliance Board fundamentally disagreed with the CMA’s finding and appealed the Infringement Decision at the Competition Appeal Tribunal CAT, with those proceedings closing on 4 August 2023. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED The maturity profile of the Group’s financial gross capital and interest liabilities, except forward foreign exchange contracts for which maturity is disclosed separately, at the year end is as follows: 31 December 2023 In one year or less £000s In more than one year, but not more than two £000s In more than two years, but not more than five £000s In more than five years £000s Total £000s Trade and other payables 36,298 Bank loans 114,844 Lease liabilities 768 631 1,395 975 3,769 151,910 631 1,395 975 154,911 Includes an amount of £114.8m 2022: £134.1m in respect of gross contractual cash flows payable under the RCF; these are shown as due within one year or less to reflect the contractual maturity of the tranches drawn down at 31 December 2023. The RCF is classified as a non-current liability as the Directors have assessed that the Group has the ability and the intent to roll over the drawn RCF amounts when due. 31 December 2022 In one year or less £000s In more than one year, but not more than two £000s In more than two years, but not more than five £000s In more than five years £000s Total £000s Trade and other payables 35,003 Bank loans 134,065 Lease liabilities 613 594 1,263 1,362 3,832 169,681 594 1,263 1,362 172,900 Financial instruments The Group uses financial instruments comprising borrowings, derivatives, cash and liquid resources, and various items such as trade receivables and trade payables that arise directly from its operations. The main risks arising from the Group’s financial instruments are liquidity risk, interest rate risk, foreign currency risk and credit risk."
"The Board is responsible for risk management policies on managing each of these, which are summarised below, except credit risk which is detailed in note 14. Liquidity risk The Group’s operations are financed by retained earnings and bank borrowings, with additional equity being raised on a periodic basis to finance larger acquisitions. Borrowings are denominated in Sterling, Euro and US Dollars. The purpose of Euro and US Dollar borrowings are to manage the currency exposure arising from the Group’s operations. On 15 August 2023, the Group agreed a new £150.0m fully Revolving Credit Facility, together with a £65.0m Accordion. The facility was agreed with its existing syndicate of lenders, replacing the previous RCF which ran through to July 2024. This new facility is available until August 2026, with two further one-year extension options. The RCF is drawn in short to medium-term tranches of debt which are repayable within 12 months of draw-down. These tranches of debt can be rolled over provided certain conditions are met, including covenant compliance. The Group considers that it is highly unlikely it would be unable to exercise its right to roll-over the debt. This is due to mitigating actions it could take to maintain compliance with these conditions, including future covenant requirements, even in downside scenarios. The Directors therefore believe that the Group has the ability and the intent to roll-over the drawn RCF amounts when due and consequently has presented the RCF as a non-current liability. The Group also has access to an overdraft facility of £2.0m. Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Because of the size of the Euro-denominated loan, a 0.5% increase or decrease in EURIBOR would not have affected pre-tax profits in 2023. A 0.5% increase in US LIBOR would have reduced pre-tax profits by approximately £0.1m in 2023; a 0.5% decrease would have the opposite effect. Currency risk The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch between the currencies in which sales, purchases, receivables and borrowings are denominated and the respective functional currencies of Group companies. The functional currencies of Group companies are primarily Sterling, Euro, US Dollars and Hong Kong Dollars. Approximately 17% of the Group’s sales are invoiced in Euro, 32% invoiced in US Dollars and 11% invoiced in Hong Kong Dollars. The majority of other Group sales are invoiced in Sterling. The Group’s risk management policy is to hedge up to 75% of its estimated net foreign currency exposure in respect of forecast sales and purchases for up to the next 18 months at any point in time. The Group uses forward foreign exchange contracts to hedge its currency risk. These contracts are generally designated as cash flow hedges. After the impacts of hedging, 5% weakening or strengthening of Sterling against the Euro would have resulted in £0.5m gain or loss to EBITDA in 2023. On the same basis, 5% weakening or strengthening of Sterling against the US Dollar would have resulted in a £0.4m gain or loss to EBITDA in 2023. On the same basis, 5% weakening or strengthening of Sterling against the Hong Kong Dollar would have resulted in a £0.7m gain or loss to EBITDA in 2023. Net investment hedges The Group uses currency-denominated borrowings to hedge the exposure of a portion of its net investment in overseas operations against changes in value due to changes in foreign exchange rates. 100% of the US Dollar denominated loan is in a net investment hedge. The net investment hedge was tested for effectiveness during the year and found to be effective. As the Group repays its foreign-denominated borrowings, the hedged portion of the net investment is reduced. Financial instruments continued Interest rate risk The Group’s debt is provided on a floating interest rate basis. The Group is exposed to risks of rising interest rates on interest costs and the headroom available under financial covenants. Interest rate hedging products are used to manage financial exposures and protect covenants when certain trigger levels are met. In 2023, the Group used interest rate swaps to fix the rates paid on a portion of its debt in order to mitigate against these risks."
"At 31 December 2023, the Group had GBP interest rate swaps in place with a nominal value of £90.0m and a weighted average fixed rate percentage of 5.47%. The swaps were transacted with an amortising profile ending in June 2026 and were remeasured to fair value at the period end. The interest rate exposure of the financial liabilities of the Group at the period end was: Floating rate interest exposure 31 December 2023 £000s 31 December 2022 £000s At 31 December 2023 Bank loans Sterling denominated 96,817 96,817 Bank loans Euro denominated 6,865 6,987 Bank loans US Dollar denominated 11,162 30,261 Total financial liabilities 14,844 134,065 Unamortised issue costs (1,198) (321) Net book value of financial liabilities 113,646 133,744 The Sterling floating rate borrowings bear interest at a rate based on SONIA for the year ended 31 December 2023. The Euro floating rate borrowings bear interest at a rate based on EURIBOR. The US Dollar floating rate borrowings bear interest at a benchmark rate US Dollar LIBOR. A 0.5% increase in SONIA would have reduced pre-tax profits by approximately £0.5 million in 2023; a 0.5% decrease would have the opposite effect. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Forward foreign exchange contracts Level 2 The Group’s currency rate swaps are not traded in active markets. These have been fair valued using observable currency rates. The effects of non-observable inputs are not significant for currency rate swaps. Counterparty banks perform valuations of currency rate swaps for financial reporting purposes, determined by discounting the future cash flows at rates determined by year end spot and forward rate. The valuation processes and fair value changes are discussed by the Audit and Risk Committee and the finance team at least every half year, in line with the Group’s reporting dates. Forward foreign exchange contract assets and liabilities are presented in Derivative financial instruments either as assets or as liabilities within the statement of financial position. At 31 December 2023, the Group held the following forward exchange contracts to hedge exposures to changes in foreign currency rates: Maturity 1 to 6 months 6 to 12 months More than one year Forward exchange contracts Net exposure £000s 422 397 77 Average GBP to USD forward contract rate 1.234 1.236 Average GBP to EUR forward contract rate 1.147 1.131 Average GBP to HKD forward contract rate 9.737 9.533 9.543 Financial instruments continued Fair value measurement The Group has adopted IFRS 13 for financial instruments that are measured in the Group balance sheet at fair value. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: quoted prices unadjusted in active markets for identical assets or liabilities Level 1; inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly that is, as prices or indirectly that is, derived from prices Level 2; and inputs for the asset or liability that are not based on observable market data that is, unobservable inputs Level 3. The Group’s financial instruments held at fair value or for which fair value is disclosed in the scope of IFRS 13 are as follows: Level 31 December 2023 Carrying value £000s 31 December 2022 Carrying value £000s Interest rate swap contracts 2 (1,771) Forward foreign exchange contracts 2 896 174 (875) 174 For the other financial assets and liabilities, the carrying amount is a reasonable approximation of fair value and therefore, no further disclosure is provided."
"The valuation techniques used for instruments categorised in Level 2 are described below: Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Financial liabilities 31 December 2023 £000s 31 December 2022 £000s Financial liabilities at amortised cost Trade and other payables 35,087 33,457 Loans and borrowings 14,844 134,108 Lease liabilities 3,769 3,832 153,700 171,397 Fair value through profit and loss Derivative financial instruments 2,184 155,884 171,397 Financial instruments continued Forward foreign exchange contracts Level 2 continued At 31 December 2022, the Group held the following forward exchange contracts to hedge exposures to changes in foreign currency rates: Maturity 1 to 6 months 6 to 12 months More than one year Forward exchange contracts Net exposure £000s 117 40 17 Average GBP to USD forward contract rate 1.195 1.200 1.196 Average GBP to EUR forward contract rate 1.131 1.123 1.120 Average GBP to HKD forward contract rate – – – Group Classification of the Group’s financial assets and liabilities is set out below: Financial assets 31 December 2023 £000s 31 December 2022 £000s Financial assets at amortised cost Trade receivables 49,371 44,764 Accrued income 600 691 Cash and cash equivalents 22,436 31,714 72,407 77,169 Fair value through profit and loss Derivative financial instruments 1,309 174 73,716 77,343 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Financial instruments continued Reconciliation to cash flow movements 2022 £000s Cash flows Non-cash changes 2023 £000s Principal £000s Net additions £000s Interest £000s Foreign exchange Net additions £000s Amortisation £000s Interest £000s Gross loans and borrowings 134,065 (18,000) – – (1,221) – – – 14,844 Prepaid arrangement fees (321) – (1,338) – – – 461 – (1,198) Accrued interest 43 – – (9,433) – – – 9,471 81 Lease liabilities 3,832 (867) – – – 692 – 112 3,769 Exchange movements on loans and borrowings with effective net investment hedges are reported in other comprehensive income and accumulated in the translation reserve. Derivative financial instruments 31 December 2023 Assets Liabilities £000s 31 December 2022 Assets Liabilities £000s Current portion asset 1,232 157 Current portion liability (413) – Non-current portion asset 77 17 Forward exchange swap cash flow hedge 896 174 31 December 2023 Assets Liabilities £000s 31 December 2022 Assets Liabilities £000s Non-current portion liability (1,771) – Interest rate swap cash flow hedge (1,771) – The cash flow hedges were tested for effectiveness both retrospectively and prospectively as at 31 December 2023. They were found to be highly effective, with the ineffective element being immaterial. The amount recognised through the Income Statement in finance costs for interest rate swaps during the year was a charge of £148,000 2022: £nil. The amounts recognised through the Income Statement in respect of the forward foreign exchange contracts during the year was a debit of £38,000 in revenue 2022: debit of £1,060,000. Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Deferred tax The Group 31 December 2023 £000s 31 December 2022 restated £000s Accelerated capital allowances on tangible assets 820 1,057 Temporary differences trading 287 205 Temporary differences non-trading 1,549 1,630 Accelerated allowances on intangible assets (7,460) (14,085) Initial recognition of intangible assets from business combination (30,179) (45,326) Share-based payments 111 167 Foreign exchange forward contracts (224) (44) Interest rate swap contracts 443 – Losses and unrelieved interest 1,438 1,058 (33,215) (55,338) Recognised as: Deferred tax asset 4,648 4,117 Deferred tax liability (37,863) (59,455) See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022."
"Reconciliation of deferred tax movements: The Group 1 January 2023 restated £000s Transfers £000s Recognised in other comprehensive income directly in equity Recognised in the income statement £000s 31 December 2023 £000s Non-current assets Intangible assets (59,411) – 1,202 20,570 (37,639) Property plant and equipment 1,057 – – (237) 820 Non-current liabilities Derivative financial instruments (44) – (122) (58) (224) Interest rate hedge – – 443 – 443 Other non-current liabilities 1,630 – (81) – 1,549 Equity Share option reserve 167 – 14 (70) 111 Temporary differences Trading 205 – – 82 287 Losses 1,058 – – 380 1,438 (55,338) – 1,456 20,667 (33,215) Recognised as: Deferred tax asset 4,117 – 376 155 4,648 Deferred tax liability (59,455) – 1,080 20,512 (37,863) (55,338) (33,215) The Group has unrecognised deferred tax assets of £295,000 in relation to losses 2022: £354,000. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Share capital Allotted called up and fully paid No. of shares £000s At 1 January 2022 Ordinary shares of 1p each 538,225,524 5,382 Issued during the year 1,769,562 18 At 31 December 2022 Ordinary shares of 1p each 539,995,086 5,400 Issued during the year 394,994 4 At 31 December 2023 Ordinary shares of 1p each 540,390,080 5,404 Between 1 January 2023 and 31 December 2023, 394,994 shares were issued on the exercise of employee share options 2022: 1,769,562. The holders of Ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. Potential share options commitment Under the Group’s share option scheme for employees and Executive Directors, options have been granted to subscribe for shares in the Company at prices ranging from 0.00p to 102.80p 2022: 0.00p to 102.80p. Options are exercisable three years after date of grant, but in certain instances this can be extended to five years. Options outstanding are as follows: Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Year of grant Exercise price Pence Exercise from Scheme 31 December 2023 Number 000s 31 December 2022 Number 000s 2013 37.25 2016 CSOP 233 2014 33.75 2017 CSOP 242 281 2015 43.75 2018 CSOP 306 350 2015 46.75 2018 CSOP 500 500 2016 47.50 2019 CSOP 571 619 2016 47.50 2021 CSOP 1,400 1,400 2017 53.00 2020 CSOP 2,318 2,366 2018 81.60 2021 CSOP 3,177 3,241 2019 76.90 2022 CSOP 4,154 4,412 2019 0.00 2022 LTIP – 226 2020 73.70 2023 CSOP 3,285 4,231 2020 0.00 2023 LTIP – 542 2021 102.80 2024 CSOP 5,483 6,044 2021 0.00 2024 LTIP 468 468 2022 58.20 2025 CSOP 7,245 7,837 2022 0.00 2025 LTIP 878 877 2023 0.00 2026 LTIP 8,805 – 38,832 33,627 The weighted average remaining contractual life at 31 December 2023 is 6.0 years 2022: 7.8 years. The provision of shares to satisfy certain of the Group’s share option schemes can be facilitated by purchases of own shares by the Group’s Employee Benefit Trust. The cost of operating the Trust is borne by the Group but is not material. To date, no shares have been purchased by the Trust for satisfaction of outstanding or future share option awards. Managing capital Our objective in managing the business’s capital structure is to ensure that the Group has the financial capacity, liquidity and flexibility to support the existing business and to fund acquisition opportunities as they arise. The capital structure of the Group consists of net bank debt and shareholders’ equity. At 31 December 2023, net debt was £91.2 million 2022: £102.0 million note 30, whilst shareholders’ equity was £217.9 million 2022: £265.5 million restated. The business is profitable and cash-generative. The main financial covenants applying to bank debt are that leverage the ratio of net bank debt to EBITDA should not exceed 3.0 times, and interest cover the ratio of EBITDA to finance charges should not be less than 4.0 times. The Group complied with both of these covenants in 2023 and 2022. Smaller acquisitions are typically financed using bank debt, while larger acquisitions typically involve a combination of bank debt and additional equity."
"The mixture of debt and equity is varied, taking into account the desire to maximise the shareholder returns while keeping leverage at comfortable levels. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE FINANCIAL STATEMENTS CONTINUED Share options were exercised throughout the financial year. Share options were exercised at prices of between 38.90p and 71.19p per share. Certain options are subject to EPS or Total Shareholder Return TSR accretion performance criteria; those outstanding are as follows: Year of grant Exercise price Pence Exercise from 31 December 2023 Number 000s 31 December 2022 Number 000s 2014 33.75 2017 92 92 2015 43.75 2018 104 104 2016 47.50 2019 155 155 2016 47.50 2021 1,400 1,400 2017 53.00 2020 323 323 2018 81.60 2021 1,639 1,639 2019 76.90 2022 336 421 2019 0.00 2022 – 226 2020 73.70 2023 – 637 2020 0.00 2023 – 542 2021 102.80 2024 924 961 2021 0.00 2024 468 468 2022 58.20 2025 919 919 2022 0.00 2025 878 877 2023 0.00 2026 5,356 – 12,594 8,764 Share-based payments Under the Group’s share option scheme for employees and Executive Directors, options to subscribe for shares in the Company are granted normally once each year. The contractual Life of a CSOP option is ten years from the date of grant and for LTIPs, four years from the date of grant. Generally, options granted become exercisable on the third anniversary of the date of grant, but in certain instances this can be extended to five years. Exercise of an option is normally subject to continued employment. Options are valued by a third-party provider using the Black-Scholes option-pricing model. Share options and weighted average exercise price are as follows for the reporting periods presented: 2023 2022 Number (000s) Weighted average price Pence Number (000s) Weighted average price Pence Outstanding at start of year 33,627 67.5 30,933 71.62 Granted 8,804 8,759 52.34 Exercised (issued) (395) 16.50 (1,770) 50.96 Exercised (withheld) (146) 38.39 (1,203) 63.21 Forfeited (3,058) 0.61 (3,092) 75.53 Outstanding at end of year 38,832 53.26 33,627 67.54 Exercisable at end of year 10,822 67.84 13,628 64.71 Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Cash generated from operations Group Year ended 31 December 2023 £000s Year ended 31 December 2022 (restated) £000s Loss for the year (33,136) (21,208) Taxation (15,664) (1,842) Interest payable and similar charges 9,991 5,433 Interest income (113) (16) Unrealised foreign exchange gain (423) (56) Depreciation of property, plant and equipment 1,225 1,558 Amortisation and impairment of intangibles 88,353 55,694 Change in inventories (1,859) (2,209) Change in trade and other receivables (6,481) (18,720) Change in trade and other payables 1,937 7,281 Change in provisions (7,785) (1,078) Share-based employee remuneration 889 92 Cash generated from operations 36,934 24,929 Share-based payments The total expense for the year relating to share-based payment plans was £0.9m (2022: £0.1m), of which £1.0m (2022: £1.1m) related to equity-settled transactions and a credit of £0.1m (2022: credit of £1.0m) related to cash-settled transactions. It is assumed that, on average, options will be exercised after five years. The expected volatility is based on historical volatility, adjusted for any expected changes to future volatility due to publicly available information. The risk-free rate of return is based on UK Government bonds of a term consistent with the assumed option life. The cash-settled transaction expense includes provision for social security charges based on the applicable social tax rate applied to the number of share awards which are expected to vest, valued with reference to the year-end share price. The estimated total equity-settled fair value of the share options granted on 4 October 2023 was £1,736,000. The model inputs were a market price of 45.0p, expected volatility of 43.99% and a risk-free rate of 4.29%. Ultimate controlling party The Company’s shares are listed on the Alternative Investment Market and are held widely. There is no single ultimate controlling party. Alternative Performance Measures The performance of the Group is assessed using Alternative Performance Measures. The Group’s results are presented both before and after non-underlying items. Adjusted profitability measures are presented excluding non-underlying items, as we believe this provides both management and investors with useful additional information about the Group’s performance and aids a more effective comparison of the Group’s trading performance from one period to the next."
"In addition, the Group’s results are described using certain other measures that are not defined under IFRS and are therefore considered to be APMs. These measures are used by management to monitor ongoing business performance against both shorter-term budgets and forecasts but also against the Group’s longer-term strategic plans. APMs used to explain and monitor Group performance are as follows: Measure Definition Underlying EBIT and EBITDA Earnings before interest, tax and non-underlying items, then depreciation, amortisation and impairment. Calculated by taking profit before tax and financing costs, excluding non-underlying items and adding back depreciation and amortisation. EBITDA margin is calculated using See-through revenue. Free cash flow Free cash flow is defined as cash generated from operations less cash payments made for interest payable and similar charges, capital expenditure and tax. Net debt Net debt is defined as the Group’s gross bank debt position net of finance issue costs and cash. Underlying effective tax rate Underlying effective tax rate is calculated by dividing total taxation for the year less impact of tax rate changes and non-underlying charges, by the underlying profit before tax for the year. Capital commitments The Group had capital commitments for property, plant and equipment at 31 December 2023 totalling £810,000 (2022: £22,000). Contingent liabilities Contingent liabilities are possible obligations that are not probable. The Group operates in a highly regulated sector and in markets and geographies around the world each with differing requirements. As a result, and in the normal course of business, the Group can be subject to a number of regulatory inspections, investigations and customer and other claims on an ongoing basis. It is therefore possible that the Group may incur penalties for non-compliance. In addition, a number of the Group’s brands and products are subject to pricing and other forms of legal or regulatory restrictions from both governmental and regulatory bodies and also from third parties. Assessments as to whether or not to recognise a provision in respect of these matters are judgemental, as the matters are often complex and rely on estimates and assumptions as to future events. As at 31 December 2023, there are no contingent liabilities (2022: £nil). Pensions The Group operates a defined contribution pension scheme for the benefit of Executive Directors and employees. Contributions payable by the Group for the year 1,506 1,345 Related parties The Group has a related party relationship with its subsidiaries and with its directors and key management. A list of subsidiaries is shown on pages 165 to 166 of these financial statements. Transactions between two subsidiaries for the sale and purchase of products or for management charges are priced on an arm’s length basis. Benefit expenses in respect of key management are shown in note 7. The Group has no external related parties and therefore there are no external related party transactions for the year (2022: none). Underlying EBIT and EBITDA Reconciliation of Underlying EBIT and EBITDA Year ended 31 December 2023 £000s Year ended 31 December 2022 (restated) £000s Loss before tax (48,800) (23,050) Non-underlying items 80,303 53,361 Underlying profit before tax 31,503 30,311 Finance costs 10,358 5,361 Underlying EBIT 41,861 35,672 Depreciation 1,225 1,558 Underlying amortisation 1,903 1,964 Underlying EBITDA 44,989 39,194 Underlying EBITDA margin 24.6% 22.8% Free cash flow Reconciliation of free cash flow Year ended 31 December 2023 £000s Year ended 31 December 2022 £000s Cash generated from operations 36,934 24,929 Interest payable and similar charges (9,433) (4,804) Capital expenditure (696) (407) Tax paid (5,524) (3,957) Free cash flow 21,281 15,761 Operating costs Defined as underlying administration and marketing expenses, excluding depreciation and underlying amortisation charges. See-through Income Statement Under the terms of the transitional services agreement with certain supply partners, Alliance receives the benefit of the net profit on sales of Nizoral from the date of acquisition up until the product licences in the Asia-Pacific territories transfer to Alliance. The net product margin is recognised as part of statutory revenue. The See-through Income Statement recognises the underlying sales and cost of sales which give rise to the net product margin, as management consider this to be a more meaningful representation of the underlying performance of the business, and to reflect the way in which it is managed. Constant exchange rate revenue Like-for-like revenue, impact of acquisitions, and total See-through revenue are stated so that the portion denominated in non-Sterling currencies is retranslated using foreign exchange rates from the previous financial year."
"Like-for-like figures compare financial results in one period with those for the previous period, excluding the impact of acquisitions and disposals made in either period. Company balance sheet 31 December 2023 £000s 31 December 2022 (restated) £000s Assets Non-current assets Investment and loans to subsidiaries 193,228 193,248 Current assets Trade and other receivables 227 93 Amounts owed by group undertakings 3,564 4,005 Cash and cash equivalents 4,503,795 4,148 Total assets 197,023 197,396 Equity Ordinary share capital 5,404 5,400 Share premium account 151,684 151,650 Share option reserve 11,217 10,214 Retained earnings 27,842 29,377 Total equity 196,147 196,641 Liabilities Current liabilities Trade and other payables 817 755 Corporation tax 59 – Total liabilities 876 755 Total equity and liabilities 197,023 197,396 The Company’s profit for the year was £8,057,000 (2022: £5,429,000). As permitted by section 408 of the Companies Act 2006, no separate Income Statement is presented in respect of the Parent Company. The financial statements were approved by the Board of Directors on 18 June 2024. Peter Butterfield Andrew Franklin Director Director The accompanying accounting policies and notes form an integral part of these financial statements. Company number 04241478 Alliance Pharma plc Annual Report and Accounts 2023 Share options charge including deferred tax 1,252 Transactions with owners 18 322 1,252 (9,116) (7,524) Profit for the period and total comprehensive income 5,429 Balance 31 December 2022 5,400 151,650 10,214 29,377 196,641 Balance 1 January 2023 5,400 151,650 10,214 29,377 196,641 Issue of shares 4 34 38 Dividend paid (9,592) Share options charge including deferred tax 1,003 Transactions with owners 4 34 1,003 (9,592) (8,551) Profit for the period and total comprehensive income 8,057 Balance 31 December 2023 5,404 151,684 11,217 27,842 196,147 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE COMPANY FINANCIAL STATEMENTS The Company produces consolidated financial statements which are prepared in accordance with International Financial Reporting Standards. As the consolidated financial statements of the Company include the equivalent disclosures, the Company has also taken the exemptions under FRS 101 available in respect of the following disclosures IFRS 2 Share Based Payments in respect of Group settled share based payments and the disclosures required by IFRS 7 and IFRS 13 regarding financial instrument disclosures have not been provided. Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other Companies within the Group, the Company considers these to be insurance arrangements and accounts for them as such. The Directors do not expect to have to provide support to subsidiary entities for the foreseeable future and therefore consider the value of the guarantee to be insignificant. The Company accounts for intra-Group cross guarantees under IFRS 9. As permitted by s408 of the Companies Act 2006, the Company has elected not to present its own profit and loss account or statement of comprehensive income for the year. The profit attributable to the Company is disclosed in the footnote to the Company’s balance sheet. Foreign currency Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange at the balance sheet date and the gains or losses on translation are included in the profit and loss account. Accounting policies The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements. Notes a to f relate to the Company rather than the Group. Except where indicated, values in these notes are in £000. Basis of preparation The financial statements have been prepared under the historical cost convention. The Company has applied Financial Reporting Standard 101 Reduced Disclosure Framework issued by the Financial Reporting Council incorporating the Amendments to FRS 101 issued by the FRC in July 2015 and the amendments to Company law made by The Companies, Partnerships and Groups Accounts and Reports Regulations 2015. In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures a Cash Flow Statement and related notes comparative period reconciliations for share capital and tangible fixed assets Disclosures in respect of transactions with wholly owned subsidiaries Disclosures in respect of capital management the effects of new but not yet effective IFRSs and Disclosures in respect of the compensation of Key Management Personnel."
"Investments in subsidiaries Investments are measured at cost less any provision for impairment and comprise investments in subsidiary companies. Share-based payments The Company has adopted IFRS 2 and its policy in respect of share-based payment transactions is consistent with the Group policy shown in note 2 to the Group financial statements. Dividends Interim dividends are recorded in the financial statements when they are paid. Final dividends are recorded in the financial statements in the period in which they are approved by the Company’s shareholders. Critical accounting estimates and judgements Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting estimates will, by definition, seldom equal the actual results. The estimates and assumptions that have a risk of causing a material adjustment to the carrying amount of assets and liabilities in the next financial year are listed below. There are no critical accounting estimates or judgements requiring evaluation. Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED The investment balance includes outstanding intercompany debt due from subsidiaries of £170.0m. The Directors do not consider that this amount will be demanded by the Company and therefore it has been classified as an investment. No provision has been recognised for estimated credit losses on loans to subsidiaries as it is considered these would be immaterial. The balance sheet as at 1 January 2022 and 31 December 2022 has been restated for the reclassification between investments and loans to subsidiaries non-current asset and amounts owed by group undertakings current asset. Previously reported as investment and loans to subsidiaries £000s Reclassified to amounts owed by group undertakings £000s Restated £000s Cost At 1 January 2022 199,348 (6,111) 193,237 At 31 December 2022 197,253 (4,005) 193,248 The subsidiary and associated undertakings where the Group held 20% or more of the equity share capital at 31 December 2023 are shown below. Personnel expenses in the Company profit and loss account Alliance Pharma plc has no employees. Costs relating to service contracts with Executive and Non-Executive Directors during the year were as follows Year ended 31 December 2023 £000s Year ended 31 December 2022 £000s Wages and salaries 1,219 234 Social security costs 155 29 Other pension costs 25 1,399 263 Disclosures required by paragraph 1 of schedule 5 of SI2008/410 are set out in the Director’s Remuneration Report on pages 86 to 97. Investments in the Company balance sheet Investment and loans to subsidiary undertakings £000s Cost At 1 January 2023 restated 193,248 Net movements (20) At 31 December 2023 193,228 At 1 January 2022 restated 193,237 Net movements 11 At 31 December 2022 restated 193,248 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED Company Country of registration or incorporation % owned Nature of business Alliance Health Limited England and Wales 100 Dormant Alliance Healthcare Limited England and Wales 100 Dormant Caraderm Limited Northern Ireland 100 Dormant Dermapharm Limited England and Wales 100 Dormant MacuVision Europe Limited England and Wales 100 Dormant Maelor Laboratories Limited England and Wales 100 Dormant Opus Group Holdings Limited England and Wales 100 Dormant Opus Healthcare Limited England and Wales 100 Dormant Investments held directly by Alliance Pharma plc. The registered address in each country is as follows Territory Company Registered Office Address USA Advanced Bio-Technologies Inc. 1000 Regency Pkwy Ste 106 Cary NC 27518 United States Alliance Pharma Inc. 1000 Regency Pkwy Ste 106 Cary NC 27518 United States France Alliance Pharmaceuticals SAS 13 rue Paul Valéry 75016 Paris France Alliance Pharma France SAS 13 rue Paul Valéry 75016 Paris France China Alliance Pharmaceuticals Lifescience Technology Shanghai Co. Limited Suite 701 NanFung Tower No. 1568 Road Huashan Shanghai 200030 P.R. China Germany Alliance Pharmaceuticals GmbH Niederkasseler Lohweg 175 40547 Düsseldorf Germany Hong Kong Alliance Pharmaceuticals Asia Limited Room 2105 21/F Office Tower Langham Place 8 Argyle Street Mongkok Kowloon Hong Kong Company Country of registration or incorporation % owned Nature of business Advanced Bio-Technologies Inc."
"USA 100 Pharmaceutical sales Alliance Pharma France SAS France 100 Pharmaceutical sales Alliance Pharma S.r.l. Italy 100 Pharmaceutical sales Alliance Pharmaceuticals Limited England and Wales 100 Pharmaceutical sales Alliance Lifescience Technology Shanghai Co. Limited China 100 Pharmaceutical sales Alliance Pharmaceuticals Spain SL Spain 100 Pharmaceutical sales Alliance Pharma Inc. USA 100 Pharmaceutical sales Alliance Pharmaceuticals Thailand Co. Ltd Thailand 100 Pharmaceutical sales Alliance Pharmaceuticals Philippines Corporation Philippines 100 Pharmaceutical sales Alliance CHC India Private Limited India 100 Non-trading Alliance Pharma Ireland Limited Republic of Ireland 100 Pharmaceutical sales Alliance Pharmaceuticals GmbH Germany 100 Non-trading Alliance Pharmaceuticals GmbH Swiss Branch Switzerland 100 Non-trading Alliance Pharmaceuticals SAS France 100 Non-trading Alliance Pharma Singapore Private Limited Singapore 100 Non-trading Alliance Pharmaceuticals Asia Limited Hong Kong 100 Non-trading Opus Healthcare Limited Republic of Ireland 100 Dormant Alliance Consumer Health Limited England and Wales 100 Dormant Alliance Generics Limited England and Wales 100 Dormant Alliance Pharma plc Annual Report and Accounts 2023 Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Contents Generation Page Contents Generation Sub Page Contents Generation Section NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED d. Trade and other receivables in the Company balance sheet 31 December 2023 £000s 31 December 2022 £000s Other receivables 182 85 Prepayments 45 8 227 93 e. Trade and other payables in the Company balance sheet 31 December 2023 £000s 31 December 2022 £000s Trade payables 58 111 Accruals 759 644 817 755 f. Capital and reserves in the Company balance sheet Details of the number of Ordinary shares in issue and dividends paid in the year are given in note 22 to the Group financial statements. Territory Company Registered Office Address Italy Alliance Pharma S.r.l. Viale Francesco Restelli 5 20124 Milano Italy Republic of Ireland Alliance Pharma Ireland Limited United Drug House Magna Drive Dublin D24 X0CT Ireland Opus Healthcare Limited 6th Floor South Bank House Barrow Street Dublin 4 Singapore Alliance Pharma Singapore Private Limited 1 Scotts Road Shaw Centre 22–06 228208 Singapore Spain Alliance Pharmaceuticals Spain SL Regus Business Center Torre de Cristal Paseo de la Castellana 259 C Planta 18 Cuatro Torres Business area 28046 Madrid Spain Switzerland Branch Alliance Pharmaceuticals GmbH Düsseldorf Bahnhofstrasse 37 Postfach 2818 CH-8021 Zürich Switzerland Thailand Alliance Pharmaceuticals Thailand Co. Ltd No. 444 Olympia Thai Tower 8th Floor Ratchadapisek Road Samsennok Sub-district Huaykwang District Bangkok Thailand England and Wales All Companies Avonbridge House Bath Road Chippenham Wiltshire SN15 2BB Northern Ireland Caraderm Limited 6 Trevor Hill Newry County Down BT34 1DN Philippines Alliance Pharmaceuticals Philippines Corporation 30/F 88 Corporate Center Sedeno Cor Valero STS BEL-AIR 1209 City of Makati NCR Fourth District Philippines India Alliance CHC India Private Limited 314 Bhaveshwar Arcade Annexe LBS Marg Opp Shreyas Cinema Ghatkopar West Mumbai Bandra Suburban MH 400086 IN Unless otherwise stated, the share capital comprises Ordinary shares and the ownership percentage is provided for each undertaking. All subsidiary undertakings prepare accounts to 31 December. Additional Information Company overview Strategic Report Governance Financial Statements Company overview Strategic Report Governance Financial Statements Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section UNAUDITED INFORMATION Shareholder Information Shareholder enquiries The Company’s share register is maintained by Link Group who are responsible for updating the register including changes to shareholders’ names or addresses and processing off-market transfers of the Company’s shares. If you have any question about your shareholding in the Company or you need to notify any changes to your personal details, you should write to Link Group Central Square 29 Wellington Street Leeds LS1 4DL or telephone 0371 664 0300 calls are charged at the standard geographical rate and will vary by provider lines are open 9.00am to 5.30pm Monday to Friday."
"Financial Calendar Annual General Meeting July 2024 Interim results announcement September 2024 Year end 31 December 2024 Preliminary announcement April 2025 Company overview Strategic Report Governance Financial Statements Additional Information Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section FIVE YEAR SUMMARY Year ended 31 December 2019 £m Year ended 31 December 2020 £m Year ended 31 December 2021 £m Year ended 31 December 2022 restated £m Year ended 31 December 2023 £m Revenue 135.6 129.8 163.2 167.4 180.7 Operating profit before non-underlying items 37.4 36.8 45.6 35.7 41.9 Non-underlying operating items (1.8) (20.5) (24.0) (53.4) (80.3) Operating profit loss 35.6 16.3 21.6 (17.7) (38.4) Profit before tax before non-underlying items 32.9 33.5 42.2 30.3 31.5 Profit loss before tax after non-underlying items 31.1 13.0 18.2 (23.1) (48.8) Intangible assets 328.7 412.9 413.8 393.4 300.0 Tangible assets 11.6 15.9 4.8 5.6 5.7 Current assets 65.0 77.2 81.0 105.5 104.1 Current liabilities 24.2 30.2 40.6 47.0 40.6 Equity 274.2 281.0 282.5 265.5 217.9 Average shares in issue millions 520.7 531.1 535.3 539.5 540.1 Shares in issue at period end millions 529.4 532.9 538.2 540.0 540.4 Earnings per share basic p 4.80 1.51 1.37 (3.93) (6.13) Earnings per share adjusted underlying basic p 5.09 5.11 6.39 4.28 4.55 See note 2.20 for an explanation and analysis of the prior year restatement in respect of 31 December 2022. Company overview Strategic Report Governance Financial Statements Additional Information Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section Registered Office Avonbridge House Bath Road Chippenham Wiltshire SN15 2BB Company number 04241478 Auditor Deloitte LLP 3 Rivergate Temple Quay Bristol BS1 6GD Financial PR Buchanan Communications 107 Cheapside London EC2V 6DN Registrars Link Group Central Square 29 Wellington Street Leeds LS1 4DL Nomad and Joint Broker Numis Securities Limited 45 Gresham Street London EC2V 7BF Joint Broker Investec Bank plc 2 Gresham Street London EC2V 7QP Bankers Bank of Ireland Bow Bells House 1 Bread Street London EC4M 9BE Citibank N.A Citigroup Centre 33 Canada Square Canary Wharf London E14 5LB Lloyds Bank PLC 25 Gresham Street London EC2V 7HN National Westminster Bank PLC 250 Bishopsgate London EC2M 4AA HSBC Innovation Banking Alphabeta 14 18 Finsbury Square London EC2A 1BR ADVISERS AND KEY SERVICE PROVIDERS Company overview Strategic Report Governance Financial Statements Additional Information Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section CAUTIONARY STATEMENT Cautionary statement regarding forward-looking statements This Annual Report has been prepared for the members of the Company and no one else. The Company its Directors employees or agents do not accept or assume responsibility to any other person in connection with this document and any such responsibility or liability is expressly disclaimed. This Annual Report contains certain forward-looking statements with respect to the principal risks and uncertainties facing Alliance. By their nature, these statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are several factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The forward-looking statements reflect the knowledge and information available at the date of preparation of this Annual Report and will not be updated during the year. Nothing in this Annual Report should be construed as a profit forecast. The Report of the Directors in this Annual Report has been drawn up and presented in accordance with English company law and the liabilities of the Directors in connection with that report shall be subject to the limitations and restrictions provided by such law. Directors would be liable to the Company but not to any third party if the Report of the Directors contains errors because of recklessness or knowing misstatement or dishonest concealment of a material fact but would not otherwise be liable. Company overview Strategic Report Governance Financial Statements Additional Information Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section Printed by a Carbon Neutral Operation certified CarbonQuota under the PAS2060 standard. This product is made using recycled materials limiting the impact on our precious forest resources helping reduce the need to harvest more trees. This publication was printed by an FSC certified printer that holds an ISO 14001 certification."
100 percent of the inks used are HP Indigo ElectroInk which complies with RoHS legislation and meets the chemical requirements of the Nordic Ecolabel Nordic Swan for printing companies. 95 percent of press chemicals are recycled for further use and on average 99 percent of any waste associated with this production will be recycled and the remaining 1 percent used to generate energy. The paper is Carbon Balanced with World Land Trust an international conservation charity who offset carbon emissions through the purchase and preservation of high conservation value land. Through protecting standing forests under threat of clearance carbon is locked in that would otherwise be released. GLOSSARY AGM Annual General Meeting APAC Asia-Pacific and China B2B Business-to-business B2C Business-to-consumer CBEC Cross-border ecommerce CEO Chief Executive Officer CFO Chief Finance Officer CMA Competition and Markets Authority CMO Contract manufacturing organisation COO Chief Operating Officer EMEA Europe Middle East and Africa ERP Enterprise resource planning ESG Environmental Social and Governance GPTW Great Place To Work HCP Healthcare professional I&D Innovation and development IHP International Health Partners IR Investor Relations J&J Johnson and Johnson LSP Logistics service provider NED Non-Executive Director OTC Over the counter SECR Streamlined Energy and Carbon Reporting regulations TCFD Task Force on Climate-Related Financial Disclosures tCO2 Tonnes of carbon dioxide gas released into the atmosphere. This metric is often used when reporting electricity market-based emissions factors. tCO2e Greenhouse gases have different global warming potentials and are converted to a carbon dioxide equivalent to ease comparison and reporting. Company overview Strategic Report Governance Financial Statements Additional Information Alliance Pharma plc Annual Report and Accounts 2023 Contents Generation Page Contents Generation Sub Page Contents Generation Section Alliance Pharma plc Avonbridge House Bath Road Chippenham Wiltshire SN15 2BB United Kingdom T plus 44 0 1249 466966 F plus 44 0 1249 466977 E ir@alliancepharmaceuticals.com www.alliancepharmaceuticals.com Appreciate Group plc Annual report and accounts 2021 www.highstreetvouchers.com www.getpark.co.uk www.appreciate.co.uk www.appreciategroup.co.uk Appreciate Group plc Annual report and accounts 2021 Appreciate Group plc Valley Road Birkenhead Merseyside CH41 7ED We make giving receiving and experiencing easier and more joyful. Appreciate Group is a financial services business providing individuals and businesses with solutions. Appreciate Group plc Annual report and accounts 2021 Strategic Report Corporate Governance Financial Statements Appreciate Group plc Annual report and accounts 2021 Strategic Report 2021 Highlights At a glance Investment case Business model Our Strategy Strategy in action Message from the Chairman Chief Executive’s Review Chief Financial Officer Review s.172 statement ESG Trademark behaviours Principal Risks and Uncertainties Corporate Governance The Board Directors’ Report Corporate Governance Remuneration Report Independent Auditor’s Report Financial Statements Consolidated Statement of Profit or Loss Consolidated Statement of Comprehensive Income Statements of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Statements of Cash Flows Accounting Policies Notes to the Accounts Directors and Advisers Our purpose To create more joy in the world. By being trusted to help our customers with celebrating and rewarding. Our strategic priorities Productivity Appeal Clarity Experience Our Trademark Behaviours Collaborative Respectful Empathetic Dynamic Our business model Prepayment Gifting Engagement How we do it Appreciate Group plc Annual report and accounts 2021 Highlights Group billings million Profit before taxation before exceptional item million Group revenue million Operating profit million Dividends per share p Total basic earnings per share p Profit before taxation million How we have performed Despite the challenges we have faced as a business during the pandemic we achieved a resilient performance for the year with strong Corporate demand increased digital sales and restructuring actions mitigating the impacts of COVID which were especially acute in the early months of the first national lockdown. Appreciate Group plc Annual report and accounts 2021 Expanded range of products and solutions with flexible online food outlets gaming and entertainment alongside increased retail options.
Growth in digital Digital billings up almost four-fold to million Love2shop Contactless Gift Card launched to Corporate clients Broader distribution New partnership with PayPoint giving consumers opportunity to purchase products at physical locations across the UK announced since year-end Award-winning workplace Business Culture Award for Best Working Environment and Workplace Design Great Place to Work certified for period from October 2020 to October 2021 with Trust Index ahead of average UK company Successful peak trading period Underlying Q3 billings up by percent to million Our best ever December with percent billings rise on previous year to million Further business simplification Disposed of or withdrawn from hamper production contract packing operations in the Republic of Ireland and the brand engagement agency FMI New Corporate business up Demand from new Corporate clients rises percent from million to million Prestigious new clients added such as B&Q Sharps Bedrooms and Halfords Operational highlights Appreciate Group plc Annual report and accounts 2021 At a glance Giving and receiving Consumer and Corporate Our business is split into two divisions Corporate Providing around business customers with market-leading incentive recognition and rewards options for an estimated two million recipients through redemption partners with thousands of outlets. Appreciate Group plc Annual report and accounts 2021 Corporate Consumer Paper Card Digital Christmas Savings Corporate Consumer Our business is split into two divisions million market share Consumer Offers multi-retailer redemption product directly from our website highstreetvouchers.com or via our leading Christmas savings offering which currently helps approximately families budget for Christmas. Product mix FY2021 Appreciate provides products with three formats. The product mix is moving towards Card and Digital due to changing customer tastes and strategic initiatives. Division share of Group revenue for year ended March source Gift Card and Voucher Association based on market in Appreciate Group plc Annual report and accounts 2021 Investment case Ready for growth Rich heritage Trusted by our customers to help them enjoy moments that matter for more than years. Strong market position Clear market leader in Christmas savings. Strong proposition for the Corporate and Gifting markets customer base of more than clients split across B2C and B2B markets. Robust financials Profitable with strong visibility of earnings and cash held in trust. Experienced leadership team Strong management team with a clear strategy to drive growth and demonstrated decisive action to evolve the business through COVID-19. Appreciate Group plc Annual report and accounts 2021 Growth opportunity Foundations are being laid for future growth through a more robust and scalable business model. Well invested Major investment in infrastructure and product development being delivered in line with strategic plan. Well placed for digital growth which is expected to continue in the market. Growth in digital Opportunity to grow digital business following almost four-fold rise in and acceleration in consumer behaviour in pandemic. Attractive proposition Multi-partner redemption product offering with around redemption options with range of formats including digital physical card and paper. Appreciate Group plc Annual report and accounts 2021 Christmas Savings Helping to create more joy for businesses and consumers Business model How we do things underpins our culture and Our resources Our propositions Prepayment Gifting Engagement Helping consumers put money aside to ensure they can pay for key future events Helping consumers convert their kind thoughts into joyful gifts Helping businesses recognise and reward their employees and customers Our channels People We deliver success through our purpose-driven and inclusive culture. Financial resources We deploy our financial resources to grow a sustainable business and help our customers and clients meet their goals. Technology Our technology helps us to deliver a positive experience for customers and provide products which meet their evolving needs. Infrastructure Our infrastructure ensures systems are reliable robust and resilient. Governance Our risk management and governance provide controls and drive responsible behaviour and are designed to help us follow relevant regulation.
"Appreciate Group plc Annual report and accounts 2021 Digital Card Paper Partners benefit from increased footfall and basket value and pay a commission on the value of spend Businesses also purchase other products and services to help them manage their engagement programmes Some revenue is derived from non-redemption Customers We help customers and clients who use our products and services achieve their aims Colleagues We support colleague wellbeing enable them to develop their career and empower and motivate them to deliver for our customers Investors We build a strong resilient business that can deliver growth and sustainable returns Partners We help our partners attain business and strengthen their customer relationships Communities We seek to have a positive benefit on our communities and protect our environment. Format Revenue stream Value creation drives successful performance across the Group Appreciate Group plc Annual report and accounts 2021 Productivity We will be more efficient and effective Appeal We will broaden our customer appeal Actions completed Improved peak season Great Place To Work certified Business Culture Award winner HM Treasury Women in Finance Charter signatory Seamless remote working maintained Grown Corporate client-base Actions completed Launched Love2shop Contactless Gift Card to Corporate clients Rebranded B2B business Expanded e-codes and e-cards within our proposition Broadened multi-redemption options Enhanced Christmas Savings agency commission structure Physical distribution through new partnership with PayPoint announced post year-end In the financial year ending March we made significant progress in our strategic business plan to build a robust and scalable platform on which to grow. We categorised these plans under four pillars Productivity Appeal Clarity and Experience. Strategy P A Impact Increased collaboration enhanced talent pool and capability Digital billings up almost four-fold. Partnership 2020-21 Actions completed: Data center migration completed, replaced company servers, Enterprise Resource Planning (ERP) program progressing, digital billings growth, paper down, reshaped marketing function with digital focus. We responded to the pandemic by accelerating key parts of our long-term strategy, in particular, simplification of the business and advancing our digital plans. In addition, we created a new Chief Marketing Officer role and reshaped our Marketing function to reflect the digital direction of the business. Our plans to continue to make the proposition more attractive through a range of online, experiential, and food options progressed with the combination of options across online and in store. All of this was achieved working in a largely remote environment, giving us encouraging signs for the future of the business. Impact: Simplification means focus and resources will be on our core business. Customers are now at the center of business decisions, data, and product development. Flexible solutions: Love2shop gift cards offer the choice of when, where, and how to redeem, whether online or in store, for food outlets, gaming and entertainment, along with leading retailers and experiences at many of the UK’s favorite attractions. We are dedicated to ensuring our customers are at the forefront of everything we do, and we constantly look for ways to enhance our products and customer experience. Showing care through reward: Care home workers have been unsung heroes during the pandemic and deserve to be recognized for their critical roles on the front line to keep people safe and help the fight against the spread of COVID. As a large care home provider in the UK, Abbeyfield chose Love2shop gift cards as a way to say thank you to around 1,500 employees for their efforts throughout 2020, allowing each one to choose to redeem with around 190 brands. Creative solutions: Love2shop Contactless gift cards can be sent instantly or scheduled for an upcoming special date and delivered by SMS, email, WhatsApp, or Facebook Messenger, and placed in a mobile wallet. Digital gift cards have proven a flexible solution for customers to gift and reward at a time when so many have been unable to come together. Retired Monica wanted to give her daughter a birthday present without putting her or her family at risk at a time when households could not mix. She chose to send a Love2shop Contactless Gift Card which was delivered via text message, meaning she could create a moment of joy while keeping both her and her family safe. Message from the Chairman: The last year has been a period unlike any other. The pandemic has had an impact on us all."
"Under the strong leadership of our CEO, Ian O’Doherty, the Group has navigated these challenges by making the wellbeing of our colleagues and the needs of our customers the priority throughout, remaining true to our purpose and values. At the time of our last Annual Report, I said that we were determined to emerge strongly from the pandemic and be ready for growth. I am pleased to say that Appreciate Group has risen to the challenge during the year, continuing to deliver our strategy and reshaping the business to lay the foundations for future years. By accelerating initiatives in our long-term plan, restructuring the business to focus on our core product, and delivering for our customers in our key markets (prepayment, gifting, and engagement) and building our digital capability, we are now better positioned to take advantage of future growth opportunities. The onset of the pandemic caused a great deal of disruption and uncertainty in the early months of 2020. Despite this, our business has proved resilient as a result of the actions we have taken. We delivered an improved second-half performance with the usual swing to profitability following a higher than normal first-half loss due to the first lockdown. Our performance in the key Q3 Trading Period provided real signs of encouragement. We believe this demonstrates that our response to the pandemic was well judged, and the reshaping of the business will provide the bedrock for future sustainable growth. Supporting customers through lockdown: The Group strengthened its products and proposition to enable Consumer and Corporate customers to gift and reward despite COVID-19 related restrictions. We were able to make an important contribution to the Government’s free school meals initiative by working at pace to facilitate food retailer Iceland’s participation in the scheme. Corporate clients turned to our solutions to thank their hard-working employees during the pandemic, leading to record levels of new business and helping us deliver an improved peak season. We also continued to focus on broadening the appeal of our products, adding new sectors such as hotels and learning options to the redemption choice, making essential retail available on digital products to support customers during lockdown, and adding some strong retail brands. We extended expiry dates on paper vouchers, which could only be redeemed in-store, to ensure that customers did not lose the opportunity to spend them because of lockdown. Digital growth: A key component of our long-term strategy has been to build our digital offering and capability. As the pandemic led to an acceleration in the adoption of digital by customers seeking alternative ways to gift and reward during lockdowns, we intensified and brought forward many of our strategic initiatives. This included launching new digital solutions and broader choices for both the Corporate and Consumer segments that do not require physical cards. We will continue to invest in our digital proposition to exploit future growth opportunities and use the important insights and learnings to sharpen our offering and enhance the customer experience. Colleagues, culture, and ESG: We have been fortunate to have the commitment of so many dedicated and resilient colleagues. The majority have adapted remarkably to home-working, while those working in our fulfillment operations have embraced the changes of working in a COVID-secure environment. I want to thank all of our people for their efforts over the last year. I have no doubt we would not have adapted so flexibly to the challenges over the last 12 months had we not made the earlier investments in infrastructure and our workplace. We underlined our commitments to colleagues and to being a responsible business over the past year by making tangible progress with a number of initiatives. Our approach to fully embed the company purpose – to create joy – in our new head office was recognized with a prestigious Business Culture Award. We strengthened our work with Everton in the Community by becoming an official partner. Through this partnership, we became the main supporter in a new education program that will help teach young people in the Liverpool City Region digital skills, such as coding. Despite remote working, our colleagues have continued to explore opportunities to fundraise for important causes, including Children in Need and Zoe’s Place (a Liverpool-based children’s hospice and long-term charity of choice for colleagues) as well as through activities to celebrate Red Nose Day. We chose to repay all the funds received under the UK Government’s Coronavirus Job Retention Scheme when it became clear that our performance had recovered sufficiently."
"Financial strength: Our balance sheet remains robust, with good levels of liquidity, which we continue to manage due to swings in free cash from month to month, driven by the timings of monies being moved in and out of trusts, and the purchasing of third-party, single retailer redemption products. This is supported by our revolving credit facility with Santander that was put in place last year, a notable achievement in itself at such a time. Dividend: Following our decision not to pay a dividend for the previous financial year in light of uncertainty at the time, we reinstated the interim dividend in November as it became clear that trading had improved. As this improvement has been maintained in the second half of the financial year, the Board has recommended a proposed final dividend of 0.6p, making a total dividend for the year of 1.0p per share (2020: 0p). The dividend will be paid on 1 October 2021 to shareholders on the register on 27 August 2021, with an ex-dividend date of 26 August 2021. Regulation: As a regulated organization, we take our responsibility to our customers seriously and we always seek to comply with all applicable regulation. We welcome increased focus on the regulation of e-money issuers through annual audits of their safeguarding practices. The Board is committed to making improvements to controls and administrative and procedural practices in line with regulation. Summary: We are now a leaner, more digital-focused business, and we have shown we can respond to the toughest of challenges with agility and resilience. We have made considerable progress in reshaping the business over the last two years, which will provide the foundations on which to grow in future years. We are determined to build on this momentum by enhancing our products and proposition to attract new customers, in line with regulation. The speed at which normal levels of activity will return is unclear, but we believe that as the economy emerges from lockdown, we are better positioned to support customers following the accelerated adoption of digital products. We have a clear strategy of innovation-led growth to capture the potential in our markets, and we are confident our approach and expertise will drive strong and sustainable growth for the long term. Focused on the future: Corporate revenue £53.7 million, Consumer revenue £53.1 million. Introduction: Although the pandemic has had a significant impact on everybody, I have seen it bring the best out of our business and our people. We are now a more agile and resilient company than we were before COVID-19 struck, and I am extremely proud of the dedication that our colleagues have shown to support our customers, as well as each other. Importantly, the decisions taken by the leadership team to respond to the crisis have been guided by our company purpose and trademark behaviors, providing the compass to ensure we have always focused on driving outcomes that are aligned to the long-term interests of all our stakeholders. Results for the year: I am pleased to report that, despite the challenges we have faced as a business during the pandemic, we achieved a solid performance for the year, with strong corporate demand, increased digital sales, and the benefits of previous restructuring actions partially mitigating the impacts of COVID, which were especially acute in the early months of the first national lockdown. Profit before tax and exceptional items was £2.3 million (2020: £11.4 million) excluding exceptional costs of £1.1 million (2020: £3.7 million of exceptional items) relating to the impairments and redundancies net of profit on disposal of assets held for sale. This performance reflected a robust second half when we saw the usual swing to profitability that is typical for the seasonal nature of our business. Group billings decreased by 3.2% to £406.5 million (2020: £419.9 million) despite growth from our Corporate business. Revenue decreased by 5.2% to £106.8 million (2020: £112.7 million) due to lower billings with a greater level of deferred revenue following delays in spending while customers had fewer options to redeem their products in stores. Some of this deferred revenue is expected to come through in the next financial year. Operating profit before exceptional items for the year was £1.9 million (2020: £10.1 million), of which £7.2 million was delivered in H2. Net interest income fell to £0.4 million (2020: £1.3 million) following lower interest rates on average cash balances (including cash held in trust) of £181.2 million (2020: £177.0 million)."
"Digital billings rose four-fold, from £17.7 million in 2020 to £68.5 million, driven by the introduction of a broad choice of Love2shop e-codes and the launch of a Love2shop Contactless Digital Gift Card to Corporate clients. Total cash balances, including monies held in trust and bank deposits, at 31 March 2021, were £163.5 million (2020: £132.3 million). Following the solid second half performance, and after the reintroduction of the dividend at half year, we are pleased to be in a position to declare a final dividend of 0.6p. Divisional review: We operate in dynamic markets, serving customers in both corporate and consumer channels. The UK gift card market was estimated to be worth approximately £7 billion annually in 2019 and predicted to grow to £8.7 billion by 2025. The market in 2020 was impacted by COVID, with data indicating trends of a move from stores to online, from physical to digital, and from B2C to B2B. Some of these trends were already present, with the pandemic serving to accelerate their development. Corporate: Appreciate Group’s Corporate business provides around 39,000 business customers with market-leading incentive, recognition, and rewards options for an estimated two million recipients to use with around 190 redemption partners with almost 24,000 outlets. Corporate billings of £201.3 million were 1.8% higher than the prior year (2020: £197.7 million), a stable performance having been driven by record levels of new business, a strong Q3 performance, and billings through the free school meals scheme of £23.0 million. Corporate revenue was £53.7 million (2020: £50.3 million), representing an increase of 6.8%. Segmental profit decreased by £4.0 million to £2.6 million (2020: £6.6 million), reflecting the lower margin on billings through the free school meals initiative and higher administration costs. In the year, we continued to increase the clients we work with by adding organizations such as B&Q, Halfords, and Sharps Bedrooms as new partners. Consumer: Consumers can access Appreciate Group’s multi-retailer redemption product directly from our website highstreetvouchers.com or via our leading Christmas Savings offering, which currently helps approximately 350,000 families budget for Christmas. Our Consumer business billings were £205.3 million compared to £222.2 million in the prior year. Consumer revenue was £53.1 million (2020: £62.4 million) with a segmental profit of £0.5 million versus £5.3 million in the prior year, which was impacted by the increase in deferred revenue due to lockdowns. To support customers in lockdown, a broad range of e-codes were introduced, providing more appealing options to customers spending more time at home, such as Just Eat, Xbox Live, Uber Eats, and ASOS. The Christmas Savings order book for 2020 finished down 8% overall, with most savings plans in place before COVID struck. The book is currently predicted to be approximately 14% lower for 2021, having been held back by lockdown restrictions impacting face-to-face agent activity. In addition, unspent paper vouchers are £6.4 million higher compared to last year due to shopping restrictions, and we believe that some customers intend to use them towards Christmas 2021, rather than starting a new savings plan. In response to this reduced predicted order book for 2021, a number of initiatives are underway to encourage customers to save and incentivize agents. We held a virtual event to engage agents in May and introduced a regular prize draw to encourage customers to add to their savings plans. We also introduced a new agency commission structure in 2020 to support plans. The focus on digital has also led to growth in billings through highstreetvouchers.com in the second half, up by over a third (36%) in our peak third quarter. We continued to optimize traffic, with visitors increasing 31.8% in the second half against the previous year, and a continued focus on conversion, with rates up from 3.5% in H2 2020 to 4.7% in H2 2021. Strategic progress: Since late 2018, Appreciate Group has been delivering a transformation focused on building a robust and scalable business model to support future growth. The strategy is underpinned by four strategic pillars of Productivity, Appeal, Clarity, and Experience. Significant investments in infrastructure and technology had been made prior to the pandemic, including the head office move, rebranding to Appreciate Group, launching a digital gift card, and cloud technology. The Group focused on accelerating key elements of its business plan over the past year and has made excellent progress in a number of areas. Digital growth: It is important that we have solutions that meet the demands of customers in an increasingly digital world."
"The pandemic has led to a more rapid advancement of consumer digital adoption, and we responded by intensifying our own focus on digital. Investments to strengthen our digital offering and capability. Helped us respond to the pandemic and boost digital billings during the year, which almost quadrupled. Digital billings represented 17.3% of the overall product mix, up from 4.4% in the previous year. We have also gained significant insight and learnings which will help us enhance our approach further, and we plan to make further investments to support growth in our digital offering. Paper billings were down 46% year on year to 22.5% of the overall product mix, although this will have been partially helped by lockdown. See accounting policies for a reconciliation of billings to revenue. See Financial Review for reconciliation of adjusted to statutory profit measure. Source: UK Gift Card and Voucher Association. Appreciate Group plc Annual report and accounts 2021. Simplifying our business, our long-term strategy is to focus on our core product and delivering for our customers and clients in the prepayment, gifting, and engagement markets which provide the vast majority of the Group’s profits. During the year we accordingly disposed of, or withdrew from, a number of non-core activities including hamper production, contract packing, our operations in the Republic of Ireland, and the brand engagement agency, FMI. Management focus is now dedicated to improving and driving the core business where we see opportunities for scale and growth. A sale of the land and buildings at Valley Road, Birkenhead, was completed for £3.1 million during the first half of the year, freeing up funds for investment in the core business. Continuing to invest in IT, the next phase of the Enterprise Resource Planning programme remains on track to be delivered during the summer, with the following phase scheduled in the second half of the financial year. This is a cornerstone of our target to build a robust and scalable platform and will provide significant benefits through enhanced resilience and workflow. The scope of the project has evolved as the Group has accelerated and prioritized its digital focus during the pandemic, which together with the impact of COVID restrictions, has resulted in additional programme costs. Cumulative project costs total approximately £5.9 million, of which £3.5 million was incurred in the financial year ended 31 March 2021. The first phase involves replacing current back office systems for highstreetvouchers.com with Microsoft Dynamics 365, leading to enhanced efficiencies and improvements in the customer experience. We migrated to a new state-of-the-art, outsourced data centre in April 2021. This provides increased reliability and resilience. The Group plans to continue to invest in enhancing its digital proposition to exploit future growth opportunities. Growth in Corporate, we repositioned our B2B business to support our plans for growth, rebranding it to Appreciate: The home of Love2shop. This places us as experts in rewards and recognition whilst retaining the well-recognized Love2shop brand. The business enjoyed a successful Q3 peak period including our busiest ever December, as clients explored alternatives to reward their workforces, leading to record levels of new business with £19.3 million during the year. We launched a Love2shop Contactless Gift Card, our in-wallet digital gift card, to corporate clients in September building on insight from its consumer launch. Overall billings for this were £1.8 million for the year. Through our successful partnership with Iceland, we helped provide thousands of children with free school meals. By working at pace when the date of the scheme was extended, we were able to ensure recipients could shop at the supermarket. Our corporate business continues to achieve high customer satisfaction scores on Trustpilot with an average of 4.6 out of 5 and 83% of reviews rated as excellent, demonstrating the strength of our proposition in this growing market. Workplace culture, during the year we received external recognition for the progress we are making on our workplace culture. I am proud that we became an accredited Great Place to Work and that our office relocation to Liverpool received a prestigious Business Culture Award. Strengthened marketing, we are placing a greater focus on digital marketing and commercial planning as we seek to deliver future growth. The marketing team has been restructured to support this and make better use of insight to provide analysis for product development, campaigns, and strategy. A new commercial planning function will help deliver targets and campaigns alongside best practice planning and digital marketing."
"Improving customer choice, we continued to expand our redemption partner range to offer a broader choice to customers. Food options such as Nando’s, Bella Italia, and RealFoodHub.co.uk have been added, alongside attractive brands such as Schuh and Superdry. Customers now have more flexibility between online and in-store redemptions, and the ability to choose from food, hospitality, leisure, and entertainment alongside leading retailers. Regulation, we are committed to complying with all relevant regulations. All e-money providers are now required to undertake an annual audit of their safeguarding practices, with many of these initial sector-wide audits expected to identify areas for improvement to meet updated safeguarding regulations. Our safeguarding audit is ongoing. Findings to date have identified areas of administrative and procedural practices that should be improved, none of which resulted in any loss of funds. As a result, we have made changes, or are in the process of doing so, to improve these, whilst also strengthening our controls environment. Improved distribution, in May 2021, we entered into a new distribution partnership with PayPoint that will provide consumers with the opportunity to purchase Love2shop e-codes from a network of 28,000 locations across the UK. This now gives us a physical presence to offer our products to customers in the heart of communities for millions of people across the UK. Looking ahead, the actions taken to respond to the pandemic have helped us deliver a resilient performance during one of the most uncertain periods in the history of our business. Appreciate Group remains well positioned in its markets with differentiated product and service offerings. Following the accelerated investments in digital and infrastructure, we now look forward to building on the progress we have made and navigating further uncertainties in the economic recovery. Whilst there is optimism following the success of the vaccine rollout, uncertainty about the speed at which normal activity will return remains. Despite a slower than anticipated start to the new financial year, we expect a recovery for the year overall with an increasing benefit from the investments and innovations we have made over the last two years. Overall, we have a clear strategic plan and our business model is better positioned than ever to deliver sustainable growth as the economy emerges from lockdown. The Board is, therefore, confident of the Group’s future success. Chief Executive Q&A Q. How much progress have you made with your digital proposition? A. One of our key responses to the pandemic has been to focus on improving our digital capability. We enhanced our approach by providing a range of Love2shop e-codes and the Love2shop Contactless Digital Gift Card which was launched to corporate clients in the second half of the year. It is pleasing to see that our digital billings almost quadrupled during the year. But we will not rest on this and are determined to make further progress. Our experience so far has provided considerable insight that is helping us strengthen our approach for the future and we plan to continue investing in our digital proposition. Combining this with the changes in customer behavior during the pandemic, which are likely to be embedded for the longer term, we believe we are well positioned for future growth opportunities. Q. How have your colleagues fared over the last 12 months? A. The last 12 months have been an uncertain period for everyone but our colleagues have truly responded to the challenges. I am extremely proud to lead the team at Appreciate Group. They have focused on ensuring we can continue to deliver for our customers, whilst adapting to new and different ways of working, whether that be from home, or in the socially distanced environment of our operations. I know colleagues are looking forward to the return to a level of normality and being able to work again from our award-winning offices. Their commitment over the last 12 months gives me great confidence that we have a strong team that is determined to deliver the best possible experience for our customers. Q. What is the focus of the business for the year ahead? A. We have made great progress over the last 12 months in reshaping and simplifying our business. This means we can now focus fully on the core activities of prepayment, gifting, and engagement. We are determined to build on our recent success in digital and, so, we will continue to improve our digital capability, and adapting our approach to marketing to support this."
"We have made good progress in corporate and it was pleasing to see such a strong peak Q3 period. We want to build on this. I was delighted that we were able to achieve the Great Place to Work certification in 2020 and we are committed to making Appreciate Group an even better employer for our colleagues. At the heart of all we do is a determination to be a responsible business and play a positive role in society. We will continue to explore ways to work with organizations such as Everton in the Community to help bring positive benefits to society. And we want to leverage some of our great partnerships, such as the new agreement with PayPoint, which gives us a physical network for the first time to offer our products to consumers up and down the country. Activity will return remains. Despite a slower than anticipated start to the new financial year, we expect a recovery for the year overall with an increasing benefit from the investments and innovations we have made over the last two years. Overall, we have a clear strategic plan and our business model is better positioned than ever to deliver sustainable growth as the economy emerges from lockdown. The Board is, therefore, confident of the Group’s future success. Chief Financial Officer Review Impact of COVID-19, the impact of COVID-19 has had a significant impact on the financial results for the year. For the majority of the first quarter, we were in the first lockdown and our priority was to protect the safety of our employees and partners. Consequently, we closed our physical dispatch facility that had an impact on our ability to sell products at that time. To protect the financial health of the business, whilst the economic outlook was unclear, the Board took the decision to cancel the dividend relating to 2019/20, preserving £6.0 million of cash. In November 2020, we announced our intention to reintroduce the dividend for 2020/21. Initially we furloughed up to 79 employees, receiving £0.3 million from the Government’s Job Retention Scheme, however the Board chose to repay these funds in December 2020. Whilst demand levels remained low throughout Q1, as the UK came out of lockdown in Q2, business levels began to recover, and improved further during Q3, which included a record month for billings in December. Our billings benefitted from inclusion in the Government’s Free School Meals campaign, where we supported Iceland and achieved billings of £23.0 million in the year. The order book for our Christmas Savers business is normally complete by March and this did not experience any significant level of cancellations, and finished, as expected 8% lower than the prior year. A number of strategic projects were delivered during the year. In August we completed a bank financing exercise of an unsecured 5 year revolving credit facility with Santander UK of £15 million plus an additional uncommitted accordion of £10 million. This facility will provide additional financial flexibility enabling longer term growth, as well as investing in the continued switch to digital products. This facility has not yet been utilized. We completed the sale of the land and buildings of our former head office in Valley Road, Birkenhead for £3.1 million, in line with the net book value of the asset. At the same time we announced the closure of our hamper production and third party packing business. The redundancy and stock impairment costs of £1.1 million are included within exceptional items. There are further losses relating to our hamper packing business, costs of decommissioning our previous head office and losses in FMI that suppress the underlying result this year but will be non-recurring next year. Total revenue £106.8 million. In Q3 we concluded the disposal of FMI, our brand engagement agency, reporting a profit on the sale of £0.2 million. In the final quarter of the year, as the UK entered another national lockdown, non-essential retail businesses were temporarily closed again, which limited the opportunity for our customers to use their products. This meant that redemption levels during Q4 were lower than expected, leading to higher unspent balances. Whilst this preserved cash relating to unregulated products, it created a much higher level of deferred revenue (£11.2 million in 2021 vs £7.4 million in 2020). This is because revenue and profit are recognized when products are redeemed. We expect some of this deferred revenue to come through in the next financial year."
"Billings and revenue, the Group’s products are split into the following categories: Multi-retailer redemption products – Love2shop vouchers, flexecash cards, Mastercards and e-codes Single retailer redemption products – third party retailer vouchers, cards and e-codes Other – hampers, merchandise and consultancy fees. Hampers and merchandise operations were closed during the year. Multi-retailer redemption product billings are the gross value of goods and services shipped and invoiced to customers during the year. Revenue for multi-retailer redemption products is the net service fee received on redemption, cardholder fees and breakage which are recognized when multi-retailer redemption products are redeemed. For single retailer redemption products and other, both billings and revenue are the gross value of goods and services shipped and invoiced to customers during the year. Billings 2021 £ million 2020 £ million Change % Multi-retailer redemption products 351.8 354.3 (0.7) Single retailer redemption products 50.8 52.9 (4.0) Other 3.9 12.7 (69.3) Total 406.5 419.9 (3.2) Multi-retailer redemption product billings includes billings in respect of e-codes which are capable of being converted into either multi-retailer redemption products or single retailer redemption products. Revenue figures below reflect the product into which the e-code is converted by the cardholder. Revenue 2021 £ million 2020 £ million Change % Multi-retailer redemption products 24.7 37.9 (34.8) Single retailer redemption products 78.2 62.1 25.9 Other 3.9 12.7 (69.3) Total 106.8 112.7 (5.2) The mix of in-house, multi-retailer products remains high within billings, in line with the strategy of promoting our own products. The mix of multi-retailer redemption products was 86.5% of total billings, marginally higher than last year’s 84.4%. Revenue decreased by 5.2% to £106.8 million. There was a greater mix of single retailer redemption products that are reported gross in revenue as opposed to multi-retailer redemption products that are reported net. This was due to a high level of conversions of digital e-codes that are categorized as multi-retailer products when billed to customer but later converted to single store use. The increase in single store revenue was offset by lower multi-retailer product revenue, due to more conversions, and lower other income due to the cessation of hamper production and contract packing. Profit from operations, the Group’s operations are divided into two principal operating segments: Consumer – which represents sales to consumers, utilizing the Group’s Christmas savings offering and our website, highstreetvouchers.com; and Corporate – comprising sales to businesses, offering primarily sales of the Love2shop voucher, flexecash cards, Mastercards and e-codes in addition to other retailer vouchers. All other segments comprise central costs and property costs which are shown separately in order to give a more meaningful view of divisional performance. 2021 £ thousand 2020 £ thousand Change £ thousand Consumer 532 5,327 (4,795) Corporate 2,638 6,581 (3,943) All other segments (2,340) (5,512) 3,172 Operating profit 830 6,396 (5,566) Consumer, in the consumer business, customer billings have decreased by 7.6% from £222.2 million to £205.3 million. Billings for Christmas savers were down by 8.4%, partially offset by an improved performance in other consumer billings, derived through the highstreetvouchers.com website, which were 18.2% higher. Revenue has decreased 14.9% to £53.1 million (2020: £62.4 million) because of delayed redemptions by customers due to the closure of non-essential retail in the final quarter of the financial year. Operating profit was £0.5 million, a decrease of £4.8 million from the £5.3 million achieved in the prior year. This was primarily due to lower revenue and an increase in administration costs, as explained below, relating to the closure of our hamper packing business. Corporate, in the corporate business customer billings have increased by 1.8%, from £197.7 million to £201.3 million. This increase includes £23.0 million of Free School Meal codes redeemable through Iceland which offset the lower demand experienced during the first half of the year during the first lockdown. Corporate revenue increased by 6.8% over the prior year, from £50.3 million to £53.7 million due to higher billings and more conversions to single retailer products that are reported gross in revenue. Operating profit decreased to £2.6 million (2020: £6.6 million) due to lower margin business and higher administration costs. Appreciate Group plc Annual report and accounts 2021 Chief Financial Officer Review continued. All other segments, central and property costs reduced from £5.5 million to £2.3 million. This is due to the impairment cost of the Valley Road site at £1.8 million included in the prior year number. Administration costs increased from £20.0 million to £21.1 million due to consultancy and advisory costs relating to projects completed in the year."
"The Board believes that adjusted profit excluding non-recurring items such as impairments and redundancy costs is the best measure of the underlying performance of the Group. This gives stakeholders a better understanding of the Group’s trading position in the year by adjusting for items which are significant in value, infrequent and in the case of impairments, do not have a cash flow impact in the year. 2021 Operating profit £000 Profit before tax £000 Profit after tax £000 Profit before exceptional items 1,896 2,319 1,917 Impairment of goodwill (218) (218) (218) Redundancy costs (639) (639) (639) Impairment of obsolete stock (414) (414) (414) Profit on sale of assets held for sale 205 205 205 Statutory profit 830 1,253 851 2020 Operating profit £000 Profit before tax £000 Profit after tax £000 Profit before exceptional items 10,072 11,446 9,187 Impairment of property, plant and equipment and available for sale assets (1,813) (1,813) (1,813) Impairment of goodwill (1,316) (1,316) (1,316) Impairment of obsolete stock (124) (124) (124) Redundancy costs (423) (423) (423) Statutory profit 6,396 7,770 5,511 Exceptional costs for the year were £1.1 million compared with £3.7 million in the prior year. In the year, we closed hamper production and our contract packing business based at Valley Road. Following consultation with staff, we made 40 roles redundant and have incurred exceptional costs of £0.6 million. Additionally, we impaired the value of hamper stock by £0.4 million. Finance income decreased to £0.8 million from £1.5 million due to the lowering of the Bank of England base rate. Average total cash held by the Group, including cash held in trust during the year increased by 2.4% to £185.0 million (2020: £177 million). The effective tax rate for the year was 32.1% (2020: 28.4%) of profit before tax. The rate is higher than the standard rate of corporation tax of 19% due primarily to legal fees, property, plant and equipment additions and the share option charge not attracting tax relief. The Company took advantage of the government’s COVID-19 VAT deferral scheme, and owed £697,954 as at 31 March 2021. This will be repaid in full during the new financial year. Basic earnings per share fell by 84.5% from 2.96 pence in 2020 to 0.46 pence. Excluding the exceptional charge, basic earnings per share is 1.03 pence (2020: 4.93 pence), down 79.1%. It has been the Board’s policy to distribute just over half of post-tax profit as dividend, with one third of that as an interim dividend and the remaining two thirds as a final dividend. Following the cancellation of the dividend for the financial year 2019/20, the Board is pleased to reintroduce this policy for the current year and recommends a full year dividend of 1.0 pence (2020: nil). Cash flows from operating activities were £4.9 million, £2.0 million (29.0%) lower than the prior year, due to the decrease in profit and an increase in monies held in trust, offset by a working capital cash inflow. Monies in trust grew from £102.7 million in 2020 to £132.1 million. This growth was primarily in the Park Card Services Limited e-money Trust to support the e-money float in accordance with regulatory requirements. This increased by £25.2 million to £69.4 million due to higher levels of card and digital business. In addition, £51.5 million (2020: £55.1 million) was held by the Park Prepayments Trustee Company Limited. The trust holds payments received in respect of orders for delivery the following Christmas. The conditions for the release of this money to the Group are detailed in the trust deed. Also, at 31 March 2021, the Group held £11.1 million of other ring fenced funds (2020: £3.4 million). At the end of March 2021, £31.4 million (2020: £29.6 million) of cash was held by the Group. This was £1.8 million (6.1%) higher than last year due to lower redemptions by customers offset partly by lower profit. The total amount of cash and deposits net of any overdraft position held by the Group, combined with the monies held in trust, has increased in the year by 23.6% to £163.5 million from £132.3 million. These total balances peaked at just under £236 million in the year, representing a marginal increase of £1.3 million from the prior year. During the financial year, we completed a bank financing exercise of an unsecured 5 year revolving credit facility with Santander UK of £15 million plus an additional uncommitted accordion of £10 million."
"This facility will provide additional financial flexibility enabling longer term growth, as well as investing in the continued switch to digital products. As part of the Board’s strategy to develop a scalable and resilient platform to enable future growth, we have continued to invest in our technology platform in the year with £5.0 million of additions. This included investment in a new ERP platform, Microsoft Dynamics 365, of £3.5 million in the year, taking cumulative spend on this project to £5.9 million. Included within trade and other payables is deferred income in respect of multi-retailer redemption products. Revenue is deferred for service fees and breakage, net of discount. The amount of revenue deferred at March 2021 has increased to £11.2 million from £7.4 million in the prior year due to the closure of non-essential retail in Q4 causing much slower redemptions by customers. At 31 March 2021, provisions have increased to £77.9 million from £53.8 million. This was mainly due to an increase in the amounts provided in respect of flexecash cards of £20.0 million and an increase in the amounts provided for unspent vouchers of £4.1 million. The Group continues to operate two defined benefit pension schemes, where pensions at retirement are based on service and final salary. These schemes are now closed to future accrual of benefit arising from service with the Group. These schemes have a combined net pension surplus of £2.1 million based on the valuation under IAS19 performed at 31 March 2021. Following a High Court ruling in November 2020 in respect of Guaranteed Minimum Payments equalisation uplifts to historic transfer values, our actuaries have calculated that the expected impact of this for the group is £73,000 and this has been recognised in the statement of profit or loss. The Group has recognised net interest income of £99,000 in the statement of profit or loss in respect of the pension schemes. In addition, the Group has recognised a re-measurement loss in the statement of comprehensive income of £1.7 million net of tax. In the year ended 31 March 2021, there were no contributions by the Group to the schemes. The latest triannual scheme funding reports indicated that one scheme had a technical provisions deficit of £0.1 million and one had a surplus on the same basis of £1.6 million. No further contributions to either scheme are currently required. The next triannual valuation will be undertaken as at 31 March 2022 when the positions will be reassessed. Our s.172 statement sets out a series of matters to which the directors have regard to in performing their duty to promote the success of the Company for the benefit of all its stakeholders, in accordance with the Companies Act 2006. In doing so, the Board will have due regard to the likely consequences of any decision in the long term, the interests of the Company’s employees, the need to foster the Company’s business relationships with suppliers, customers and others, the impact of the Company’s operations on the community and the environment, the desirability of the Company maintaining a reputation for high standards of business conduct, and the need to act fairly as between members of the Company. The Board is ultimately responsible for the direction, management and long-term sustainable success of the Company. It sets the Group’s strategy and objectives taking into account the interests of all its stakeholders. A good understanding of the Company’s stakeholders ensures the Board considers the potential impact of each strategic decision on each stakeholder group in Boardroom discussions. Board resolutions are determined with reference to the Company’s key stakeholders: employees, customers, suppliers, the community, the environment and shareholders. Our Board considers it crucial that the Company maintains a reputation for high standards of business conduct. The Board is responsible for setting, monitoring and upholding the culture, values, standards, ethics and reputation of the Company to ensure that its obligations to all stakeholders are met and that the desired culture is embedded throughout the organisation. The Board monitors adherence to compliance through corporate governance requirements across the Group and is committed to acting if the business falls short of the standards expected. The Board also considers broader societal issues such as the environment and climate change. The Board looks to support open and transparent relationships with all stakeholders. The Board considers the health and wellbeing of colleagues and promotes diversity and inclusivity within our workforce."
"We actively engage with our core stakeholder groups to ensure their views inform our business strategy, understand their priorities, and use their feedback to shape our business. Colleagues play an integral role in delivering our success. We want to be a leading employer, supporting colleague wellbeing and career development. We want to attract and retain the talent required to support the future needs of our business. Great Place to Work annual employee engagement survey, feedback from monthly Colleague Forum meeting, bi-monthly video calls with CEO and management team covering strategy, performance and activities, and a wellbeing campaign to support colleagues largely working from home has run throughout 2020. Our partners are essential in allowing customers to have options to redeem our products. Having a broad range of partners strengthens the attractiveness of our proposition. Feedback from regular review meetings through dedicated partnership team, redemption reporting and management information, and operational updates are key to our engagement with partners. We seek to have two-way dialogue with customers to understand their needs and ambitions. Delivering a great customer experience is key to building advocacy. We want to understand how they experience our products and services; and where improvements can be made. Customer insight and analysis, feedback to colleagues, contact centres and external data sources, regular customer reports produced for management, and customer segment owners assigned in the business to develop plans and strategy are part of our customer engagement. Having good relationships with suppliers ensures we receive the services needed to support our business. We want to maintain continuity of critical services. New Head of Procurement reviewing overall approach and policy in place to always pay suppliers on or before the agreed term are part of our supplier engagement. We want to meet our regulatory obligations and provide trust to customers as a regulated entity. Regular returns, engagement with the Financial Conduct Authority formally and informally, and participation in consultation responses as a Group or as a member of industry bodies are part of our engagement with regulatory bodies. We are committed to supporting our local communities and understand any changes and impacts to our business from local and central government activity. We aim to be a responsible corporate citizen in contributing to all aspects of society through colleague volunteering, engagement with local business groups, and an ESG plan that considers the interests of the communities in which the business operates and potential impacts on the environment. Significant decisions in 2021 include the decision to exit hamper production and contract packing in the year. This had been deemed a non-core, legacy part of business, despite it having been the key activity of the business when originally founded around 50 years ago. The Board’s strategy has been to re-focus the business on its core, more profitable activities of prepayment, gifting and engagement, and to build the Group’s digital capability, in order to lay strong foundations for future years of growth. Set against this context, hamper production was a declining business. During the pandemic, there were additional factors to consider as it became clear that it would be difficult to protect the health of our people during the peak period of hamper production whilst maintaining safe social distancing guidelines. There was also potential for disruption to the broad supply chain from COVID outbreaks. An option to sell this part of our business was preferred to minimise the risk of redundancy to impacted colleagues. The Board ensured plans were in place to fully engage with colleagues, and entered into a period of consultation where there was an opportunity to put forward views and alternatives. The Board also felt it was important that colleagues were supported with a smooth exit from the business as well as to prepare those impacted by redundancy. Having originally set out our strategy to re-focus the business in late 2018, we updated shareholders of this significant decision in a regulatory news service update as part of our full year results announcement. This included the wider context of how the Board had reached its decision and how it supported our long-term plans to focus on the more profitable core business for the future where there are opportunities for growth. We recognised that some customers would be disappointed by the outcome of this decision. However, the Board also understood that the company could continue to offer customers help with saving towards the cost of their Christmas groceries and merchandise through other products, which should reduce the impact."
"The Board ensured that plans were in place for all impacted customers to be contacted to let them know the rationale for the decision and to offer alternative ways that the Group could continue to support them. The Board understood that a large number of partners, such as suppliers, were impacted by this decision. These would also be dealing with similar challenges due to COVID. The Board ensured that partners were informed as early as possible, so that they could put in place plans to mitigate the impacts of the decision. By making the decision at an early stage, we were able to avoid any situation where we might not be able to deliver for customers, which would have coincided with subsequent rises in Coronavirus cases in the autumn and winter of 2020. Risk from not being able to deliver on customer orders when Christmas came closer, and when they would have had less time to make alternative arrangements. Outreach with all stakeholders was handled sensitively given it was the heritage of our business. The Board took the decision to sell its brand engagement agency, FMI, during the financial year to Neon Agency Ltd. The Board is focused on simplification of the business as a key part of its strategy. Its future plans are to grow three core lines of more profitable business: prepayment, gifting, and engagement. While FMI is an expert in brand engagement, the majority of its activities were not in the Group’s core areas of focus, so the Board took the decision to explore options to dispose of the business. Shareholders: The Board has communicated with shareholders since late 2018 about the Group’s focus on the three core lines of business which it believes will offer future years of sustainable growth, and therefore support shareholder value. The decision to sell FMI was taken as another step in line with that strategy. Colleagues: The Board recognized that this would impact a small number of colleagues employed by FMI and sought to achieve the best possible outcome for them. The Board also understood the challenges of this exercise being carried out while colleagues were working remotely during the pandemic. The Board sought an acquirer that would be a good fit for FMI in terms of alignment of business and location, allowing for the smooth transfer of all employees. It also made sure we remained true to the company’s Trademark Behaviours, one of which is Empathy, throughout the process. Customers: FMI’s customers include large, global brands which it supports through brand, incentives, and events. The Board ensured that customer disruption was minimized where possible. As part of a wider range of activities that have simplified the business during the year, the Board believes management can now focus its efforts on driving the core business in markets which offer significant opportunities for future growth. A key element of the Group’s strategy to build a robust and scalable platform for future growth is to deliver a new Enterprise Resource Planning (ERP) system. Following the intensified focus on accelerating our digital plans in response to the pandemic, it needed to consider changes to the scope, delivery plan, and timeframe to ensure the ERP would support the more rapid evolution of the business. Due to the pandemic, we accelerated our digital plans. This meant that the original aims of the ERP programme needed to align with the progress the business had made in bringing forward initiatives as well as key learnings from its digital activities. Colleagues: The ERP is a major change programme in our transformation plan and its success is dependent on colleagues supporting the change. The Board ensured key colleagues involved in the programme directly, along with vital contributors, were consulted on the high-level changes, enabling their engagement to help deliver our altered plans and ensure more rapid adoption of the new systems. Shareholders: The programme will deliver a more reliable and scalable platform to support our future plans for growth. The focus placed on ensuring the revised plans were robust meant we retained our commitment to supporting sustainable, long-term growth, in line with the interests of our shareholders, while adapting to meet the Group’s rapidly evolving needs. Customers: The new ERP will deliver benefits through improved workflows. While we remained committed to this, the decisions made by the Board also strengthened the proposition for customers by aligning to changes in customer behaviour following the pandemic. The Board believed changes to the plan were necessary following the Company’s response to COVID."
"The revisions to the plan deliver better outcomes for all stakeholders in the long term, by better supporting a more sustainable and successful business through a more robust and scalable platform. We seek to build a sustainable future which benefits all. Our main areas of focus are the environment, our people, their wellbeing and workplace, as well as the communities in which they work and live, diversity and inclusion, and governance, including business conduct. Our company purpose is to create more joy in the world and this includes a commitment to being a responsible business. Our approach is embedded throughout the organisation and we always seek to bring a positive impact to all stakeholders, including the environment, through our activities. Minimising our environmental impact: Appreciate Group is committed to reducing its impact on the environment. Our carbon footprint has reduced considerably over the last 12 months following the disposal of our land and buildings in Birkenhead, where our presence has scaled back considerably to just around 20 people in our remaining fulfilment and redemption operation. Having only been in the new head office for several months prior to lockdown, we have been unable to develop accurate benchmarking of our energy usage and areas for potential efficiency on which to set future targets. As we return to the office later in the year, we will gain a better understanding and will set our future ambitions. However, we plan to implement LED lighting at the remaining site used in Birkenhead, following their successful introduction at Chapel Street in the previous financial year. The Group is also planning to implement an energy monitoring system for all its sites to provide more effective measurement and is seeking ISO 50001 certification. In preparation for the return of colleagues to the office, we have introduced a new flexible working policy which will enable them to work from home for part of their working week. We no longer require colleagues to be in the office each working day, and this will help both reduce our energy usage at the site and reduce emissions from colleagues’ travel to the office. At all our operations, we are determined to reduce our waste, energy, and water usage and will set appropriate targets to drive this when we have a full understanding of the impact of our operations following the changes made over the past 18 months. Our strategy is to develop our digital proposition which will help further reduce the use of paper products, and result in fewer plastic cards and reduced transportation and delivery, thereby supporting our aim to lower environmental impact. Gift cards are often an environmentally friendly gift option compared to physical gifts and offer businesses and consumers solutions that can help reduce their own impact. We recognise that demand remains for physical cards. We recently began a pilot using environmentally friendly paperboard, compostable cards, as a potential alternative to plastic. We will review the success of the exercise to consider the use of these more widely with customers. Throughout lockdown, we have remained determined to contribute positively on societal issues both locally and more broadly. We became an official partner of Everton in the Community during the year, building on earlier initiatives, such as donating hampers for distribution to families in the previous year. This relationship has deepened further and we have funded equipment for a new education programme that will help teach young people in the Liverpool City Region digital skills, such as coding. Appreciate Group’s contribution is expected to generate a societal value of over £470,000 and is being rolled out to over 60 schools. It will illustrate how tackling the skills gap that exists in young people in subjects such as technology can be addressed using innovative teaching methods. Supporting young people within the communities in which we operate will continue to be one of our areas of focus. We sponsored Everton in the Community’s Breakthrough Awards which seek to recognise achievements of young people who have made significant personal achievements. The physical awards event could not be held during the pandemic and has been rescheduled for later in 2021. The Group donated toys and gifts to Everton in the Community for families with children as part of an initiative that helped deliver more than 1,300 festive meals and gifts to those most in need at Christmas."
"We also donated office furniture which is no longer used following our exit from Valley Road to the charity, extending the equipment’s use lifetime and preventing it from going to waste. Supporting colleagues through uncertain times: Throughout the past year we have made colleague wellbeing a priority for the business. With the majority of colleagues working from home, regular insight was sourced through surveys and focus groups to understand their concerns and how and what support could be made available. This led to a range of wellbeing initiatives being developed such as podcasts, webinars, and guest speakers to help colleagues deal with challenges of remote working. This included promoting healthy habits in a digital world and support tools around physical wellbeing. To assist colleague financial wellbeing, anyone not able to work due to the impact of COVID was supported with extra measures such as additional paid parental leave, enhanced maternity, paternity, and sickness policies. With colleague annual leave take-up initially at lower levels than normal during the year, we encouraged colleagues to take time off to support their wellbeing, whilst allowing some flexibility through holiday carryover. Our Colleague Forum has been reinvigorated, with regular routines where representatives from across the company can share insights and raise questions, and input on organisational plans and decisions. A company-wide step challenge with colleagues being split into teams to compete over four weeks was held in January. This helped raise funds for charity whilst promoting physical health with participating colleagues making almost 18 million steps. We will look to build on our focus on health and wellbeing of our people in 2021 and we are exploring ways to broaden this commitment into our community as one of our future priority ESG themes. Great place to work: Appreciate Group was certified as a Great Place to Work for the period from October 2020 to October 2021. This was achieved in our first Great Place to Work employee engagement survey with almost nine in ten colleagues taking part. The survey measures engagement as a form of trust, providing an overall Trust Index score, which for the Group was 67 percent, above that for the average company in the UK. We want to continue this progress and have used the survey results to identify priorities. Our aim is to build on this and to maintain certification in 2021. Award-winning workplace: Our workplace was recognised with a prestigious award for Best Working Environment and Workplace Design at the Business Culture Awards. The accolade was for our head office move from Birkenhead to Chapel Street and the approach that was taken to enhance collaboration and create a joyful workplace in line with our company purpose. The awards showcase outstanding examples of organisational culture and were attended by some of the biggest brands in UK and global business such as Volkswagen, Lloyds Banking Group, Sainsbury’s, Tata, and Barclays. Helping disadvantaged groups: The pandemic has illustrated the important role gift cards can play in supporting disadvantaged groups within society. Appreciate Group has made an important contribution to the Government’s Free School Meals initiative, helping bring tens of thousands of meals to meet the needs of schoolchildren up and down the country at a time when the issue was elevated through the campaigning work of footballer Marcus Rashford. We have helped a number of charities by providing gift card solutions that enabled them to safely support vulnerable people during COVID, providing access to ways to shop for essentials. We also introduced a Volunteer Shopping Card to allow those who are vulnerable in society to send money in a safe, secure way digitally to a volunteer who could shop on their behalf. Supporting good causes: Our communities have never been as important as they were in the last year. Our approach needed to alter due to social distancing and remote working, but we have remained committed to doing good. Colleagues held a virtual coffee morning in aid of Children in Need, supported Christmas Jumper Day to raise funds for Zoe’s Place, a Wirral-based children’s hospice and long-term charity of choice for colleagues, and held activities to celebrate Red Nose Day. With company match-funding added this helped raise more than £1,000 for important causes. Going forward, and as colleagues return to the office, we will have a greater focus on supporting good causes. While our colleague volunteering scheme has been impacted as a result of lockdown, we will set targets for colleague involvement in the community once it is safe to do so."
"We continued to support All Together Now, a printed newsletter for people with disabilities which is distributed throughout the North West. Historically, we have sponsored the newsletter, which runs about five editions each year, but moved our commitment to advertising in the publication from 2021. To mark Random Acts of Kindness Day on 17 February, we donated an arts and crafts care package to Alder Hey Children’s Hospital for use with patients to help create joy in line with our purpose. We were the main sponsor of the cancelled 2020 Liverpool 5k Santa Dash, usually held in December each year. This partnership was carried forward to 2021 due to COVID. It provides an opportunity for brand activation while supporting health and wellbeing in our local community. We also sponsored a children’s football team; Ormskirk-based TQ Sports U9s began displaying the Appreciate Group logo on their jerseys and provided another opportunity for us to support young people and physical wellbeing. We are an active member of the Liverpool business community and engage locally with other organisations based in the City through networks and we support the Liverpool Business Improvement District which seeks to create the best possible local trading environment. Diversity and inclusion: We are committed to creating a workplace and culture that is welcoming and inclusive for all. We value the contribution of all our people and recognise that diverse backgrounds, experiences, and ideas enable us to grow and remain resilient. Our Board currently has a 40 percent female representation. The Board is made of five people of which our Chairman is female and a former commissioner of the Equality and Human Rights Commission, along with a non-executive director, who is Chair of the Remuneration Committee. In 2020, we became signatories of the HM Treasury Women in Finance Charter and committed to promoting gender balance within our senior management. We have a published target to achieve a 40 percent share of women in senior management positions by August 2022, from 38 percent in September 2020. We are making good progress and as of March 2021 our percentage of women in senior roles stood at 41.2 percent. Our aims also take account of gender representation in the digital skills market and skills we will require as a future digital-first business. We are also pleased to report improvements on the gender pay gap. The hourly mean pay gap has reduced by over 2 percent from 24.0 percent to 21.9 percent. There have also been a number of key female appointments across the business, and the percentage of women receiving a bonus has almost doubled. We continue to focus on further positive change. Diversity metrics are key to our ability to track progress and we are investing time into developing these metrics this year. Diversity, equality, and inclusion have been embedded throughout our recruitment lifecycle and we work proactively with recruitment partners to ensure shortlists for all roles across the business are well balanced. In 2020, we introduced a gender bias decoder into all of our job role advertisements and developed interview guides and competency frameworks to eliminate unconscious bias. A diversity, equality, and inclusion module was added to the annual mandatory training calendar for all colleagues within the organisation, ensuring every person undergoes learning to strengthen their awareness. Treatment of the top seven statements shows that diversity and inclusion metrics factored as three of the top scores, with fair treatment regardless of race receiving a 97 percent favorable score, sexual orientation receiving a 96 percent favorable score, and gender receiving a 91 percent favorable score. We also signed up to the Business Disability Forum's Accessible Technology Charter, making a commitment to an inclusive technology strategy and improving accessibility. Governance The Group has a zero-tolerance approach to modern slavery, has policies in place to support this, and complies with the Modern Slavery Act 2015 by making a regular public statement on our website, appreciategroup.co.uk. As part of our approach to tax, we do not participate in aggressive tax planning, seek to structure transactions in an artificial manner, or condone abusive tax practices that would contravene our trademark behaviors and culture. We always act with integrity and transparency in our relationship with HM Revenue and Customs and all other tax authorities. The Group employs a comprehensive approach to identifying and articulating risks to the business, supported by our Risk Management Framework, which integrates a broad range of risk categories directly into the management process. The framework is overseen by the Risk Committee."
"We have a defined risk appetite that enables us to effectively manage the potential upside and downside risks to our strategy. A number of our principal risks correspond to our growth strategy, which includes our continued development of new propositions and services to meet a broader range of customer needs. We are committed to ensuring that the behaviors and practices of our organization reflect our high business standards and compliance with applicable laws and standards. Looking forward, we are determined to build on the progress made in adding value to society. For our customers and stakeholders, we are exploring ways we can enhance our proposition and offer solutions that meet their needs. We will pursue an energy efficiency and positive environmental strategy and look to set appropriate and ambitious targets once we have been able to develop consistent benchmarks following changes to the organization. We plan to adopt the Task Force on Climate-related Financial Disclosures recommendations into our risk management framework and use learnings from our experiences during COVID-19 to help us mitigate potential future risks and crises. Our Community Strategy will be enhanced to increase our community investment, and we will identify suitable volunteering opportunities for colleagues. Our focus on colleague wellbeing and employee experience will be maintained, and we will continue to develop initiatives that raise awareness and understanding around diversity and proactively enhance our own diversity and inclusion practices. 28 August 2018 and is the Chief Financial Officer. He is an Associate of the Chartered Institute of Management Accountants and joined the Group from Assurant Europe where he was CFO. Assurant Europe is the European subsidiary of Assurant Inc., the US-listed global insurance provider. His previous roles include, from 2011 to 2013, Finance Director of Lifestyle Services Group, an insurance administrator and outsourcing provider and, from 2009 to 2011, Commercial Finance Director of Shop Direct Group. Before then he spent over 10 years in the travel industry in many finance and general management roles including Finance Director of Airtours and Managing Director of Going Places. He has a service agreement with the Company entered into on 11 May 2018 which requires six months’ notice of termination by either party. John Gittins Non-Executive Director John was appointed to the Board as a non-executive director on 22 September 2016 and as Senior Independent Director on 25 September 2019. He is a graduate of the London School of Economics and is a Chartered Accountant. He has a service agreement with the Company entered into on 22 September 2016 which requires three months’ notice of termination by either party. He serves as independent non-executive director and chairman of the audit committee on the Board of Nichols plc, the AIM listed international soft drinks business. In addition, he is finance trustee of Claire House Children’s Hospice. Previously, he worked for over 20 years in an executive capacity, operating as CFO across a number of sectors within UK listed, multi-site, national and international businesses. Mr. Gittins is chairman of the Group’s audit committee and a member of the remuneration and nomination committees. Sally Cabrini Non-Executive Director Sally was appointed to the Board as a non-executive director on 25 September 2019. Sally is a graduate of Anglia Ruskin University and a Fellow of the Chartered Institute of Personnel and Development. She has a service agreement with the Company entered into on 25 September 2019 which requires three months’ notice of termination by either party. She is also a non-executive director and chair of the remuneration committee at First Group plc. Her executive experience includes human resources, transformation and IT roles with Interserve Group Limited and United Utilities plc. Mrs. Cabrini is chairman of the Group’s remuneration committee and a member of the audit and nominations committees. Appreciate Group plc Annual report and accounts 2021 The directors submit their report for the year ended 31 March 2021 for Appreciate Group plc, registration number 01711939. Profit and dividend The Group profit for the financial year, after taxation, was £0.9 million. The directors have declared a dividend as follows: Approved interim dividend of 0.40 pence per share, proposed final dividend of 0.60 pence per share, total ordinary dividend of 1.00 pence per share. Principal activities A statement describing the business activities of the Company and its subsidiary undertakings is set out on pages 16 to 19 with comments on current and future developments in the Chairman’s Statement on pages 14 to 15."
"The principal subsidiary undertakings and their activities are set out in note 8 to the accounts. Business review A review of the Group’s activities over the financial year is contained in the Chairman’s Statement on pages 14 to 15 and in the Chief Executive’s Review on pages 16 to 19. Share capital Issue of new ordinary shares No awards were made under the 2009 long term incentive plan during the year so no new shares were issued. Grant of Strategic Growth Plan awards The annual LTIP award has been replaced, for the CEO and the CFO, with a one-off Strategic Growth Plan, which will operate over a five year performance period from 1 October 2018 to 30 September 2023. Regular LTIP awards will not be made to the participants of the SGP during this period. The SGP will provide participants with a pool of shares with a value equal to 10% of any cumulative shareholder value created above a compound hurdle rate of 10% per annum. The CEO will be allocated a 45% share of the pool and the CFO will be allocated a 25% share of the pool. Initially, only the CEO and CFO will participate in the SGP. The remaining 30% of the SGP pool will be reserved for allocation to new participants. An overall cap on the maximum number of shares that can be granted under the SGP is set at 5% of the outstanding share capital at grant to prevent excessive payouts or dilution. This will therefore sit outside of the current share plan limits and therefore be in addition to the current 10% limit that applies for LTIP and SAYE awards. The Committee will have discretion to adjust the value of the award at the end of the measurement period, for example to prevent perverse outcomes which are as a result of factors outside of participants’ control, including a change of control or other merger and acquisition activity. Employee Share Save Scheme The directors are eligible to participate in the SAYE, details of which are shown in the Remuneration Report. Major shareholders At the date of this report the following had notified interests in the share capital of the Company of 3% or more: Premier Miton Group plc 20,075,204 shares, Schroders plc 18,374,612 shares, Artemis Investment Management LLP 15,996,056 shares, SFM UK Management LLP 15,660,000 shares, Unicorn Asset Management Limited 13,208,797 shares, Investec Wealth & Investment Limited 9,428,815 shares, The Ramsay Partnership Fund Limited 7,486,300 shares, Investec Asset Management Limited 7,250,000 shares, Cazenove Capital Management Limited 6,925,875 shares, Janus Henderson Group plc 5,890,047 shares. Directors’ Report Appreciate Group plc Annual report and accounts 2021 Directors and their interests The directors who were in office during the year ended 31 March 2021 are shown on pages 42 and 43. Details of directors’ and connected persons’ share interests in the Company are shown in the Remuneration Report. Going Concern Disclosures The financial statements are prepared on a going concern basis. The Group has access to a £15 million Revolving Credit Facility that is available until August 2025. A further £10 million of uncommitted funds is available via an accordion facility attached to the RCF however this is uncommitted. The Group has not drawn down on the RCF in the year to 31 March 2021 nor to the date of signing these financial statements. The Group is required to comply with covenants attached to the RCF. These covenants are: Interest Cover in respect of any relevant period ending on or after 31 March 2021 shall not be less than 4.0:1. Adjusted Leverage in respect of any relevant period ending on or after 30 September 2020 must not exceed 3.0:1. PPP T Balance on each Quarter Date must not be less than 1.0:1. The Directors have modelled management’s best estimate of financial results for the Going Concern assessment period to 31 December 2022 and adopted the plan as the Board approved budget. Alongside the Board approved budget, the Board have identified and approved cost control measures; and together these form our Base Case. The Base Case assumes: A decrease in Year 1 billings compared to 2020/2021 actuals, with then an 8% increase in Year 2. Christmas savers order book £170 million in both years. A reduction in paper redemptions compared to 2020/2021, followed by a significant decrease in Year 2 in line with the decrease in paper product mix. Increased card and digital redemptions in both years."
"Product Mix: Paper billings for Consumer assumed to be 21% in Year 1 and 15% in Year 2; paper billings for Corporate assumed to be 7% in Year 1, with minimal levels assumed in Year 2. Remaining billings are assumed to be card/digital. A flat cost base compared to the prior year for administrative expenses and staff costs in both years. Capital spend is restricted to that required to complete the ERP system and only further essential IT development in Year 2. Dividend payment of £1.5 million is assumed in October 2021 in line with our stated dividend policy, with future dividend payments subject to trading results and so not modelled in the Base Case. The Base Case requires the group to draw down on the RCF in the period, with the lowest headroom being £4.9 million in September 2022. The Directors have modelled six plausible downside scenarios to test the sensitivity of the Base Case. The scenarios are as follows: Corporate and Gifting billings remain flat against the 2020/2021 actuals. Christmas Savers order book £165 million in Year 1 and £150 million in Year 2. A combination of 1 and 2 above. An additional 10% shift from paper to digital products above the Base Case in Year 1 and 2. 25% faster redemption of paper products and 25% slower redemption of card and digital products than Base Case in Year 1 and 2. A combination of 3, 4 and 5 above. In scenarios 1 to 5 the Group would not breach its headroom in the period to 31 December 2022, and would be fully compliant with all of its RCF covenants. In the most extreme downside scenario 6, the Group would breach its headroom by £2.3 million, but would be fully compliant with all of its RCF covenants in the period to 31 December 2022. Current trading for the year to mid-June 2021 shows billings levels lower than the Base Case. When the percentage reduction in current billings versus Base Case are run in conjunction with current trends on product mix and redemptions, the outcome is not as severe as sensitivity 6, and the Group remains compliant with its covenants and does not breach its headroom. Management have identified mitigating actions, additional to those in the Base Case, to provide headroom, if necessary during the going concern period. These include: Cost saving initiatives that would result in cash savings of £2.3 million in the going concern period, relating to reductions in administrative and staff costs. A decision will be taken at the end of July 2021, dependent on trading, with implementation from October 2021 should they be deemed necessary. Two strategy changes, which could generate significant additional headroom in key months. The first reduces marketing spend in respect of Christmas Savers whilst maintaining the paper voucher mix; and the second maintains the paper voucher mix currently being experienced in our Corporate customer base by avoiding moving Corporate accounts away from paper vouchers. These will be implemented with immediate effect. When overlaying these mitigating actions and assumed outcomes, which includes an associated reduction in Christmas Savers Year 2 order book to £145 million; these provide significant headroom across the going concern period, with the lowest forecast headroom in Year 1 being £5.2 million in September 2021, and lowest forecast headroom in Year 2 being £6.3 million in July 2022. Management have modelled a number of reverse stress tests which consider whether the reduced marketing spend could more severely impact Year 2 Christmas Savers billings; and consider adverse movements on the Christmas Savers product mix in Year 1. Assuming product mix remains in line with Base case and the current Year 1 order book then it would take a 40% reduction against Base case in the order book in year one and 56% reduction against Base case in Year 2 for the Group to run out of headroom. The Group would remain compliant with its covenants, as they are less sensitive than the liquidity headroom to these changes in billings and product mix. The Board consider those variances over Base Case to be implausible. Appreciate Group plc Annual report and accounts 2021 Conclusion Having carefully considered the Base Case, downside scenarios, current trading and trends since the year-end, and further mitigating actions available, as well as the £15 million committed RCF, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the period to 31 December 2022."
"Therefore, the directors continue to adopt the going concern basis of accounting in preparing the consolidated financial statements. Employee Engagement The Group is committed to involvement with its employees and has continued to keep them informed on matters that affect them as employees as well as other factors relating to the performance of the Group. This is achieved through a series of formal and informal meetings and internal communications. During the year, the Group launched a new employee forum where employee representatives are consulted on a monthly basis on matters of interest as well as the factors affecting the Group’s performance. The Group uses a mobile enabled internal communications platform called Connect to share information regularly. Employees are also kept informed on business matters through regular all staff calls. During the year the Group carried out its first Great Place To Work employee engagement survey, for which it received an accreditation based on the results. The Group has prioritised actions based on the survey to help boost employee engagement further, with particular focus on recognition and new reward systems. The Group is committed to motivating employees and encourage them to become involved in the Company’s performance via its Employee Share Save Scheme when opportunities to join are open. The Group is now placing more emphasis on employee learning and development. It introduced mandatory learning covering a range of relevant topics such as diversity, anti-fraud and bribery and phishing. A new management development programme has also been introduced to enhance organisational leadership. The Group places significant importance on employee wellbeing and during the year executed a campaign to share tips and techniques with employees as well as bringing in external guest speakers to support employees, the majority of whom have been working from home. The Group believes in equal opportunities regardless of gender, age, religion or belief, sexual orientation, race and disability. This approach is supported by our commitment to providing equal opportunities to our current and potential employees along with fair employment practices. Further information on employee engagement is set out on pages 31 and 33 of the Strategic report. Market value of land and buildings As at 31 March 2021, in the opinion of the directors, the market value and book value of the land and buildings of the Group are not significantly different. Political and charitable contributions During the year ended 31 March 2021 the Group contributed to charity £33,000. These donations were made primarily to local charities supporting local communities. There were no political contributions. Financial instruments The Company’s financial risk management policies and objectives, including the exposure to market risk, credit risk and liquidity risk are set out in note 26 to the accounts. Creditor payment policy For all trade creditors, it is the Group’s policy to agree the terms of payment at the start of business with that supplier, ensure that suppliers are aware of the terms of payment, and pay in accordance with its contractual and other legal obligations. At 31 March 2021 the parent company had no third party creditors. Directors’ liabilities During the year the Company had in place appropriate insurance cover in favour of one or more directors of the Company, against liability in respect of proceedings brought by third parties, subject to the conditions set out in section 234 of the Companies Act 2006. This was also in place for the prior year. Subsequent events There have been no important events affecting the group which have occurred since the end of the financial year. Business relationships with key stakeholders See pages 24 to 27, our S172 statement, for details of business relationships with key stakeholders."
"2021 energy and carbon report for Appreciate Group plc Emissions Scope Global 12 months ending 31 March 2021 Tonnes CO2e UK 12 months ending 31 March 2021 Tonnes CO2e Global 12 months ending 31 March 2020 Tonnes CO2e UK 12 months ending 31 March 2020 Tonnes CO2e Emissions from combustion of gas 118 118 227 227 Emissions from combustion of fuel for transport purposes 0.3 0.3 2 2 Emissions from purchased electricity 382 382 485 485 Emissions from other activities which the company own or control including operation of facilities 3 3 3 3 Scope 1 plus 2 503 503 717 717 Emissions from business travel in rental cars or employee-owned vehicles where the business is responsible for purchasing the fuel 1 1 27 27 Scope 1 plus 2 plus 3 504 504 744 744 Underlying energy 2,283,887 2,283,887 3,255,336 3,255,336 Tonnes CO2e per million billings (Scope 1 and 2) 1.2 1.2 1.7 1.7 Tonnes CO2e per million turnover (Scope 1, 2, and 3) 1.2 1.2 1.8 1.8 Data based on 12 months up to 31 March 2021. Directors' Report continued Appreciate 36523 AR2021 Book Prf11.indb 46 Appreciate 36523 AR2021 Book Prf11.indb 46 28 July 2021 16:51 28 July 2021 16:51 Strategic Report Corporate Governance Financial Statements 47 Appreciate Group plc Annual report and accounts 2021 Streamlined Energy and Carbon Reporting In accordance with The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, we have prepared a Streamlined Energy and Carbon Report for the financial year ending 31 March 2021. Our SECR disclosure presents our carbon footprint across Scopes 1, 2, and 3, along with an appropriate intensity metric and our total energy use of electricity and gas. Reducing our carbon footprint Appreciate Group is committed to reducing its impact on the environment. Our underlying energy usage reduced by 30% in the financial year and, while we are pleased with this reduction, it is important to note that it has been helped by a combination of significant factors. Our operational presence at the site at Valley Road, Birkenhead reduced considerably during 2020 and early 2021 following the decision to cease hamper production and third-party contract packing. Our operations are now significantly smaller and we lease the space having sold the land and premises during the year. The scaled down presence was also driven by our move to the new head office in Liverpool in late 2019. With the majority of our colleagues working from home during the pandemic, use of our head office has been limited throughout the financial year. Gross emissions have fallen by 30% as a result of these changes to our business and the impact of COVID. While we are focused on reducing our energy usage and aim to be a leader for sustainability in the gift card industry, we have been unable to develop consistent benchmarks for our energy use on which to base future targets. As we return to the office, alongside a regular period of our current and future requirements at Valley Road, we will focus on gathering the insight to set realistic targets for the future. This will also help improve our understanding of exposure to the risks of climate change. Future energy efficiency plans We plan to implement LED lighting at the remaining site used in Birkenhead, following the successful introduction at Chapel Street in the previous financial year. The Group is also planning to implement an energy monitoring system for all its sites to provide more effective measurement and will seek ISO 50001 certification. In preparation for the return of colleagues to the office, we have introduced a new flexible working policy which will enable colleagues to work from home for part of their working week. This will help both reduce our energy usage at the site. Our future strategy is focused on developing our digital proposition which will help further reduce use of paper products, and result in fewer plastic cards and reduced transportation and delivery, thereby supporting our aim to lower environmental impact. We recently began a pilot using environmentally friendly paperboard, compostable cards, as a potential alternative to plastic. We will review the success of the exercise to consider use of these more widely with customers. Energy footprint Electricity 76% Natural gas 23% Fugitive emissions 0.6% Owned transport 0.1% Staff vehicles 0.3% Methodology A location-based calculation of CO2 equivalent emissions was made using energy data collected from energy suppliers. Energy and carbon from transport were modeled using different average UK vehicles."
"A screening method was used to model the fugitive emissions from refrigerant systems. Of the disclosed energy use, 6,521 kWh, or 0.3%, is on a net calorific value basis. The methodology is consistent with the 2020 edition of the UK Government GHG Conversion Factors for Company Reporting. Directors' statement under section 418 of the Companies Act 2006 - Disclosure of information to auditors The directors who held office at the date of approval of this Directors' Report confirm that, so far as they are aware, there is no relevant audit information of which the Company's auditors are unaware; and each director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information. Auditors In accordance with section 489 of the Companies Act 2006, a resolution for the reappointment of Ernst and Young LLP as auditors of the Group is to be proposed at the forthcoming AGM. By order of the Board. Tim Clancy Chief Financial Officer 28 June 2021 kWh for the 12 months ending 31 March 2021 Electricity 76% Natural gas 23% Fugitive emissions 0.6% Owned transport 0.1% Staff vehicles 0.3% Appreciate 36523 AR2021 Book Prf11.indb 47 Appreciate 36523 AR2021 Book Prf11.indb 47 28 July 2021 16:51 28 July 2021 16:51 48 Appreciate Group plc Annual report and accounts 2021 For further information see page 49 For further information see page 49 For further information see pages 50 to 51 For further information see page 52 Remuneration committee Nomination committee Audit committee Risk management committee The Board Committees of the Board The Board The Group is controlled through its Board of directors. The Board's main roles are to provide entrepreneurial leadership of the Group, to set the Group's strategic objectives and to ensure that the necessary financial and human resources are in place to enable them to meet those objectives, to review management performance, to set the Company's standards and values, and to ensure that the Company's obligations to its shareholders and others are understood and met. The Board, which meets at least five times a year, has a schedule of matters reserved for its approval. It meets on other occasions as necessary. The Board has appropriate insurance cover in respect of legal action against its directors. Corporate Governance The specific responsibilities reserved to the Board include setting Group strategy and approving an annual budget and medium-term projections, overseeing the implementation of the agreed strategies and policies of the Group, monitoring the liquidity risk of the business and the going concern basis of preparation, reviewing operational and financial performance, approving entering into financing arrangements, approving major acquisitions, divestments and capital expenditure, reviewing the Group's systems of financial control and risk management, ensuring that appropriate management development and succession plans are in place, developing and implementing risk management systems, reviewing the environmental, health and safety performance of the Group, approving appointments to the Board and the Company Secretary, approving policies relating to directors' remuneration and the severance of directors' contracts, and ensuring a satisfactory dialogue takes place with shareholders. Appreciate 36523 AR2021 Book Prf11.indb 48 Appreciate 36523 AR2021 Book Prf11.indb 48 28 July 2021 16:51 28 July 2021 16:51 Strategic Report Corporate Governance Financial Statements 49 Appreciate Group plc Annual report and accounts 2021 Remuneration committee Nomination committee Members 04 Meetings 00 During the year the nomination committee comprised Laura Carstensen (Chairman), Sally Cabrini, John Gittins, and Ian O'Doherty. The nomination committee's terms of reference are available from the Company Secretary and are displayed on the Group's website. The nomination committee meets if a vacancy arises or need is identified to alter the mix of skills and experience on the Board and to review succession planning. The nomination committee's policy on diversity is encapsulated by the values set out in the Company's policy on equality and diversity. During the year the remuneration committee comprised Sally Cabrini (Chairman), Laura Carstensen, and John Gittins. The remuneration committee met formally five times during the year. The remuneration committee's principal responsibilities are setting, reviewing, and approving individual remuneration packages for executive directors and the Chairman including terms and conditions of employment and any changes to the packages, recommending and monitoring the level and structure of remuneration for senior management, approving the rules, and launch, of any Group share, share option or cash-based incentive scheme, and the grant, award, allocation, or issue of shares, share options or payments under such scheme."
"In addition, the remuneration committee periodically reviews the Group's remuneration policy in relation to its competitors and industry norms, compensation commitment, and contract periods. The remuneration for the non-executive directors is determined by the executive directors. The remuneration committee's terms of reference are available from the Company Secretary and are displayed on the Group's website. The directors' Remuneration Report is set out on pages 54 to 57 of the annual report. Members 03 Meetings 05 Appreciate 36523 AR2021 Book Prf11.indb 49 Appreciate 36523 AR2021 Book Prf11.indb 49 28 July 2021 16:51 28 July 2021 16:51 50 Appreciate Group plc Annual report and accounts 2021 Members 03 Meetings 05 Audit committee During the year the audit committee comprised our non-executive directors. These were John Gittins (Chairman), Laura Carstensen, and Sally Cabrini. John Gittins is a qualified Chartered Accountant and all committee members have significant, senior experience within PLC environments. Ian O'Doherty, Tim Clancy, and the Group's internal and external auditors attend meetings of the audit committee by invitation. The audit committee met five times during the year. The audit committee usually reviews its terms of reference annually and recommends to the Board any changes required as a result of the review. The audit committee's terms of reference are available from the Company Secretary and are displayed on the Group's website. Corporate Governance continued In the financial year to 31 March 2021, the audit committee discharged its responsibilities by reviewing the Group's draft financial statements and interim results statement prior to Board approval and reviewing the external auditors' detailed reports thereon, reviewing the appropriateness of the Group's accounting policies, reviewing regularly the potential impact in the Group's financial statements of certain matters, reviewing and approving the audit fee and reviewing non-audit fees payable to the Group's external auditors, reviewing the external auditors' plan for the audit of the Group's accounts, which included key areas of audit focus, key risks on the accounts, confirmations of auditor independence and the proposed audit fee and approving the terms of engagement for the audit, reviewing the plan for internal audit work, and reviewing the reports arising from this work, reviewing risk and compliance processes, including a review at each meeting of principal risks and key mitigating controls, which informs the scope of internal audit work, reviewing the arrangements for the external audit of our compliance with safeguarding requirements under applicable e-money regulations and Financial Conduct Authority expectations as set out in its Approach Document and further Guidance, and considering the results to date of the ongoing safeguarding audit and approving management's proposed response to the issues identified. The audit committee, at least annually, meets the external auditors, without management, to discuss matters relating to its remit and any issues arising from the audit. Under its terms of reference, the audit committee monitors the integrity of the Group's financial statements and any formal announcements relating to the Group's financial performance, reviewing any significant financial reporting judgments contained in them. It reviews accounting papers prepared by management which provide details on some of the main financial reporting judgments, as well as reports by the external auditors on key areas of focus for the half-year and full-year reports. During the year the audit committee reviewed key judgments and reports relating to revenue recognition. The Group's revenue recognition policy, as described on pages 75 to 78, requires estimation of provisions for unredeemed vouchers and cards. Management uses historical data over a number of years, as well as current trends, to prepare these estimates. The committee was satisfied that the methodology used was consistent with previous years and remains appropriate. Appreciate 36523 AR2021 Book Prf11.indb 50 Appreciate 36523 AR2021 Book Prf11.indb 50 28 July 2021 16:51 28 July 2021 16:51 Strategic Report Corporate Governance Financial Statements 51 Appreciate Group plc Annual report and accounts 2021 Accounting for leases The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The committee considered the key assumptions relating to lease terms applied by management and were comfortable with the conclusions."
"Impairment of intangible assets Significant judgments and estimates are applied in determining the carrying value of the assets, including assumptions made in respect of the status of the program each asset relates to, and there may be a range of possible outcomes when a program is complex. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The committee considered the key assumptions used in assessing the value of the assets and any potential impairment and were comfortable that they were appropriate. Breakage For multi-retailer redemption products where the end user has no right of redemption, the Group may expect to earn a breakage amount. In order to calculate the expected breakage amount, the Group estimates how many products will be fully redeemed and how many will be partially redeemed. For those which are partially redeemed, the Group estimates projected balances remaining on the products at expiry. The committee has reviewed the estimates used in these calculations and is satisfied with the methodology used. Going concern The committee has reviewed the going concern assessment prepared by management, which covers the board approved base case forecast for trading for the period to 31 December 2022, along with a range of downside scenarios and reverse stress tests. The assessment focuses on the ability of the Group to operate within the financial resources and covenants provided by its revolving credit facility. Under the base case and downside scenarios considered, taking into consideration the Board approved mitigating actions, the facility and headroom were considered sufficient and covenant compliance demonstrated. Further details of the going concern review are given on pages 45 and 46. External audit of safeguarding practices One of the Group's wholly-owned subsidiaries, Park Card Services Ltd, is authorized and regulated by the Financial Conduct Authority as an electronic-money institution, with permission to issue electronic money and provide payment services. The FCA has been conducting a review of the e-money and payment service provider sector over a number of months into the effects of the coronavirus pandemic on e-money firms, with a focus on ensuring customer funds are appropriately protected. In July 2020, the FCA introduced a requirement for firms in the payment services and electronic money sectors to have an annual audit of compliance with safeguarding requirements, with the findings to be reported to the FCA. The committee has considered the results to date from the ongoing audit of PCS' safeguarding practices, which identified specific administrative and procedural practices that did not comply with applicable regulations or meet FCA expectations as set out in its Approach Document, although none of these have resulted in any loss of funds. The committee also reviewed and approved management's action plan arising from these findings. Having regard to the FCA's Principle 11 that requires firms to deal with its regulators in an open and cooperative way, PCS will inform the FCA of these findings in advance of the final report being issued, and, as part of management's action plan, has either already made changes necessary to address the matters identified or is in the process of doing so. The committee will continue to monitor any further sector-wide areas for focus, and the FCA has stated its intention to update its Approach Document in this area. The audit committee is responsible for monitoring the external auditor's independence and objectivity, the effectiveness of the external audit process and making recommendations to the Board in relation to the appointment, reappointment, and remuneration of the external auditor. It is responsible for ensuring that an appropriate relationship between the Group and the external auditors is maintained, including reviewing non-audit services and fees. EY have been the Company's external auditor for nine years and the committee remains satisfied with their effectiveness and independence. The committee has adopted a policy of tendering external audit services at least once every ten years. Accordingly, the committee intends to conduct an external audit tender process within the next twelve months to select an external auditor to start from the 2022 financial year, subject to the phasing of significant finance system changes arising from the Group's ERP program. The audit committee reviews arrangements by which staff of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters referred to as whistle-blowing."
"The audit committee's objective is to ensure that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action. There were no instances of whistleblowing reported during the period. The audit committee monitors regularly the non-audit services being provided to the Group by its external auditors in line with its policy on non-audit work performed by the auditors. The policy prohibits the external auditors from undertaking certain work and provides that other categories of non-audit work must be submitted to the audit committee for approval prior to engagement. The audit committee keeps under informal review the need for the Group to have an internal audit function. Due to the size and scope of the business, the audit committee has recommended to the Board that it does not currently consider it appropriate for the Group to have an internal audit function. Over the year the management team continued to use. BDO LLP will carry out internal audit reviews to examine areas of management and control risks. These reviews are part of an ongoing program of internal audit work. The committee monitors the effectiveness and independence of BDO LLP in conducting this work and is satisfied with their performance. The Board continues to keep under review the need for a more formally constituted internal audit program. The audit committee considers any matters in relation to the principal risks, as determined by the risk management committee. The following table sets out the number of scheduled meetings of the Board and its committees during the year and individual attendance by Board members at these meetings. Attendance at the meetings by non-member directors is not shown: Group Board: 9 Audit committee: 5 Remuneration committee: 4 Nomination committee: 0 Senior Independent Director: The Board appointed John Gittins as Senior Independent Director on 25 September 2019. He is always available to meet shareholders on request and to ensure that the Board is aware of any shareholder concerns not resolved through the existing mechanisms for investor communication. The Board currently comprises the independent Non-Executive Chairman, two independent non-executive directors, and two executive directors. The names of the directors, together with their biographical details, are set out on pages 42 and 43. During the year, the risk management committee comprised members of the senior leadership team. The risk management committee meets on a monthly basis during the year. The risk management committee’s terms of reference include: - Identification of business risk throughout the Group’s operations - Determination of the controls necessary to manage identified risk - Evaluation of the effectiveness of those controls - Continuous assessment and reporting to the Board The Board includes independent non-executive directors who constructively challenge and help develop proposals on strategy and bring independent judgment, knowledge, and experience to the Board’s deliberations. The independent directors are of sufficient caliber and number that their views carry significant weight in the Board’s decision making. The Board considers its non-executive directors to be independent in character and judgment. The independent Non-Executive Chairman and the independent non-executive directors have confirmed that, except for as noted below, none of them: - Has been an employee of the Company or Group within the last five years - Has, or has had within the last three years, a material business relationship with the Group apart from a director’s fee, participates in the Company’s share option or performance-related pay scheme, or is a member of the Group’s pension scheme, except as noted below - Has close family ties with any of the Group’s advisers, directors, or senior employees - Holds cross-directorships or has significant links with other directors through involvement in other companies or bodies, other than those disclosed in the directors’ biographical details on pages 42 and 43 - Represents a significant shareholder - Has served on the Board for more than nine years The directors are given access to independent professional advice at the Group’s expense when the directors deem it necessary in order for them to carry out their responsibilities. On appointment, directors take part in an induction program when they receive information about the structure and practices of the Group together with the Group’s latest financial information. This is supplemented by meetings with key senior executives and advisers."
"Throughout their period in office, the directors are continually updated on the Group’s business, the competitive and regulatory environments in which it operates, and other changes affecting the Group and the industry it operates in as a whole, by written briefings, meetings with senior executives, and attendance at external courses. There is a formal process for the annual evaluation of the Board. Areas covered are leadership, Board reports, effectiveness, accountability, remuneration, relations with shareholders, and Board committees. The remuneration committee considers individual director’s performance when it determines their forthcoming annual remuneration. Directors’ performance is under continual review and is measured against targets. The non-executive directors are subject to evaluation. The Board considers its arrangements for evaluation or appraisal are adequate to ensure effective governance given the size of the Company and its Board. Subject to the Company’s articles of association, the Companies Acts, and satisfactory performance, non-executive directors are appointed for an initial period of three years. Before the third and sixth anniversary of the non-executive director’s first appointment, the director discusses with the Board whether it is appropriate for a further three-year term to be served. The Company’s articles of association require that any director who was not elected or re-elected at either of the two preceding AGMs will retire from office and be eligible for re-election. The directors are responsible for preparing the annual report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group and parent Company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange, they are required to prepare the Group financial statements in accordance with International Accounting Standards in conformity with the Companies Act 2006 and have elected to prepare the parent Company financial statements on the same basis. Under Company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company 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 - State whether they have been prepared in accordance with International Accounting Standards in conformity with the Companies Act 2006 - Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The directors have decided to prepare voluntarily a directors’ Remuneration Report, adopting some of the best practice provisions in connection with preparation of such reports. The directors have decided to adopt the Quoted Companies Alliance Corporate Governance Code. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The directors believe that due to the nature of our business, slavery is unlikely to be an issue for our suppliers. All goods are sourced from reputable suppliers in the UK and any supplier of services is subject to a due diligence process. As a Group, we believe we are in compliance with the Modern Slavery Act 2015. By order of the Board, Laura Carstensen, Chairman, 28 June 2021. The Company Secretary is responsible for advising the Board through the Chairman on all governance matters. The directors have access to the advice and services of the Company Secretary who is responsible to the Board for ensuring Board procedures are complied with. The Company’s articles of association provide that the appointment and removal of the Company Secretary is a matter for the full Board. Regular reports and papers are circulated to the directors in a timely manner in preparation for Board and committee meetings."
"These papers are supplemented by information specifically requested by the directors from time to time. All executive directors receive monthly management accounts and regular management reports and information which enable them to scrutinize the Group’s and management’s performance against agreed objectives. The Board periodically invites executives to present on specific topics to allow the Board to take a more in-depth view. The Board believes that our culture is consistent with our strategic pillars of clarity, experience, productivity, and appeal. The Chairman gives feedback to the Board on issues raised by major shareholders. The AGM is attended by all directors, and shareholders are invited to ask questions during the meeting and to meet with directors after the formal proceedings have ended. The Group maintains a corporate website containing a wide range of information of interest to investors. Presentations are made to analysts and institutional investors following announcements to the stock exchange of the half-year and full-year results. Other ad hoc meetings are held with interested parties on request. The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. There is an ongoing process for identifying, evaluating, and managing the significant risks faced by the Group. These may be strategic, operational, reputational, financial, or environmental. The process is reviewed regularly by the Board. The directors have continued to review the effectiveness of the Group’s system of financial, operational, and compliance controls against significant risk. The principal elements of the Group’s established control systems include: - A clearly defined organizational structure under which individual responsibilities are monitored by members of the Board - Budgets covering key financial aspects of Group activities which are approved by the Board - Monthly comparisons of results against budget and prior year which are considered by the Board - Clearly defined procedures for treasury management and the authorization of capital expenditure - An ongoing program of internal audit work performed by BDO LLP - The appointment of a risk management sub-committee A risk management system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. This report sets out details of remuneration for the directors of Appreciate Group plc during the year ended 31 March 2021. As a Company listed on AIM, the Company is not required by the Companies Act 2006 to prepare a Directors’ Remuneration Report. The Board has, however, voluntarily adopted many of the best practice provisions in connection with the preparation of such reports. Details of the members of the remuneration committee are given on page 49. In undertaking its responsibilities, the committee seeks independent external advice as necessary. The principal external advisers to the committee are PricewaterhouseCoopers LLP. The aim of the Group’s remuneration policy is to adopt levels of remuneration which should be sufficient to attract, motivate, and retain high caliber executives. The policy is to reward directors with competitive salaries and benefit packages which are linked to both individual and business performance. These packages are reviewed each year to ensure that they are supportive of the Group’s business objectives and the creation of shareholder value. Executive directors are remunerated through the provision of a basic salary, annual bonus linked to performance, long-term incentives linked to performance, car allowance, medical, group income protection, life insurance, and permanent health insurance cover. Certain executive directors enjoy benefits in kind such as contributions to pension arrangements and the payment of certain professional subscriptions. At the time of our last annual report, we said that we were determined to emerge strongly from the pandemic and be ready for growth. As outlined in our wider commentary, Appreciate Group responded by making considerable progress in these aims, delivering our strategy and reshaping the business to lay the foundations for future years. We initially used the furlough scheme for colleagues who could not work from home when our operations were closed. However, we chose to repay all £0.3 million of the funds used from the Government support scheme when it became clear that our performance was recovering as we moved further into the financial year. We also treated colleague financial wellbeing as a priority by topping up furlough pay, offering additional parental leave, enhancing maternity leave, and being agile in working arrangements. In addition, we promoted the use of holidays as well as offering wellbeing support to all colleagues to help them through the lockdown challenges."
"We responded to the challenges by accelerating initiatives in our long-term plan, restructuring the business to focus on core activities of prepayment, gifting, and engagement, and building our digital capability to respond to a rapidly changing world. Following our decision not to pay a dividend for the previous financial year ended March 2020 in light of uncertainty created by the pandemic, we reinstated the dividend at half year in November as it became clear that trading had improved. As this improvement has been maintained in the second half of the financial year, the Board has recommended a proposed final dividend of 0.6 pence making a total dividend for the year of 1.0 pence per share. Basic salaries for executive directors are reviewed by the remuneration committee each year. Communication of base salaries is part of a total compensation view, with any changes communicated in June 2021. Salaries for executive directors were not changed during 2020, and salaries were reviewed in March 2021 and it was determined that no increase would be made. A wider workforce review has been deferred for consideration later in the year. Executive directors can earn performance-related cash bonus payments, subject to the achievement of predetermined business objectives and Group profit targets over one financial year. For the financial year 2020/2021, up to 80% of salary is applied for the CEO and up to 75% of salary for the CFO. Bonuses do not form part of pensionable earnings. Bonus payments for executive directors are reviewed by the remuneration committee each year. Bonuses for the 2021 financial year will be payable at 65% of eligibility for executive directors as business performance for the year is better than might have been expected given the challenges of COVID-19. A number of strategic goals have been delivered including restructuring of the business, digital acceleration both for customers and colleagues, and successful delivery of the peak season, and financial measures linked to profit before tax performance are ahead of the budget for the year. When agreeing final bonus amounts, the Remuneration Committee looked to ensure that executive remuneration is aligned to the experience of the wider workforce and shareholders. Accordingly, the Remuneration Committee has considered ways in which to recognize the hard work of colleagues during the year. The current executive directors participate in the Group’s Strategic Growth Plan and Save As You Earn full details of which are shown in note 21b. Strategic Growth Plan awards are equity settled awards in the form of nil-cost options. These were granted to executive directors on 21 December 2018 and have a five-year performance period from 1 October 2018 to 30 September 2023. The Strategic Growth Plan provides participants with a pool of shares with a value equal to 10% of any cumulative shareholder value created above a compound hurdle rate of 10% per annum. This value is based on the growth in market capitalization plus dividends over the five-year period. The awards for the executive directors were: - CEO: 45% share of the pool - CFO: 25% share of the pool Based on performance to 31 March 2021, none of the Strategic Growth Plan award would vest. The Committee will be reviewing the long-term incentive arrangements over the course of the financial year with a view to considering new long-term incentive awards that vest post 30 September 2023 following final determination of the Strategic Growth Plan. The beneficial interests in the share capital of the Company of the directors in office at 31 March 2021 and connected persons were as follows: - I O'Doherty: 70,000 - T Clancy: 20,000 - J Gittins: 10,000 - L Carstensen: 70,000 - S Cabrini: 0 Details of executive directors’ service contracts are given on pages 42 and 43. No contract provides for compensation payments on loss of office. The independent non-executive directors receive fees as directors which are determined by the Board, each director abstaining from decisions affecting their own remuneration. The following graph charts the total cumulative shareholder return of the Company since 1 April 2017, compared with the AIM All-Share Index and the FTSE All-Share Financials Index. The Company feels that these are the most appropriate indices to use as the first shows a broad average equity performance and the second shows the performance for the industry sector in which the Company operates. The chart illustrates that over the period the total shareholder return has underperformed on the two indices."
"The emoluments of directors for the year ended 31 March 2021 were: Total Pension costs Salary or fees £’000 Performance related payments £’000 Benefits. We are here live in Omaha, Nebraska. Good morning, everybody. I am Becky O'Doherty, along with Mike Santoli. In just 30 minutes, Berkshire Hathaway Chairman and CEO Warren Buffett is going to be taking the stage with his Vice Chair Charlie Munger. Executive I O'Doherty 325 169 65 559 390 T Clancy 240 117 52 409 292 565 286 117 968 682 Non-executive L Carstensen 73 73 M de Kare-Silver 22 J Gittins 42 42 S Cabrini 40 21 155 158 720 286 117 1,123 840. Michael de Kare-Silver resigned as a director of Appreciate Group plc on 24 September 2019. The prior year figures represent remuneration up to that date. Sally Cabrini was appointed as a director of Appreciate Group plc on 25 September 2019. The prior year figures represent remuneration from that date. Directors' share options The individual interests of the executive directors under the SAYE is as follows: SAYE options over ordinary shares 31 March 2021 Exercise price Date exercisable Expiry date I O'Doherty 26,745 67.3p 01.09.21 01.03.22. In addition, the executive directors have the following interests in the SGP: SGP share of pool Share at 31 March 2021 End of performance period I O'Doherty 45% 30.09.23 T Clancy 25% 30.09.23. By order of the Board S Cabrini Chairman of the Remuneration Committee 28 June 2021. Independent Auditor’s Report To the Members of Appreciate Group plc Opinion In our opinion, Appreciate Group plc’s group financial statements and parent company financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2021 and of the group’s profit for the year then ended. The group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The parent company financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and as applied in accordance with section 408 of the Companies Act. The financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Appreciate Group plc and its subsidiaries for the year ended 31 March 2021 which comprise: Group Parent company Consolidated Statement of financial position as at 31 March 2021 Company Statement of financial position as at 31 March 2021 Consolidated Statement of profit or loss for the year then ended Company Statement of changes in equity for the year then ended Consolidated Statement of comprehensive income for the year then ended Company Statement of cash flows for the year then ended Consolidated Statement of changes in equity for the year then ended The Accounting Policies and related notes 1 to 26 to the financial statements including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards to the parent company financial statements, as applied in accordance with section 408 of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate."
"Our evaluation of the directors’ assessment of the group and parent company’s ability to continue to adopt the going concern basis of accounting included the following procedures: In conjunction with our walkthrough of the group’s financial statement close process, we confirmed our understanding of management’s going concern assessment process and also provided feedback to management to ensure all key risk factors were considered in their assessment. We obtained and reviewed the going concern assessment prepared by management for the period to 31 December 2022, being the going concern review period. We obtained evidence of board approval of the base case and cash savings strategies. We obtained management’s forecasts for the period to 31 December 2022 and checked the appropriateness of the model, including the arithmetical accuracy, as well as the starting cash position as at 1 April 2021. We considered past historical accuracy of management’s forecasting by comparing budget to actual for the year ended 31 March 2021. We evaluated management’s assumptions applied in preparing the forecasts by corroborating to supporting evidence and explanations and/or by assessing changes from the prior period and considering whether there was any indication of management bias, including consideration of any contrary evidence. Management has modeled six downside scenarios in order to assess the impact of a decline in billings, product mix and redemptions on covenant compliance and liquidity position. We evaluated and challenged the headroom under management’s downside scenarios, which formed the basis of management’s conclusions regarding going concern. We evaluated and challenged the sensitivities on the forecast to understand how severe any further downside scenario would have to be to result in a covenant breach and/or elimination of the liquidity headroom. We confirmed to the agreement the availability and duration of the group’s revolving credit facility to July 2025. We reperformed covenant calculations for the going concern period under the base case and sensitized forecasts. We read board minutes for any inconsistencies with the risks considered in the going concern assessment. We assessed current trading performance by inspecting the May 2021 period end management accounts in addition to making inquiries of management to identify any issues with the group’s current trading and profitability through to the date of our audit report. We evaluated management’s ability to take mitigating actions and the impact that those actions would have on liquidity and the covenants. We enquired of management as to their knowledge of events or conditions beyond the period of their assessment that may cast significant doubt on the entity’s ability to continue as a going concern and compared their response to our understanding from completion of our audit procedures. We read the disclosures in the Annual Report and Accounts to confirm that they were consistent with our understanding of the going concern assessment that had been undertaken by the directors and that they appropriately reflected the risks that had been considered and were in conformity with the relevant standards. We note that management has performed a going concern assessment with a base case scenario, six downside sensitivities and reverse stress testing. The revolving credit facility is in place until July 2025. The most severe downside scenario showed negative liquidity headroom in the final six months of the going concern period; for which management identified a number of cash saving initiatives, including reduced costs and a strategy shift to maintain the current paper product mix being experienced. Management will make a decision on the reduced cost saving actions in July 2021, with time to implement in advance of October 2021; the strategy shift initiatives are to be implemented with immediate effect. After these mitigating actions are implemented, the most severe downside scenario showed headroom throughout the going concern period to 31 December 2022. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group and parent company’s ability to continue as a going concern over the forecast period to 31 December 2022. Going concern has been determined to be a key audit matter. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s or the parent company’s ability to continue as a going concern. Overview of our audit approach Audit scope We performed an audit of the complete financial information of four components."
"The components where we performed full or specific audit procedures accounted for 118% of Profit before tax, 99% of Revenue and 100% of Total assets. Key audit matters Going concern Revenue recognition – occurrence of revenue during the last six months of the year Completeness of provisions for redemption of vouchers and corporate gifted cards, including measurement of income resulting from estimates of breakage. Materiality Overall group materiality of £413,500 which represents 5% of normalized earnings between 2019 and 2021, where earnings are deemed to be profit before tax and exceptional impairments. Independent Auditor’s Report To the Members of Appreciate Group plc continued An overview of the scope of the parent company and group audits Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organization of the group and effectiveness of group wide controls and changes in the business environment when assessing the level of work to be performed at each company. In assessing the risk of material misstatement to the group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, of the nine reporting components of the group, we selected four components which represent the principal business units within the group. Of the four components selected, we performed an audit of the complete financial information of four components which were selected based on their size or risk characteristics. The reporting components where we performed audit procedures accounted for 118% of the group’s Profit before tax, 99% of the group’s Revenue and 100% of the group’s Total assets. Of the remaining five components that together represent 1% of the group’s revenue and contributed a loss of 18% of the group’s profit before tax, none are individually greater than 1% of the group’s revenue or 11% of the group’s profit before tax. For these components, we performed other procedures, including analytical review of review scope components, testing of consolidation journals and intercompany eliminations to respond to any potential risks of material misstatement to the Group financial statements. Changes from the prior year The changes from the prior year are two entities that were designated as specific scope components in the prior year were disposed of by the group and as a result are designated as review scope in the current year; and one entity that was designated as a full scope component in the prior year has been designated as review scope as a result of the coverage obtained in the year from other components and that it is an intermediary holding company. Involvement with component teams All audit work performed for the purposes of the audit was undertaken by the group audit team. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. In addition to going concern, the following were designated as Key Audit Matters. Risk Our response to the risk Key observations communicated to the Audit Committee Revenue recognition – occurrence of revenue during the last six months of the year £107 million. With the seasonal nature of the group’s business, three-quarters of the group’s revenue is earned during the second half of the year. As a result, we have identified a significant risk over the manipulation of revenue in the second half of the year. Most transactions are small in value and so we focus on the manipulation of revenue through the override of management controls. This is most likely to be achieved through topside manual journals used to record fictitious revenue. Revenue includes breakage in respect of vouchers and corporate gifted cards. Our risk in respect of this element of revenue is described below. We understood and assessed the design of key management controls around the revenue recognition process."
"We did not seek to obtain reliance on the control framework. We filtered using key criteria to identify, and then test, higher risk manual journals to revenue in the last six months of the year. We tested journals recorded as part of the year-end financial statement close process to supporting documentation to understand their purpose and confirm their validity. We performed a comparison of such journals to those recorded in the previous year to identify new or non-recurring journals that might have been recorded by management. We extended our cut-off testing period to one month prior to the year-end and tested a sample of recorded transactions to evidence of dispatch. We performed a reconciliation between the value of sales orders received for Christmas 2020 and the revenue reported within the Consumer segment. We performed substantive audit procedures in respect of revenues recorded after December 2020 by which time we expected all revenues related to Christmas 2020 to have been recognized. We tested a sample of transactions from throughout the year to invoice and evidence of dispatch or payment. We tested the service fee recognized as revenue in respect of vouchers and corporate gifted cards. We did this by predicting service fee income using contracted rates and redemption volumes and comparing this to the amounts recorded. We analyzed gross margin for the Corporate segment on a daily basis in March 2021 to identify days in which the margin was higher than expected; we investigated whether the margin was as a result of routine sales transactions or whether there were unexpected transactions or adjustments. Based on the procedures performed, we did not identify evidence of material misstatement in the revenue recognized in the year. The significance of the carrying values of the provisions being assessed and the sensitivity of these balances to changes in the estimated rates of breakage could lead to manipulation by management. This risk is unchanged from the previous year. We understood and assessed the design of key controls relating to the completeness of the provisions for vouchers and corporate gifted cards and the measurement of non-redemption income, known as breakage. We tested and relied upon the operation of controls relating to the processing of card transactions. We did not seek to rely on controls relating to voucher transactions. We compared the card provision to the total obligation reported by the group and third-party applications and investigated any large reconciling items. We obtained from management a reconciliation of the movement in the gross provision for unredeemed vouchers, before adjustments for service fees, breakage, and discounting, to the value of vouchers dispatched in the period and the amounts that were redeemed. We tested the value of vouchers dispatched and redeemed by agreeing a sample of these transactions to sales invoices and customer payments and to retailer settlements respectively. We assessed the estimates regarding the service fees that will be deducted from the payments to retailers on redemption by testing the assumed service fee rates for the largest retailers to signed contracts. We compared the participation by retailers in 2021 to the prior year and evaluated whether any significant changes had been appropriately reflected in the measurement of the voucher and card provisions and liability. We tested for manual journal entries recorded against the provision for unredeemed vouchers and corporate gifted cards, investigating any that looked unusual. We performed cut-off procedures to ensure that vouchers and cards related to sales orders processed by the entity’s IT application one day before and one day after the year-end were included in the provision as appropriate. We tested a sample of sales orders processed in March 2021 to ensure that the vouchers or cards were recorded in the liability at year-end. We re-performed the calculation of vouchers and cards that will not be redeemed to ensure that it had been computed accurately when applying management’s assumptions. We tested the integrity of historic data used by management to calculate the forecast of vouchers and corporate gifted cards that will not be redeemed."
"We assessed management’s assumptions relating to breakage by making enquiries of management to understand changes in breakage rates since the prior year and their rationale, considering the accuracy of management’s forecasts applied in previous years by comparing them to actual rates of expiry, comparing the trends in historic breakage rates that have now crystallized to the rates forecast by management on open vouchers and cards, and using the knowledge gained from our analysis of historic rates of expiry to form our own estimates of breakage and conclude whether management’s estimates were within an acceptable range. We obtained an independent, externally sourced discount rate which we applied in our calculation of discounted future cash flows relating to the settlement of vouchers and corporate gifted cards. We compared our discounted cash flows to the calculations performed by management. We reviewed for reasonableness the disclosure in the financial statements of policies and judgments regarding voucher and card provisions. Based on the procedures performed, we concluded that the provision for the redemption of vouchers and corporate gifted cards is not materially misstated and that the estimates relating to the breakage of vouchers and corporate gifted cards have been prepared on a reasonable basis. In the prior year, our auditor’s report included key audit matters in relation to assumptions used in determining the pension liability valuation and classification and valuation of assets held for sale. In the current year, we do not consider that pension liability valuation is a key audit matter as this is not an area where significant difficulties were identified or significant time was spent during the audit. In the current year, we have not identified classification and valuation of assets held for sale as a key audit matter as it is no longer relevant. Our application of materiality: We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. Materiality is the magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality for the group to be £413,500, which is 5% of normalized earnings over the past three years, where earnings are deemed to be profit before tax and exceptional impairments. We believe that normalized earnings provides us with an appropriate basis where an entity has been profitable historically but is currently making a loss, the entity has incurred unusual transactions that are unlikely to reoccur, or market conditions are fluctuating in a way that is not expected to continue. Given the unprecedented impact of COVID-19, we have concluded that a more appropriate normalized measure in the current year is the three-year average of profit before tax and exceptional impairments in respect of the years ended 31 March 2019 through to 31 March 2021. We determined materiality for the parent company to be £883,000, which is 5% of total equity. We have not used profit before tax as adjusted for impairments as this business is not a trading company and thus a capital basis is most appropriate. During the course of our audit, we reassessed initial materiality and the actual profit before tax and exceptional impairments for the year ended 2021 was lower than initially used in our normalized calculations by £2,229,000. This decrease was due to the actual result for the year being lower than the budgets used to set our planning materiality. Once normalized, the impact to materiality was £37,000 for which we updated our materiality and testing thresholds during the course of the audit and as such we considered that our materiality is appropriate. Performance materiality is the application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the group’s overall control environment, our judgment was that performance materiality was 50% of our planning materiality, namely £206,750. We have set performance materiality at this percentage due to our current and past experience of the audit where we have concluded a higher risk of misstatements, both corrected and uncorrected."
"Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale and risk of the component to the group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to components was £40,994 to £153,729. Reporting threshold is an amount below which identified misstatements are considered as being clearly trivial. We agreed with the audit committee that we would report to them all uncorrected audit differences in excess of £20,500, which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion. Independent auditor’s report to the members of Appreciate Group plc continued. Other information comprises the information included in the annual report set out on pages 1 to 57, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006: In our opinion, based on the work undertaken in the course of the audit, the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements and the strategic report and directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception: In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion, adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us, or the parent company financial statements are not in agreement with the accounting records and returns, or certain disclosures of directors’ remuneration specified by law are not made, or we have not received all the information and explanations we require for our audit. Responsibilities of directors: As explained more fully in the statement of directors’ responsibilities set out on page 53, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements: Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion."
"Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud: Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the company and management. We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the most significant are those that relate to the financial reporting framework, International Accounting Standards in conformity with the requirements of the Companies Act 2006, AIM Rules, Financial Conduct Authority Listing Rules, and UK Tax Legislation. We understood how Appreciate Group plc is complying with those frameworks by making enquiries of management and those responsible for legal and compliance procedures. We corroborated our enquiries through our review of board minutes and papers provided to the audit committee, as well as observation in audit committee meetings and consideration of the results of our audit procedures across the group. We also obtained and reviewed the latest correspondence with the FCA. We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur by assessing the risk of fraud absent of controls, and then identifying controls which are in place at the entity level and whether the design of those controls is sufficient for the prevention and detection of fraud, utilizing internal and external information to perform our fraud risk assessment. We considered the risk of fraud through management override and considered the design and implementation of controls at the financial statement level to prevent this, as well as incorporating data analytics across manual journal entries into our audit approach, which was designed to provide reasonable assurance that the financial statements were free from material fraud and error. Based on this understanding, we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved journal entry testing, with a focus on journals meeting our defined risk criteria based on our understanding of the business, enquiries of in-house legal counsel, compliance officer, and management, and obtaining legal confirmations. In addition, we completed procedures to conclude on the compliance of the disclosures in the annual report and accounts with the requirements of the relevant accounting standards and UK legislation. Two of the group’s subsidiaries are regulated by the FCA. We have reviewed the correspondence and submissions to the FCA alongside assessing the control environment and any impact that regulatory matters might have on the financial statements, including management’s commentary within other information, principally within principal risks and uncertainties and corporate governance. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website. This description forms part of our auditor’s report. Use of our report: This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Jennifer Hazlehurst, Senior statutory auditor for and on behalf of Ernst & Young LLP, Statutory Auditor Liverpool 29 June 2021."
"Financial Statements: Consolidated Statement of Profit or Loss, Consolidated Statement of Comprehensive Income, Statements of Financial Position, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Statements of Cash Flows, Accounting Policies, Notes to the Accounts, Directors and Advisers. Redundancy costs 20 Profit on sale of assets held for sale 15 Operating profit 830 Finance income 3 Finance costs 3 Profit before taxation 1,2 Taxation 4 Profit for the year attributable to equity holders of the parent 851 Earnings per share basic 0.46p diluted 0.46p All activities derive from continuing operations. Consolidated Statement of Comprehensive Income For the year to 31 March 2021 Notes 2021 £000 2020 £000 Profit for the year 851 Other comprehensive expense income Items that will not be reclassified to profit or loss Remeasurement of defined benefit pension schemes 19 Deferred tax on defined benefit pension schemes 4 Items that may be reclassified subsequently to profit or loss Foreign exchange translation differences 3 Other comprehensive expense income for the year net of tax Total comprehensive expense income for the year attributable to equity holders of the parent Consolidated Statement of Profit or Loss For the year to 31 March 2021 Appreciate Group plc Annual report and accounts 2021 Strategic Report Financial Statements Statements of Financial Position As at 31 March 2021 Notes Consolidated Company 2021 £000 2020 £000 2021 £000 2020 £000 Assets Non-current assets Goodwill 6 Other intangible assets 7 Investments 8 Property, plant and equipment 9 Right of use assets 18 Retirement benefit asset 19 Current assets Inventories 11 Trade and other receivables 12 Tax receivable Monies held in trust 13 Cash 14 Assets held for sale 15 Total assets Liabilities Current liabilities Trade payables 16 Payables in respect of cards and vouchers 16 Deferred income 16 Other payables 16 Provisions 17 Non-current liabilities Deferred tax liability 10 Lease liabilities 16 Total liabilities Net assets Equity attributable to equity holders of the parent Share capital 21a Share premium Retained earnings Other reserves Total equity The company reported a loss for the financial year ended 31 March 2021 of £2,233,000. The financial statements were approved and authorised for issue by the Board of Directors on 28 June 2021 and were signed on its behalf by I O'Doherty Chief Executive Officer Appreciate Group plc Annual report and accounts 2021 Notes Share capital £000 Share premium £000 Other reserves £000 Retained earnings £000 Total equity £000 Balance at 1 April 2020 Total comprehensive income for the year Profit Other comprehensive expense income Remeasurement of defined benefit pension schemes 19 Tax on defined benefit pension schemes Foreign exchange translation adjustments Total other comprehensive expense Total comprehensive loss for the year Transactions with owners recorded directly in equity Equity settled share-based payment transactions 21b Total contributions by and distribution to owners Balance at 31 March 2021 Balance at 1 April 2019 Total comprehensive income for the year Profit Other comprehensive income expense Remeasurement of defined benefit pension schemes 19 Tax on defined benefit pension schemes Foreign exchange translation adjustments Total other comprehensive income Total comprehensive income for the year Transactions with owners recorded directly in equity Equity settled share-based payment transactions 21b Tax on equity settled share-based payment transactions 4 Dividends 22 Total contributions by and distribution to owners Balance at 31 March 2020 Other reserves relate to the acquisition of the minority interest in a subsidiary."
"Consolidated Statement of Changes in Equity Appreciate Group plc Annual report and accounts 2021 Strategic Report Financial Statements Company Statement of Changes in Equity Notes Share capital £000 Share premium £000 Retained earnings £000 Total parent equity £000 Balance at 1 April 2020 Total comprehensive loss for the year Loss Other comprehensive expense income Remeasurement of defined benefit pension scheme 19 Tax on defined benefit pension scheme Total other comprehensive expense Total comprehensive loss for the year Transactions with owners recorded directly in equity Equity settled share-based payment transactions 21b Total contributions by and distribution to owners Balance at 31 March 2021 Balance at 1 April 2019 Total comprehensive income for the year Profit Other comprehensive income expense Remeasurement of defined benefit pension scheme 19 Tax on defined benefit pension scheme Total other comprehensive income Total comprehensive income for the year Transactions with owners recorded directly in equity Equity settled share-based payment transactions 21b Tax on equity settled share-based payment transactions 4 Dividends 22 Total contributions by and distribution to owners Balance at 31 March 2020 Appreciate Group plc Annual report and accounts 2021 Statements of Cash Flows For the year to 31 March 2021 Notes Consolidated Company 2021 £000 2020 £000 2021 £000 2020 £000 Cash flows from operating activities Cash generated from used in operations 23 Interest received Interest paid Tax paid Net cash generated from used in operating activities Cash flows from investing activities Proceeds from sale of property plant and equipment Sale of assets held for sale Proceeds from sale of investments Dividends received from group companies Purchase of intangible assets Purchase of property plant and equipment Net cash used in generated from investing activities Cash flows from financing activities Lease incentive payment Payment of lease liabilities Dividends paid to shareholders Net cash used in financing activities Net increase decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Cash and cash equivalents comprise Cash Appreciate Group plc Annual report and accounts 2021 Corporate Governance Appreciate Group plc Annual report and accounts 2021 Strategic Report Financial Statements Accounting Policies Basis of preparation The Group and parent Company financial statements have been prepared in accordance with international accounting standards in conformity with the Companies Act 2006. Appreciate Group plc is a company limited by shares and is incorporated and domiciled in the United Kingdom. It is listed on AIM and details of the registered office and registration number are given on page 120. The financial statements have been prepared under the historical cost convention. The Group and company financial statements are presented in sterling, which is also the functional currency of the parent company. All values are rounded to the nearest thousand except where otherwise stated. The accounting policies have unless otherwise stated been applied consistently to all periods presented in these financial statements and by all Group entities. Going Concern The financial statements are prepared on a going concern basis. The Group has access to a £15m Revolving Credit Facility that is available until August 2025. A further £10m of uncommitted funds is available via an accordion facility attached to the RCF however this is uncommitted. The Group has not drawn down on the RCF in the year to 31 March 2021 nor to the date of signing these financial statements. The Group is required to comply with covenants attached to the RCF. These covenants are Interest Cover the ratio of EBITDA to Finance Charges in respect of any relevant period ending on or after 31 March 2021 shall not be less than 4.0:1. Adjusted Leverage the ratio of Total Net Debt to Adjusted EBITDA in respect of any relevant period ending on or after 30 September 2020 must not exceed 3.0:1. PPP T Balance the ratio of PPPT Balance to Monies in Advance Balance on each Quarter Date must not be less than 1.0:1. The Directors have modelled management's best estimate of financial results for the Going Concern assessment period to 31 December 2022 and adopted the plan as the Board approved budget. Alongside the Board approved budget the Board have identified and approved cost control measures and together these form our Base Case. The Base Case assumes a decrease in Year 1 billings compared to 2020/2021 actuals with then an 8% increase in Year 2 over Year 1. Christmas savers order book £170m in both years."
"A reduction in paper redemptions compared to 2020/2021 followed by a significant decrease in Year 2 in line with the decrease in paper product mix. Increased card and digital redemptions in both years. Product Mix Paper billings for Consumer assumed to be 21% in Year 1 and 15% in Year 2 paper billings for Corporate assumed to be 7% in Year 1 with minimal levels assumed in Year 2. Remaining billings are assumed to be card digital. A flat cost base compared to the prior year for administrative expenses and staff costs in both years. Capital spend is restricted to that required to complete the ERP system and only further essential IT development in Year 2. Dividend payment of £1.5m is assumed in October 2021 in line with our stated divided policy with future dividend payments subject to trading results and so not modelled in the Base Case. The Base Case requires the group to draw down on the RCF in the period with the lowest headroom being £4.9m in September 2022. The Directors have modelled six plausible downside scenarios to test the sensitivity of the Base Case. The scenarios are as follows Corporate and Gifting billings remain flat against the 2020/2021 actuals. Christmas Savers order book £165m in Year 1 and £150m in Year 2. A combination of 1 and 2 above. An additional 10% shift from paper to digital products above the Base Case in Year 1 and 2. 25% faster redemption of paper products and 25% slower redemption of card and digital products than Base Case in Year 1 and 2. A combination of 3 4 and 5 above. In scenarios 1 to 5 the Group would not breach its headroom in the period to 31 December 2022 and would be fully compliant with all of its RCF covenants. In the most extreme downside scenario 6 the Group would breach its headroom by £2.3m but would be fully compliant with all of its RCF covenants in the period to 31 December 2022. Current trading for the year to mid-June 2021 shows billings levels lower than the Base Case. When the % reduction in current billings versus Base Case are run in conjunction with current trends on product mix and redemptions the outcome is not as severe as sensitivity 6 and the Group remains compliant with its covenants and does not breach its headroom. Appreciate 36523 AR2021 BOOK Prf11.indb 73 Appreciate 36523 AR2021 BOOK Prf11.indb 73 28 July 2021 16:51 28 July 2021 16:51 Appreciate Group plc Annual report and accounts 2021 Going Concern continued Management have identified mitigating actions, additional to those in the Base Case, to provide headroom, if necessary during the going concern period. These include cost saving initiatives that would result in cash savings of £2.3 million in the going concern period, relating to reductions in administrative and staff costs. A decision will be taken at the end of July 2021, dependent on trading, with implementation from October 2021 should they be deemed necessary. Two strategy changes, which could generate significant additional headroom in key months. The first reduces marketing spend in respect of Christmas Savers whilst maintaining the paper voucher mix; and the second maintains the paper voucher mix currently being experienced in our Corporate customer base by avoiding moving Corporate accounts away from paper vouchers. These will be implemented with immediate effect. When overlaying these mitigating actions and assumed outcomes, which includes an associated reduction in Christmas Savers Year 2 order book to £145 million; these provide significant headroom across the going concern period, with the lowest forecast headroom in Year 1 being £5.2 million in September 2021, and lowest forecast headroom in Year 2 being £6.3 million in July 2022. Management have modelled a number of reverse stress tests which consider whether the reduced marketing spend could more severely impact Year 2 Christmas Savers billings; and consider adverse movements on the Christmas Savers product mix in Year 1. Assuming product mix remains in line with Base case and the current Year 1 order book then it would take a 40% reduction against Base case in the order book in year one and 56% reduction against Base case in Year 2 for the Group to run out of headroom. The Group would remain compliant with its covenants, as they are less sensitive than the liquidity headroom to these changes in billings and product mix. The Board consider those variances over Base Case to be implausible."
"Conclusion Having carefully considered the Base Case, downside scenarios, current trading and trends since the year-end, and further mitigating actions available, as well as the £15 million committed RCF, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the period to 31 December 2022. Therefore, the directors continue to adopt the going concern basis of accounting in preparing the consolidated financial statements. Changes to International Financial Reporting Standards Interpretations and standards which became effective during the year The following accounting standards and interpretations, that are relevant to the Group, became effective during the year: Effective from accounting period beginning on or after: IAS 1 and IAS 8 Definition of Material (amendments) 1 January 2020 IFRS 3 Definition of a Business (amendments) 1 January 2020 Conceptual Framework for Financial Reporting (amendments) 1 January 2020 In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of material across the standards and to clarify certain aspects of the definition. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The amendments to the definition of material have not had a significant impact on the Group’s consolidated financial statements. The amendment to IFRS 3 Business Combinations clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that, together, significantly contribute to the ability to create output. Furthermore, it clarifies that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no impact on the consolidated financial statements of the Group, but may impact future periods should the Group enter into any additional business combinations. Interpretations and standards which have been issued and are not yet effective The following accounting standards and interpretations, that are relevant to the Group, have been issued but are not yet effective for the year ended 31 March 2021 and have not been applied in preparing the financial statements. Effective from accounting period beginning on or after: IFRS 16 Covid-19 Related Rent Concessions (amendments) 1 April 2021 IFRS 3 Reference to the Conceptual Framework (amendments) 1 January 2022 IAS 16 Property, Plant and Equipment – Proceeds before Intended Use (amendments) 1 January 2022 IAS 8 Definition of accounting estimates (amendments) 1 January 2023 IAS 1 and IFRS Practice Statement 2 Disclosure of accounting policies (amendments) 1 January 2023 IAS 12 Deferred Tax relates to Assets and Liabilities arising from a Single Transaction (amendments) 1 January 2023 Each amendment has been considered by management and the first five are not expected to have a significant impact on the Group’s future consolidated financial statements. Accounting Policies continued Appreciate 36523 AR2021 BOOK Prf11.indb 74 Appreciate 36523 AR2021 BOOK Prf11.indb 74 28 July 2021 16:51 28 July 2021 16:51 Corporate Governance Appreciate Group plc Annual report and accounts 2021 Strategic Report Financial Statements The amendments to IAS 12 require companies, at the beginning of the earliest comparative period presented to recognise deferred tax on particular transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The proposed amendments will typically apply to transactions such as leases for the lessee and decommissioning obligations. The amendments should be applied on a modified retrospective basis. The cumulative effect of initially applying the amendments will be recognised as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate. Management are currently assessing the impact of the amendment to IAS 12 on the Group but expect it to result in the recognition of additional deferred tax assets and liabilities due to the Group having substantial balances of right-of-use assets and lease liabilities. Basis of consolidation The consolidated financial statements incorporate the financial statements of the company and its subsidiaries made up to 31 March each year. Subsidiaries are entities controlled by the investor. Control is achieved when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee."
"The results of a subsidiary undertaking are included in the consolidated financial statements from the date that control commences until the date that control ceases. All subsidiaries share the same reporting date and are based on consistent accounting policies. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests, even if doing so causes the non-controlling interests to have a deficit balance. Intra-group balances, and any unrealised gains or losses or income and expenses arising from intra-group transactions, are eliminated on consolidation. Generally, there is a presumption that a majority of voting rights results in control. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. If the Group loses control over a subsidiary, it derecognises the related assets including goodwill, liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. As permitted by section 408 of the Companies Act 2006, the statement of profit or loss of the parent company has not been separately presented. The profit of the parent company is shown in a footnote to its statement of financial position. Business combinations A business combination is recognised where separate entities or businesses have been acquired by the Group. The acquisition method of accounting is used to account for the business combinations made by the Group. The cost of a business combination is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Where the consideration includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the cost of the acquisition. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in the business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the Group’s share of the identifiable net assets of the subsidiary acquired, the difference is taken immediately to the statement of profit or loss. Segmental reporting An operating segment is a distinguishable component of an entity about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Provided certain quantitative and qualitative criteria are fulfilled, IFRS 8 Operating Segments permits the aggregation of those components into reportable segments for the purposes of disclosure in the Group’s financial statements. In assessing the Group’s reportable segments, the directors have had regard to the nature of the products offered and the client bases amongst other factors. The operating segments as set out in note 1 are consistent with the internal reporting provided to the chief operating decision maker. For the purposes of IFRS 8 the chief operating decision maker has been identified as the Executive Management Board. All inter-segment transfers are carried out at arm’s length prices. The Group operates in one geographical segment, being the UK. The Group operations in the Eurozone are immaterial to the results and assets of the Group in the year ended 31 March 2021. Revenue from contracts with customers The Group recognises revenue from contracts with customers when control over the goods and services is transferred to the customer. Revenue is recognised at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods and services, net of VAT, rebates and discounts. The Group is a principal if it controls the promised good or service before transferring it to the customer. The Group is an agent if its role is to arrange for another entity to provide the good or service. The Group acts as an agent in the sale of multi-retailer redemption products and travel agency services and therefore fees that are retained for its agency service are recorded in revenue on a net basis. For all other products and services, the Group acts as a principal and revenues are recorded on a gross basis."
"Appreciate 36523 AR2021 BOOK Prf11.indb 75 Appreciate 36523 AR2021 BOOK Prf11.indb 75 28 July 2021 16:51 28 July 2021 16:51 Revenue from contracts with customers continued As described below, the majority of revenues are recognised at a point in time. For multi-retailer redemption products revenue is recognised when the products are redeemed; for single retailer redemption products and other goods revenue is recognised when the products are received by the customer. Revenue for other services is recognised over time or at a point in time depending on the nature of the revenue stream, as described further in (ii) below. The Group’s multi-retailer redemption products may be partially or fully redeemed, and the unused amount, that is the non-refundable unredeemed or unspent funds on a voucher, card or e-code at expiry, is referred to as breakage. Where the end user has no right of refund, corporate gifted cards, the Group may expect to earn a breakage amount and this is recognised as revenue in proportion to the actual timing of redemptions. Where the customer has the right of refund, breakage is recognised as revenue when the card has expired and the right of refund has lapsed. Significant accounting judgements and estimates relating to revenue are described on pages 84 to 85. The Group’s primary revenue streams are as follows: 1. Services – multi-retailer redemption products a) Love2shop vouchers b) Flexecash cards and e-codes c) Mastercards 2. Goods – single retailer redemption products a) Third party vouchers, cards and e-codes 3. Other goods a) Hampers and gifts applicable to the year ended 31 March 2020 but have now been discontinued 4. Other services a) Brand engagement b) Packing c) Collection and delivery d) Travel agency e) Other services Customers are offered standard business credit terms or pay in advance for their products and services. For multi-retailer redemption products, the Group recognises revenue for service fees, cardholder fees and breakage. The Group has contractual relationships with each of the redeemers. The Group earns a service fee from the redeemer when a consumer redeems their voucher, card or e-code with that redeemer. Cardholder fees are earned for services provided to cardholders such as issue, dealing with lost, stolen or damaged cards and maintenance. Principal and Agent Under IFRS 15, the Group is a principal and records revenue on a gross basis if it controls the promised good or service before transferring it to the customer. The Group is an agent and records as revenue the net amount that it retains for its agency services if its role is to arrange for another entity to provide the good or service. Revenue stream Principal Agent Gross Net revenue Revenue based on 1a Love2shop vouchers Agent Net Service fees received from redeemers 1b Flexecash cards and e-codes Agent Net Service fees received from redeemers 1c Mastercards Agent Net Service fees received from redeemers 2a Third party vouchers, cards and e-codes Principal Gross Values invoiced to external customers for goods 3a Hampers and gifts applicable to the year ended 31 March 2020 but have now been discontinued Principal Gross Values invoiced to external customers for goods 4a Brand engagement Principal Gross Values invoiced to external customers for services 4b Packing Principal Gross Values invoiced to external customers for services 4c Collection and delivery Principal Gross Values invoiced to external customers for services 4d Travel agency Agent Net Agent’s commission received 4e Other services Principal Gross Values invoiced to external customers for services Accounting Policies continued Appreciate 36523 AR2021 BOOK Prf11.indb 76 Appreciate 36523 AR2021 BOOK Prf11.indb 76 28 July 2021 16:51 28 July 2021 16:51 Corporate Governance Appreciate Group plc Annual report and accounts 2021 Strategic Report Financial Statements For multi-retailer redemption products, in addition to the service fees noted above, the Group also earns cardholder fees and breakage as follows: Revenue stream Principal Agent Gross Net revenue Revenue based on 1 Cardholder fees Principal Gross Charges levied 1 Breakage Principal Gross Non-refundable unredeemed funds For all revenue streams, intra-group sales are eliminated and revenue is recorded net of VAT, rebates and discounts. Timing of revenue recognition Under IFRS 15, revenue is recognised when or as an entity satisfies an identified performance obligation by transferring a promised good or service to a customer. A good or service is considered to be transferred when the customer obtains control. Revenue stream Revenue recognised 1a Love2shop vouchers Service fees when product is redeemed. Breakage in proportion to actual redemption timing. 1b Flexecash cards and e-codes Service fees when product is redeemed."
"Cardholder fees when fees are levied. Breakage where end user has no right of refund in proportion to actual redemption timing. Breakage where end user has the right of refund when product has expired and the right of refund has lapsed. 1c Mastercards Service fees when product is redeemed. Cardholder fees when fees are levied. Breakage where end user has no right of refund in proportion to actual redemption timing. Breakage where end user has the right of refund when product has expired and the right of refund has lapsed. 2a Third party vouchers, cards and e-codes When the customer obtains control of the goods usually the date on which they are received by the customer. 3a Hampers and gifts applicable to the year ended 31 March 2020 but have now been discontinued When the customer obtains control of the goods usually the date on which they are received by the customer. 4a Brand engagement Over time. As the services provided are unique to each client, the Group’s performance creates an asset with no alternative use to the Group. Additionally, the Group has an enforceable right to payment for work performed. Revenue continues to be recognised using input methods, as this is the measure of progress which most faithfully depicts the Group’s performance towards complete satisfaction of the performance obligation. The majority of projects are less than 12 months in duration. 4b Packing When the customer obtains control of the service usually the date on which they are received by the customer. 4c Collection and delivery When the customer obtains control of the service usually the date on which they are received by the customer. 4d Travel agency When the commission is paid by the third party agent. 4e Other services When the customer obtains control of the service usually the date on which they are received by the customer. Travel commission represents variable consideration contingent on future events as travel plans can be changed or cancelled after the original booking date. Accordingly, the Group does not recognise revenue until it is highly probable that a significant reversal in the amount of cumulative revenue will not occur. Appreciate 36523 AR2021 BOOK Prf11.indb 77 Appreciate 36523 AR2021 BOOK Prf11.indb 77 28 July 2021 16:51 28 July 2021 16:51 Revenue from contracts with customers continued Under IFRS 15, certain costs related to discounts and commissions are recognised as follows: Cost Timing of recognition Discounts for multi-retailer redemption products provided to corporate clients In proportion to actual redemption timing. Commission rewards for multi-retailer redemption products In proportion to actual redemption timing. Presentation and disclosure Under IFRS 15, the below items are presented as follows: Presentation Breakage on multi-retailer redemption products is presented as revenue in the Statement of Profit or Loss. Deferred revenue for multi-retailer redemption products, including service fees, is presented as deferred income in the Statement of Financial Position for vouchers, cards, and e-codes. Deferred revenue for multi-retailer redemption products related to breakage is also presented as deferred income in the Statement of Financial Position for vouchers, cards, and e-codes. Discounts form part of the transaction price and are therefore presented as deductions from revenue in the Statement of Profit or Loss. Deferred discounts for multi-retailer redemption products are netted against deferred income in the Statement of Financial Position for vouchers, cards, and e-codes. Agents' commission represents the incremental cost of obtaining customer contracts, presented in cost of sales in the Statement of Profit or Loss and in prepayments in the Statement of Financial Position. Deferred agents' commission for multi-retailer redemption products includes commission costs that are included in prepayments in the Statement of Financial Position. Prepaid costs and deferred income are not discounted to take into account the expected timing of redemption, as the impact is not considered to be material. This is due to the fact that over 90% of multi-retailer redemption products are redeemed within 12 months of issue. Contract balances include trade receivables, which represent the Group's right to an amount of consideration that is unconditional, meaning only the passage of time is required before payment is due. Contract liabilities are the obligation to transfer goods or services to a customer for which the Group has received consideration from the customer. Contract liabilities are presented as deferred income within trade and other payables. Billings represent the value of goods and services shipped and invoiced to customers during the year and are recorded net of VAT, rebates, and discounts."
"Billings is an alternative performance measure, which the directors believe provides a more meaningful measure of the level of activity of the Group than revenue. This is due to revenue from multi-retailer redemption products being reported on a net basis, while revenue from single retailer redemption products and other goods are reported on a gross basis. The reconciliation between billings and revenue is as follows: 2021: 406,532 2020: 419,857 Multi-retailer redemption products – gross to net revenue recognition: (295,816) (306,574) Timing of revenue recognition: (3,911) (559) Revenue: 106,805 112,724 Operating profit is reported as profit before taxation and finance income and costs, but after distribution costs, administrative expenses, and exceptional items. Finance income comprises the returns generated on cash and cash equivalents, other financial assets, leases for which the Group is the lessor, and monies held in trust, and is recognized as it accrues. Finance costs comprise the interest on external borrowings and lease liabilities, facility and arrangement fees, and costs of obtaining external finance, and are recognized as they accrue. Goodwill arising on acquisition represents the difference between the consideration and the fair value of net assets acquired. Goodwill is not amortized but is reviewed annually for impairment and whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. Goodwill in existence at 1 April 2004, the date of transition to IFRS for the Group, is carried in the statement of financial position as deemed cost less accumulated impairment losses at that date. At each reporting date, the Group reviews the carrying value of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. Intangible assets with indefinite lives, such as goodwill, are tested annually for impairment. All other assets subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized to the extent that the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Value in use is calculated using cash flows derived from budgets and projections approved by the board, which are discounted at the Group's risk-adjusted weighted cost of capital calculated from equity market data and borrowing rates. Testing is performed at the level of a cash-generating unit in order to compare the CGU's recoverable amount against its carrying value. Goodwill and intangible assets, such as customer lists, are allocated to CGUs based on past acquisitions of Christmas savings club brands and customer lists. While these are not operating segments, as management does not manage and review the business at this level, information is available to enable the assets to be tested for impairment at this level. Any impairment is recognized immediately through the statement of profit or loss. Impairment losses are reversed if there is evidence of an increase in the recoverable amount of a previously impaired asset, but only to the extent that the recoverable amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognized. Impairments in respect of goodwill are not subsequently reversed. Acquired software licenses are capitalized at cost and are amortized on a straight-line basis over their anticipated useful life, which is 3 to 5 years. Costs that are directly associated with the creation of identifiable software, which meet the development asset recognition criteria as laid out in IAS 38 Intangible Assets, are recognized as intangible assets. Direct costs include the employment costs of staff directly involved in specific software development projects and external consultancy fees. All other software development and maintenance costs are recognized as an expense as incurred. Computer software development costs recognized as assets are amortized over their anticipated useful lives of between 3 and 10 years on a systematic straight-line basis. Amortization begins on the date the asset is completed. Included in the Intangibles Asset balance is an asset of 5.9 million pounds that represents the implementation of a new ERP system that will replace our back office systems with a robust and scalable platform that will permit development of added value services. Phase 1 is due to go live in August 2021, and amortization of the asset will commence at this time. Customer lists acquired are included at cost less accumulated amortization and impairment."
"They are amortized over their useful life of up to 10 years based on the pattern of forecast cash flows to be generated. Investments are stated at cost less any provision for impairment in their value. Impairment is calculated based on the lower of cost or recoverable amount, determined with reference to the higher of fair value less cost of disposal and value in use. Property, plant, and equipment is stated at cost less accumulated depreciation and impairment losses. Cost represents expenditure that is directly attributable to the purchase of the asset. At the date of transition to IFRS on 1 April 2004, land and buildings previously held at cost under UK GAAP less accumulated depreciation were revalued, and the fair values derived have been taken as their deemed cost as at that date in accordance with the exemption available under IFRS 1 First time Adoption of International Financial Reporting Standards. Depreciation is charged on a straight-line basis, so as to write off the costs of assets less their residual values over their estimated useful lives, on the following basis: Freehold land nil, Freehold buildings 2 to 2.5%, Leasehold improvements over the term of the lease or the useful economic life of between 3 and 15 years, whichever is lower, Short leasehold over unexpired term of lease, Fixtures and equipment 10 to 20%, Motor vehicles 20%. The assets' estimated useful lives, depreciation rates, and residual values are reviewed and adjusted if appropriate at the end of each reporting period. An asset's carrying value is written down immediately to its recoverable amount if its carrying value is greater than its recoverable amount. The gain or loss arising on disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the statement of profit or loss. On initial classification as held for sale, assets are measured at the lower of their present carrying amount and the fair value less costs to sell, with any adjustments taken to the statement of profit or loss. These assets are not depreciated. Assets are classified as held for sale when they satisfy the following criteria: management is committed to a plan to sell, the asset is available for immediate sale, an active program to locate a buyer is initiated, the sale is highly probable within 12 months of classification as held for sale, the asset is being actively marketed for sale at a sales price reasonable in relation to its fair value, and actions required to complete the plan indicate that it is unlikely that the plan will be significantly changed or withdrawn. Inventories are stated at the lower of cost and net realizable value. Cost is determined by the average purchase price. Finished goods and work in progress include attributable production overheads. Net realizable value is based on estimated selling price in the ordinary course of the business less cost of disposal, having regard to the age, saleability, and condition of the inventory. Financial assets and liabilities are recognized in the Group's statement of financial position when the Group becomes party to the contractual provisions of the instrument. Financial assets are classified, at initial recognition, and subsequently measured at amortized cost, fair value through other comprehensive income, and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. In order for a financial asset to be classified and measured at amortized cost or fair value through other comprehensive income, it needs to give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The Group only holds financial assets that are classified as loans and receivables and are measured at amortized cost. The Group measures financial assets at amortized cost if both of the following conditions are met: the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding."
"Financial assets at amortized cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified, or impaired. A financial asset is primarily derecognized when the rights to receive cash flows from the asset have expired, or the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement. For trade and other receivables and contract assets, the Group applies the simplified approach permitted by IFRS 9, with lifetime expected credit losses recognized from initial recognition of the receivable or contract asset. These assets are assessed based on the Group's historical credit loss experience adjusted for forward-looking information. The Group uses historical trends to apply this to an assessment of the likely credit losses in the future. The Group's experience has shown that aging of receivable balances is primarily due to normal collection process issues rather than increased likelihood of non-recoverability. At each reporting date, management reviews the carrying amount of its receivables and contract assets to determine whether there is any indication that those assets have suffered an impairment loss. On 13 August 2007, a declaration of trust constituted the PPPT to hold agents' prepayments. Park Prepayments Trustee Company Limited, as trustee of the trust, holds this money on behalf of agents. The conditions of the release of this money to the Group are detailed in the trust deed. On 16 February 2010, a declaration of trust constituted the PCSET to hold the e-money float in accordance with regulatory requirements. The e-money float represents the value of the obligations of the company to cardholders and redeemers. The liability in respect of deposits received on flexecash cards is held within trade payables and provisions. Ring-fenced funds represent amounts segregated from Group cash balances and are in respect of monies held on cards which are not subject to regulatory requirements. Monies held under the declaration of trust with the PPPT and the PCSET on behalf of customers, cardholders, and redeemers, and ring-fenced funds are recognized on the statement of financial position as the Group has access to the interest on these monies and can, having met certain conditions, withdraw the funds. Cash and cash equivalents include cash in hand and deposits held with banks with short maturities of three months or less; however, the deposits can be accessed immediately if required. It is therefore considered appropriate that these deposits be classed as cash and cash equivalents. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. Cash balances and overdrafts are offset where the Group has the ability and intention to settle these balances on a net basis. For cash flow purposes, bank overdrafts are shown within cash and cash equivalents. Non-derivative financial liabilities are classified as other financial liabilities. The Group's other financial liabilities comprise borrowings, trade, and other payables. Other financial liabilities are carried at amortized cost using the effective interest method. A financial liability is derecognized only when the obligation is extinguished, that is, when the obligation is discharged, canceled, or expires. Trade and other payables are initially recorded at fair value and subsequently measured at amortized cost using the effective interest method. The unspent balances on flexecash cards and e-codes where the cardholder has the right of redemption are accounted for as a financial liability as required under IAS 39, and are reported separately under trade and other payables. Unredeemed vouchers and unspent balances on flexecash cards and e-codes where the cardholder does not have the right of refund are included at their present value at the date of recognition. This comprises the anticipated amounts payable to retailers on redemption, after applying an appropriate discount rate to take into account the expected timing of payments. Anticipated payments to retailers are assessed by reference to historical data as to voucher and card redemption rates and timings. The key estimates used in deriving the provision include the future service fees paid by retailers, interest rates used for discounting, and the timing and amount of the future redemption of vouchers and cards. The future cash payments are discounted as required under IAS 37 Provisions, Contingent Liabilities, and Contingent Assets, as the amounts are considered to be material."
"The service fee and breakage revenue associated with multi-retailer redemption products is deferred as described in the revenue recognition accounting policy. An amount is provided to cover existing and future potential settlements in relation to claims made in respect of mis-selling payment protection insurance. These policies were sold as part of the closed loan broking business. The future cash payments are not discounted as required under IAS 37 as the amounts are not considered to be material. An amount is provided to cover the future cost of removing leasehold improvements and restoring the Group's leased offices to their previous condition. Retirement benefit obligation The Group has both defined benefit and defined contribution pension plans. The assets of the defined benefit pension plans are held in separate trustee administered funds. Defined benefit plan The fair value of the plan assets less the present value of the defined benefit obligation is recognised in the statement of financial position as the retirement benefit asset, after applying the asset ceiling test. The limit on the recognition of a defined benefit pension asset is measured as the value of economic benefit available to the company in the form of refunds or reductions in future contributions, in accordance with the rules of the pension schemes. Regular valuations are prepared by independent professionally qualified actuaries on the projected unit credit method. The valuations are carried out every three years and updated on a yearly basis for accounting purposes. These determine the level of contribution required to fund the benefits set out in the rules of the plans and allow for the periodic increase of pensions in payment. The schemes are closed to future accrual for years of service but pensions are still dependent on actual final salaries. Consequently, the Group may have an amendment in future where salary rises differ from those projected. For any related plan amendment, these are recognised immediately in the statement of profit or loss. Remeasurements comprise actuarial gains and losses on the obligations and the return on scheme assets excluding interest. They are recognised immediately in other comprehensive income in the statement of comprehensive income. Net interest cost is calculated by applying the discount rate on liabilities to the net pension liability or asset adjusted for cash flows over the accounting period and is recognised within administrative expenses. Defined contribution plans For defined contribution plans, the Group pays contributions to privately administered pension plans on a contractual basis. The contributions are recognised as an employee benefit expense as they fall due. Holiday pay Provision is made for any holiday pay accrued by employees to the extent that the holiday entitlements accrued have not been taken at the period end. Accounting Policies continued Corporate Governance Share-based payments The Group operates a number of equity settled share-based payment plans. The expense is calculated as the fair value of the share options at the date of grant, using Monte Carlo simulation for long-term incentive plans and share grant plans, Black-Scholes formula for SAYE 2018 and the binomial method for SAYE 2015. A corresponding amount is recorded as an increase in equity. This expense is recognised on a straight-line basis over any relevant vesting period and is adjusted on a prospective basis at each period end for any changes in assumptions or estimates that relate to non-market conditions, taking into account the conditions existing at each year end. Where an employee fails to complete a specified service period, including termination of employment, the awards are considered to have been forfeited and the cumulative expense is reversed. Own shares The Group has an employee benefit trust used for the granting of shares to executives and certain employees. Own shares held are recognised at cost as a deduction from shareholders equity. Subsequent consideration received for the sale of such shares is also recognised in equity, with any difference between the sales proceeds and original cost being taken to equity. Foreign currency Transactions in foreign currencies are recorded at the rates of exchange at the date the transactions occur. Amounts recognised in the statement of comprehensive income are translation differences. Monetary assets and liabilities are restated at the prevailing exchange rate at each year end. Differences arising on restatement are included in the statement of comprehensive income for the year. Leases At inception of a contract the Group assesses whether a contract is or contains a lease."
"A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative standalone price. However, for leases of land and buildings in which it is a lessee, the Group has elected not to segregate non-lease components and account for the lease and non-lease components as a single lease component. As a lessee The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, less any lease incentives, any initial direct cost incurred by the lessee, and an estimate of costs to be incurred by the lessee in restoring the site on which the assets are located. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use asset is periodically tested for impairment and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability comprise the following: fixed payments including in substance fixed payments, less any lease incentives receivable; variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date; amounts expected to be payable under a residual value guarantee; and the exercise price under a purchase option that the Group is reasonably certain to exercise and penalties for early termination unless the Group is reasonably certain not to terminate early. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change of index or rate, if there is a change in future lease payments arising from a change in the Group’s estimate of the amount payable under a residual value guarantee, if there is a change in lease term, or if the Group changes its assessment of whether it will exercise a purchase extension or termination option. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of plant and machinery that have a lease term of 12 months or less and leases of low-value assets of less than £5000. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Accounting Policies continued Leases continued As a lessor When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset. When the Group is an intermediate lessor, it accounts for its interest in the head lease and sub-lease separately. It assesses the lease classification of the sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease. If an arrangement contains a lease and a non-lease component, the Group applies IFRS 15 to allocate the consideration in the contract. Taxation The charge for taxation is based on the result for the year and takes into account taxation deferred because of temporary differences between the treatment of certain items for taxation and accounting purposes."
"Current tax is the expected tax payable on the taxable result for the year using tax rules enacted or substantively enacted at the year end, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The following temporary differences are not provided for: when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transition, affects neither the accounting profit nor taxable profit or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the year end and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. Taxation is recognised in the statement of profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Dividends In accordance with IAS 10 Events After the Reporting Period, dividends are recognised in the financial statements in the period in which they are approved by shareholders in the case of the final dividends and when paid in the case of the interim dividends. Key judgements and estimates The preparation of financial statements in conformity with IFRS requires the use of estimates and judgements that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Judgements In applying the accounting policies, management has made the following judgements: Pensions The Group has two defined benefit pension schemes, as described in note 19, where the fair value of plan assets exceeds the present value of the scheme liabilities. The Group has determined, based on an evaluation of the rules of each of the pension schemes and legal advice, that it has a right to a refund during the life of the plan or when the plan is settled, that is not conditional upon factors beyond the entity’s control. Revenue In applying the principles of IFRS 15, management have considered whether the Group is a principal or agent when it supplies multi-retailer redemption products. Having assessed the nature of the Group’s contractual relationships with retailers, the directors have concluded that the Group acts as an agent in exchange for a service fee as it does not control the transfer of goods or services by the retailer to the product holder upon redemption. This results in net revenue recognition as described in the revenue recognition accounting policy. For cardholder fees and breakage associated with multi-retailer redemption products, the Group acts as a principal in its contractual relationship with the product holders. This results in gross revenue recognition as described in the revenue recognition accounting policy. Under IFRS 15, entities are required to disclose disaggregated revenue information to illustrate how the nature, amount, timing and uncertainty about revenue and cash flows are affected by economic factors. Management have considered this requirement and have disclosed information with regard to type of good or service, market or type of customer, timing of transfer of goods or services and geographical region. Management believe that this level of disaggregation is sufficient to satisfy the disclosure requirements of the standard. Unredeemed cards The directors have assessed the features of the Group’s multi-retailer redemption products and concluded that unredeemed balances on corporate gifted cards do not meet the definition of a financial liability within the scope of IFRS 9. This is because the cards have expiry dates after which the card cannot be redeemed. The cards can also be redeemed with the Group for certain goods or services and cannot be redeemed in cash. As a result, the liabilities relating to these products are not within the scope of IFRS 9 and are instead measured in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets."
"Determining the lease term of contracts with renewal and termination options – Group as lessee The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has two material lease contracts that include extension and termination options. One of these is the lease of floor 3 and 4, 20 Chapel Street Liverpool. The Group included the renewal period as part of the lease term, as the majority of the Group’s operations are based in this site in Liverpool City Centre. As a result of this, the lease extension is reasonably certain to be exercised. The other lease is for rack space and data hosting services, which has an initial term of one year with an automatic rolling 12 month extension option if not cancelled. It has been estimated the lease will be renewed for a further two years, however the exact length of the extension is dependent on the progress of the Group’s cloud migration project, and may be shorter. As the racks and data hosting are critical to the operation of the business, a two year extension renewal period has been included as part of the lease term, as it is reasonably certain that the lease extension will be exercised for this period of time. Estimates The key assumptions and other sources of estimation uncertainty at the reporting date are described below: Provisions for unredeemed vouchers and cards A provision is made in respect of unredeemed vouchers and cards. The provision is calculated by estimating anticipated amounts payable to retailers on redemption and the expected timing of payments. Historical data over a number of years and current trends are regularly reviewed and are used to prepare these estimates. Any differences to the estimates may necessitate a material adjustment to the level of the provision held in the statement of financial position. Management have considered the sensitivities of the key estimates and do not foresee that any likely change in these estimates will have a material impact on the size of the provision. In the base case scenario, voucher redemptions are assumed to slightly decrease in year one against the prior year, and then significantly decrease in year two in line with the fall in the paper voucher mix. Card redemptions are assumed to increase in year one against the prior year, and increase again in year two, in line with the shift in product mix towards card and digital products. Post year end redemptions for the first quarter of the financial year ended 31 March 2022 have been lower than the levels forecasted by the Group. The actual increase compared to the corresponding quarter in the prior year in voucher redemptions was 300%, and the actual increase in card redemptions was 183%, due to the majority of high street retailers being closed due to the lockdown in the first quarter of the prior year. It is assumed redemptions will come in line with the base case by the end of the year, so any impact of this would be negligible. Breakage For multi-retailer redemption products where the end user has no right of redemption, the Group may expect to earn a breakage amount. In order to calculate the expected breakage amount, the Group estimates how many products will be fully redeemed and how many will be partially redeemed. For those which are partially redeemed, the Group estimates projected balances remaining on the products at expiry. Historical data and current trends regarding patterns of redemption and expiry are used to prepare the estimates. As redemption behaviour may differ by market, historical data and current trends are reviewed at this level. If the expected level of breakage were to change by 1.0%, the impact on revenue for the reporting period would be £0.1 million. Management have considered the sensitivity of this estimate and do not foresee that any likely change to the estimate will have a material impact on either the level of deferred income held in the statement of financial position or the amount of revenue for the reporting period."
"Deferred income – Love2shop voucher redemption timing As described in the revenue recognition accounting policy, revenue for multi-retailer redemption products is recognised in proportion to actual redemption timing, generating deferred income balances until the point of redemption. For Love2shop vouchers, there is a time delay between the point of redemption and when they are physically returned to the Group for validation and accounting purposes. To negate the effects of this delay, an adjustment is made at the end of the reporting period, which estimates the value of vouchers already redeemed but not yet returned to the Group and records the associated revenue. Historical data over a number of years and current trends are used to prepare the estimate. Management have considered the sensitivity of this estimate and do not foresee that any likely change to the estimate will have a material impact on either the level of deferred income held in the statement of financial position or the amount of revenue for the reporting period. Goodwill Goodwill arising on acquisition represents the difference between the consideration and the fair value of net assets acquired. Goodwill is not amortised, but is reviewed annually for impairment and whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be receivable. The impairment review relies on a number of assumptions. Any differences to the assumptions made may necessitate a material adjustment to the level of goodwill held in the statement of financial position. Other intangible assets. The Group applies judgment in assessing whether the costs incurred, both internal and external, will generate future economic benefits and therefore should be capitalized. Any redundant costs are not capitalized but are expensed during the period in which they are incurred. Amortization commences when management determines the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. This is estimated to be August 2021 for the new ERP system, when phase 1 is expected to be in a position to go live. Significant judgments and estimates are applied in determining the carrying value of the assets, including assumptions made in respect of the status of the program each asset relates to, and there may be a range of possible outcomes when a program is complex. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. At each reporting date, the Group reviews the carrying value of its tangible and intangible assets, including those not yet in use, to determine whether there is any indication that those assets have suffered an impairment loss. Incremental borrowing rate (IBR) The Group cannot readily determine the interest rate implicit in the lease; therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Management has used rates ranging from 3.3% to 4.9% in respect of leases entered into during the year. Accounting Policies continued Corporate Governance The Group’s operations are divided into two principal operating segments: Consumer, which represents sales to consumers, utilizing the Group’s Christmas savings offering and our website, highstreetvouchers.com; and Corporate, comprising sales to businesses. Both segments offer primarily sales of the Love2shop voucher, flexecash cards, Mastercards, and e-codes in addition to other retailer vouchers. All other segments are those items relating to the corporate activities of the Group which it is felt cannot be reasonably allocated to either business segment. Finance income, finance costs, and taxation are not allocated to individual segments as they are managed on a Group basis. The Group operates in only one geographical segment, being the UK. The Group’s operations in Ireland were immaterial to the results and assets of the Group for the year ended 31 March 2021."
"2021 Consumer Corporate All other segments Group Billings Total billings 205,282 201,250 – 406,532 Revenue Total revenue 53,138 53,667 – 106,805 Results Segment operating profit or loss 532 2,638 (2,340) 830 Finance income 783 Finance costs (360) Profit before taxation 1,253 Taxation (402) Profit 851 All other segments loss comprises primarily of staff costs and professional fees. In arriving at segment operating profit or loss, exceptional profits or costs have been charged to the segments as follows: Consumer Corporate All other segments Group Exceptionals Impairment of obsolete stock (414) – – (414) Impairment of goodwill (218) – – (218) Redundancy costs (639) – – (639) Profit on sale of assets held for sale 205 – – 205 (1,066) – – (1,066) An analysis of the Group’s external revenue is as follows: Consumer Corporate Group Revenue from contracts with customers Goods – Single retailer redemption products 38,610 39,544 78,154 Other goods 153 106 259 Services – Multi-retailer redemption products 13,493 11,243 24,736 Other services 739 2,770 3,509 Other 143 4 147 53,138 53,667 106,805 The majority of revenue from contracts with customers is recognized at a point in time. For details of the Group’s primary revenue streams, please see the revenue recognition accounting policy. The reason for the fall in revenue from other goods compared to the prior year was the Group’s decision to cease the production and sale of hampers. The fall in revenue from other services was due to the disposal of FMI during the period. The Group has elected not to report on segment assets and liabilities as this information is not provided to the Chief Operating Decision Maker and is not relevant to the Chief Operating Decision Maker’s decision making. In respect of Appreciate Group plc, the Chief Operating Decision Maker is regarded as the executive members of the Board of directors. 2020 Consumer Corporate All other segments Group Billings Total billings 222,207 197,650 – 419,857 Revenue Total revenue 62,447 50,277 – 112,724 Results Segment operating profit or loss 5,327 6,581 (5,512) 6,396 Finance income 1,481 Finance costs (177) Profit before taxation 7,700 Taxation (2,189) Profit 5,511 All other segments loss comprises primarily of staff costs, professional fees, and the impairment of the Valley Road Site. An analysis of the Group’s external revenue is as follows: Consumer Corporate Group Revenue from contracts with customers Goods – Single retailer redemption products 31,227 30,915 62,142 Other goods 6,153 87 6,240 Services – Multi-retailer redemption products 22,591 15,279 37,870 Other services 2,386 3,985 6,371 Other 90 11 101 62,447 50,277 112,724 The majority of revenue from contracts with customers is recognized at a point in time. Notes to the Accounts continued Corporate Governance Profit before taxation The following items have been included in arriving at profit before taxation: 2021 2020 Staff costs 15,515 15,008 Cost of inventories recognized as an expense 40,530 55,103 Reduction of or write down of inventories recognized as a credit or expense (77) 95 Exceptional write down of inventories recognized as an expense 414 124 Pension interest income (99) (44) Depreciation of property, plant, and equipment 516 511 Impairment of property, plant, and equipment or assets held for sale – 1,813 Amortization of other intangibles 853 863 Impairment of other intangibles – 21 Depreciation of right of use assets 422 285 Impairment loss on goodwill 218 1,368 Loss on sale of property, plant, and equipment and other intangibles 544 4 Profit on sale of assets held for sale (205) – Repairs and maintenance on property, plant, and equipment 979 838 Services provided by the Group’s auditor During the year, the Group obtained the following services from the company’s auditor at costs as detailed below: 2021 2020 Fees payable to the company’s auditor for the audit of: company’s annual accounts 164 160 subsidiaries pursuant to legislation 317 261 Fees payable to the company's auditor in excess of base fee for the audit of: company’s annual accounts current year 123 116 company’s annual accounts prior year 147 – subsidiaries pursuant to legislation current year – 138 subsidiaries pursuant to legislation prior year 19 – Fees payable to the company’s auditor and its associates for other services: other services pursuant to legislation 149 13 expenses 3 4 Fees paid for non-audit services to the company itself are not disclosed in the individual accounts of Appreciate Group plc because the company’s consolidated accounts are required to disclose such fees on a consolidated basis."
"Finance income and costs Finance income: Bank interest receivable 783 1,479 Other interest receivable – 2 783 1,481 Finance costs: Bank interest payable 115 – Lease interest 245 177 360 177 Taxation Analysis of profit or loss charge in period Current tax 236 1,966 Adjustments to current tax in respect of prior periods (10) 52 226 2,018 Deferred tax 111 180 Adjustments to deferred tax in respect of prior periods 65 (9) 176 171 Taxation 402 2,189 Tax credited or charged directly to other comprehensive income Deferred tax on actuarial losses or gains on defined benefit pension plans (408) 383 Tax credited or charged directly to equity Reduction in deferred tax on removal of assets held for sale (110) – Deferred tax on share options – 14 The tax for the period is higher than the standard rate of corporation tax in the UK of 19%. The differences are explained below: Profit on ordinary activities before tax 1,253 7,700 Expected tax charge at 19% 238 1,463 Effects of: Adjustments to tax in respect of prior periods 55 43 Amounts not taxable or expenses not deductible for tax purposes 99 567 Tax in respect of share-based payments 10 6 Effect of rate change on current year deferred tax – 110 Total taxation 402 2,189 Earnings per share Basic EPS is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The calculation of basic and diluted EPS is based on the following figures: Earnings Profit for the year before exceptional items 1,917 9,187 Exceptional items (1,066) (3,676) Profit for the year attributable to equity shareholders 851 5,511 Weighted average number of shares Basic EPS – weighted average number of shares 186,347,228 186,347,228 Diluting effect of employee share options and LTIP awards – – Diluted EPS – weighted average number of shares 186,347,228 186,347,228 109,348 shares have been considered anti-dilutive during the year, that could potentially dilute basic EPS in the future. Basic EPS Weighted average number of ordinary shares in issue 186,347,228 186,347,228 EPS 0.46 2.96 Underlying basic EPS Weighted average number of ordinary shares in issue 186,347,228 186,347,228 EPS 1.03 4.93 Diluted EPS Weighted average number of ordinary shares 186,347,228 186,347,228 EPS 0.46 2.96 Underlying diluted EPS Weighted average number of ordinary shares 186,347,228 186,347,228 EPS 1.03 4.93 Goodwill Cost – Actual or deemed At 1 April 2020 5,048 Disposals (1,341) At 31 March 2021 3,707 Impairment At 1 April 2020 4,248 Impairment in year 218 Disposals (1,341) At 31 March 2021 3,125 Net book amount At 31 March 2021 582 At 31 March 2020 800 Cost – Actual or deemed At 31 March 2019 and 2020 5,048 Impairment At 1 April 2019 2,880 Impairment in year 1,368 At 31 March 2020 4,248 Net book amount At 31 March 2020 800 At 31 March 2019 2,168 Goodwill allocation to CGUs Goodwill is allocated to the following CGUs and is tested for impairment at this level: CGUs Goodwill at 1 April 2020 Additions Impairment Goodwill at 31 March 2021 Consumer 800 – (218) 582 Corporate – – – – Net book amount 800 – (218) 582 Consumer – Family and Country Hampers Franchisee The key assumptions in the value in use calculations were as follows: The final order position for the previous Christmas. The budgeted gross margins. These margins are forecast to be maintained going forward. Average agent retentions forecast. These are based on historical performance of agent retention achieved. Historically, such forecasts have been materially correct. An additional 10% fall in retention has been factored into the forecast for the year ended 31 March 2022 to reflect the current trading environment. A 15% fall in retention per year is typically used, which has been increased to 25% for the year ended 31 March 2022. Base case scenario revenue. This is based on average historical order value and average agent retention rates which have been extrapolated forward 10 years. The generally high retention values for customers support the adoption of a 10-year customer life cycle value as being appropriate for the business. No revenue growth has been factored into the data used in the calculation. The resulting cash flows were discounted using a pre-tax discount rate of 17%."
"The impairment in the year of £157,000 against the Family Franchisee goodwill represents the impact of a small reduction in forecasted agents retention and a slight decrease in margin due to the change in product mix and higher commissions. As described above, agents retention is expected to be lower for the year ended 31 March 2022 due to Covid-19 and the impact of lockdowns. Each year thereafter, retention is expected to return to more typical levels of around 85%. The commission structure has been revised and commissions have been increased as part of the strategy to incentivize agents and increase orders. These changes impact each year going forward in the impairment model. The impairment is included within exceptional costs in the Consumer segment. There is a reasonably possible chance that a change in one or more of the key assumptions could give rise to an impairment. Sensitivity analysis was performed where changes in key assumptions were tested, those being changes in the discount rate, retention of agents, and margin. The following table summarizes the impact on the goodwill impairment at the end of the reporting period if each of these key assumptions were changed in isolation. Change in assumption: Change in goodwill impairment Discount rate increase by 1%: increase by £2,000 Retention of agents decrease by 1%: increase by £25,000 Margin decrease by 1%: increase by £6,000 There is also a reasonably possible chance of the pre-tax discount rate increasing to 18.8%. This would result in an additional impairment of £28,000. The impairment in the year of £61,000 (2020: £52,000) against the Country Hampers Franchisee goodwill primarily represents the reduction in agents that were originally acquired from Country Hampers. This reduces the Country Hampers Franchisee goodwill to nil and is included within exceptional costs in the Consumer segment. The disposals during the year relate to companies that are no longer owned by the group, FMI and Espana Villas. The goodwill relating to these companies had been fully written down in previous years. The additions during the year include £3,519,000 related to our Enterprise Resource Planning system which will be the cornerstone of the business to build on utilizing new cloud-based technology. It is expected that amortization will commence in the year ending 31 March 2022 as this is when it is expected the asset will become available for use. An impairment review has been conducted in respect of the ERP system and no impairment has been identified. The agency customer lists relate to lists of 30,000 agents nationwide acquired from FHSC Limited on 15 February 2006, 7,500 agents nationwide acquired from Findel PLC on 7 March 2007, 4,000 agents in the Republic of Ireland acquired from Dublin based Celtic Hampers and Family Hampers on 25 October 2010, and 388 agents nationwide acquired from I and J L Brown Limited, who operated a Country Christmas Savings Club franchise, on 3 December 2012. Customer lists are amortized over their useful life of up to 10 years based on the pattern of forecast cash flows expected to be generated. On an annual basis, management reviews the expected cash flows to be generated and makes appropriate provision for impairment if necessary. The customer list became fully amortized in the year."
"At 31 March 2021, the parent company’s subsidiary undertakings included in the consolidation were: Name of company: Nature of business Park Group UK Limited: Holding company Park Retail Limited: Gifting and prepayment Park Direct Credit Limited: Debt collection services (no longer active) Park Financial Services Limited: Insurance broking services (no longer active) Park Card Services Limited: Electronic money issuer Park Card Marketing Services Limited: Card administration support services Country Christmas Savings Club Limited: Dormant company – trading name used by Park Retail Limited Family Christmas Savings Club Limited: Dormant company – trading name used by Park Retail Limited Handling Solutions Limited: Dormant company – trading name used by Park Retail Limited High Street Vouchers Limited: Dormant company – trading name used by Park Retail Limited Park Christmas Savings Club Limited: Dormant company – trading name used by Park Retail Limited Park Travel Service Limited: Dormant company – trading name used by Park Retail Limited Agency Administration Limited: Dormant company Appreciate Group Limited: Dormant company Brightdot Limited: Dormant company Cheshire Bank Limited: Dormant company Cheshire Securities Limited: Dormant company Family Hampers Limited: Dormant company Heritage Hampers Limited: Dormant company MaximB2B Limited: Dormant company Opal Loans Limited: Dormant company Park Connect Limited: Dormant company Park Food (Warrington) Limited: Dormant company Park Group Secretaries Limited: Dormant company Park Hamper Company Limited: Dormant company Park.com Limited: Dormant company The Perfect Hamper Co. Limited: Dormant company Wirral Cold Store Limited: Dormant company All of the above companies are registered in England. Details of the registered office for all companies are given on page 120. The assets held for sale balance as at 31 March 2020 related to the Valley Road property, held by the Group’s subsidiary Budworth Properties Limited. This subsidiary was sold during the period, generating a profit on sale of £41,000. The disposals within Leasehold Improvements and Fixtures and Equipment this year also relate to the Valley Road property which the Group no longer owns. Deferred tax assets have been recognized in respect of other temporary differences giving rise to deferred tax assets where it is probable that these assets will be recovered. Deferred tax assets have not been provided on brought forward trading losses of £20,624,000 (2020: £20,624,000) and on capital losses of £443,000 (2020: £2,038,000) as, at the year end, the Group does not believe it is probable that they will be able to be utilized against future taxable income. Both trading and capital losses can be carried forward indefinitely. There are no deferred tax liabilities arising on temporary differences associated with subsidiaries. The movements in deferred tax assets and liabilities are shown below: Deferred tax liabilities: Retirement benefit obligation: At 1 April 2020: (799) Charged to profit or loss: (5) Credited to statement of comprehensive income: 408 Amounts relating to subsidiaries disposed of: – At 31 March 2021: (396) Deferred tax assets: Share options: At 1 April 2020: 10 Charged to profit or loss: (10) At 31 March 2021: – The rate of corporation tax was reduced to 19% from 1 April 2017 in the Budget of July 2015 and the rate change was substantively enacted on 26 October 2015. It was reduced to 17% from 1 April 2020 in the Budget of March 2016 and this rate change was substantively enacted on 6 September 2016. However, in the Spring Budget of March 2020, the government announced that the rate would remain at 19% and this rate change was substantively enacted on 17 March 2020. The rate was subsequently increased to 25% with effect from 1 April 2023 in the Budget of March 2021 and this rate change was substantively enacted on 24 May 2021. The impact on the deferred tax balance of this rate change is to increase the deferred tax liability by £250,000. Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19% (2020: 19%). The movement on the deferred tax account is shown below: At 1 April: (1,121) Profit or loss charge: (176) Statement of comprehensive income credit/(charge): 408 Amounts credited/(charged) directly to equity: – Amounts relating to subsidiaries disposed of: 110 At 31 March: (779) Deferred tax assets have been recognized in respect of other temporary differences giving rise to deferred tax assets where it is probable that these assets will be recovered."
"Deferred tax assets have not been provided on brought forward trading losses of £20,624,000 (2020: £20,624,000) and on capital losses of £443,000 (2020: £2,038,000) as, at the year end, the Group does not believe it is probable that they will be able to be utilized against future taxable income. Both trading and capital losses can be carried forward indefinitely. There are no deferred tax liabilities arising on temporary differences associated with subsidiaries. Substantively enacted on 26 October 2015. It was reduced to 17% from 1 April 2020 in the Budget of March 2016, and this rate change was substantively enacted on 6 September 2016. However, in the Spring Budget of March 2020, the government announced that the rate would remain at 19%, and this rate change was substantively enacted on 17 March 2020. The rate was subsequently increased to 25% with effect from 1 April 2023 in the Budget of March 2021, and this rate change was substantively enacted on 24 May 2021. The impact on the deferred tax balance of this rate change is to increase the deferred tax liability by £82,000. Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19%. The movement on the deferred tax account is shown below: 2021 £000 2020 £000 At 1 April (262) (168) Profit or loss charge (15) (35) Statement of comprehensive income charge 18 (45) Amounts charged directly to equity – (14) At 31 March (259) (262) Deferred tax assets have been recognised in respect of other temporary differences giving rise to deferred tax assets where it is probable that these assets will be recovered. Deferred tax assets have not been provided on capital losses of £443,000 as at the year end, the company does not believe it is probable that they will be able to be utilised against future taxable income. The tax losses can be carried forward indefinitely. The movements in deferred tax assets and liabilities are shown below: Deferred tax liabilities Retirement benefit obligation £000 At 1 April 2020 (377) Charged to profit or loss (9) Credited to statement of comprehensive income 18 At 31 March 2021 (368) At 1 April 2019 (291) Charged to profit or loss (41) Charged to statement of comprehensive income (45) At 31 March 2020 (377) Deferred tax assets Property, plant and equipment £000 Share options £000 Total £000 At 1 April 2020 105 10 115 Credited/(charged) to profit or loss 4 (10) (6) At 31 March 2021 109 – 109 At 1 April 2019 95 28 123 Credited/(charged) to profit or loss 10 (4) 6 Charged to equity – (14) (14) At 31 March 2020 105 10 115 Notes to the Accounts continued Corporate Governance Inventories Group 2021 £000 2020 £000 Raw materials – 35 Finished goods 3,638 2,805 3,638 2,840 The cost of inventories recognised as an expense in the year is £40,530,000. The write down of inventories recognised as an expense in the period is £337,000, which comprises a credit of £77,000 in respect of provision adjustments in the corporate part of the business, offset by an exceptional impairment in respect of stock in the consumer part of the business of £414,000. Following the closure of the packing operations, including hamper packing, in the year, the Group impaired raw materials and finished goods stock by £414,000, which is included within the £337,000 as detailed above. Trade and other receivables Group Current assets 2021 £000 2020 £000 Trade receivables 5,798 5,838 Less: Expected credit loss provision (73) (21) Trade receivables – net 5,725 5,817 Other receivables 3,463 2,144 Prepayments and accrued income 2,217 1,496 11,405 9,457 Of the trade receivables net balance above, £5,488,000 is due within one month, with the remaining £237,000 falling due in more than one but less than three months. Other receivables are due within one month. Credit quality of trade receivables 2021 £000 2020 £000 Neither past due nor impaired 4,510 4,417 Past due but not impaired 1,687 1,400 Past due and impaired 73 21 Total 6,270 5,838 The Group has charged £52,000 in respect of expected credit losses during the year. The Group applies the IFRS9 simplified approach to measuring expected credit losses for trade receivables at an amount equal to lifetime expected credit losses. The expected credit losses on trade receivables are calculated based on actual credit loss experience over the preceding two years on the total balance of trade receivables before impairment and are adjusted for forward looking information."
"The Group’s credit loss experience has shown that ageing of receivable balances is primarily due to normal collection process issues rather than increased likelihood of non-recoverability. This is shown in the fact that the Group has only experienced credit losses of £4,000 in the preceding two years, which is less than 0.004% of the credit sales made in that period. Credit rating of debtors are carefully monitored when initially offering credit, and the use of credit insurance and upfront payments further mitigate the risk of default. The Group has fully analysed the impact of Covid-19 on the future expected credit losses and concluded that with the safeguards outlined above and taking into consideration recent collection patterns, there has not been material impact on the assessment of expected credit losses. The movement in the provision for expected credit losses is as follows: 2021 £000 2020 £000 At 1 April (21) (5) Additional provisions (52) (21) Amounts used – 5 Amounts recovered – – At 31 March (73) (21) The other receivables balance above of £3,463,000 primarily relates to the float account payment arrangement that several of the Group’s suppliers operate. The Group pays these suppliers in advance and are then able to utilise that balance for future orders. Within the prepayments balance above, £201,000 relates to the incremental costs of obtaining contracts with customers. Park Christmas Savings agents earn commission rewards on their orders, and this is an incremental cost of obtaining their contracts. For multi-retailer redemption products, the commission costs are prepaid. The costs are recognised in cost of sales when the services are transferred to the customer, that is when the customer redeems their product or when charges are levied. The prepayment at 31 March 2021 relates to Christmas 2021 and will be recognised in cost of sales over the forthcoming six months in proportion to the actual timing of redemption and charges. Commission reward payments for single retailer redemption products and other goods are expensed as incurred. The movement in the prepayment of costs of obtaining contracts with customers is as follows: 2021 £000 2020 £000 At 1 April 156 191 Prepaid commissions 201 156 Commissions recognised in cost of sales (156) (191) At 31 March 201 156 No impairment losses were recognised during the year. Company 2021 £000 2020 £000 Receivables from subsidiaries 22,457 27,583 Other receivables 214 384 Prepayments 36 38 22,707 28,005 Other receivables are due within one month. The receivables from subsidiaries balances stated above are shown net of the following provisions: 2021 £000 2020 £000 Provision against inter company loans 10,967 10,967 The movement in the provision against inter company loans is as follows: 2021 £000 2020 £000 At 1 April (10,967) (11,368) Additional provisions – – Amounts used – – Amounts recovered – 401 At 31 March (10,967) (10,967) Management have considered the probability of default, the loss given default when the borrower is not capable of repaying on demand, and the discount rate when calculating expected credit losses. The company has fully analysed the impact of Covid-19 on the future expected credit losses and concluded that there has not been a material impact on the assessment of expected credit losses. Notes to the Accounts continued Corporate Governance Monies held in trust Group 2021 £000 2020 £000 Park Prepayments Protection Trust 51,534 55,078 E money Trust 69,374 44,225 Ring fenced funds 11,146 3,390 Monies held in trust 132,054 102,693 On 13 August 2007, a declaration of trust constituted PPPT to hold customer prepayments. Park Prepayments Trustee Company Limited, as trustee of the trust, holds this money on behalf of the agents. The conditions of the trust that allow the release of money to the Group are summarised below: 1. Purchase of products to be supplied to customers. 2. Supply of products to customers less any amounts already received under condition 1. 3. Amounts required as a security deposit to any credit card company or other surety. 4. Amounts payable for VAT. 5. Amount equal to any bond required by the Christmas Prepayments Association. 6. Amounts to meet its working capital requirements. 7. Residual amounts upon completion of despatch of all orders in full. Products for this purpose means goods, vouchers, prepaid cards, or other products ordered by customers. Prior to any such release of monies under condition 6 above, the trustees of PPPT require a statement of adequacy of working capital from the directors of Park Retail Limited, stating that it will have sufficient working capital for the year."
"A summary of the main provision of the deeds and a copy of the trust deed is available at www.getpark.co.uk. On 16 February 2010, a declaration of trust constituted the PCSET to hold the e-money float in accordance with regulatory requirements. The e-money float represents the value of the obligations of the company to cardholders and redeemers. The ring fenced funds represent amounts segregated from Group cash balances and are in respect of monies held on cards which are not subject to regulatory requirements. As a result, the amounts are not held within the E money Trust. These funds were segregated at a client's request to give the client reassurance around their card balances. Monies held in trust are invested in deposit accounts with maturity dates of up to two years. The timing of the release of the monies to the Group from PPPT is as detailed above and is expected to be within 12 months of the year end. The release of monies from the E money Trust and ring fenced funds occurs as the obligations fall due. Further to the year end, in addition to the normal operational transfers and to further establish the amounts held in Monies held in trust, the Group made a one-off transfer of £4.8 million on 19 May 2021 from Cash to Monies held in trust. Cash Group 2021 £000 2020 £000 Cash at bank and in hand 31,415 29,632 All cash held at bank at 31 March 2021 and 31 March 2020 was held in instant access accounts. Further to the year end, in addition to the normal operational transfers and to further establish the amounts held in Monies held in trust, the Group made a one-off transfer of £4.8 million on 19 May 2021 from Cash to Monies held in trust. Company 2021 £000 2020 £000 Cash at bank and in hand 32,501 28,769 All cash held at bank at 31 March 2021 and 31 March 2020 was held in instant access accounts. The charge in place at 31 March 2020 in favour of Barclays Bank plc was satisfied on 20 November 2020. Assets held for sale Group 2021 £000 2020 £000 Asset held for sale at 1 April 3,153 – Additions 1,024 4,803 Impairment – (1,650) Disposals (4,177) – Asset held for sale at 31 March – 3,153 2021 £000 2020 £000 Liabilities directly associated with assets held for sale at 1 April – – Additions 1,077 – Disposals (1,077) – Liabilities directly associated with assets held for sale at 31 March – – The assets held for sale balance as at 31 March 2020 related to the Valley Road property, held by the Group’s subsidiary Budworth Properties Limited. This subsidiary was sold on 11 August 2020 to HP Valley Road Limited for cash consideration generating a profit on sale of £41,000. As part of the transaction, the Group has leased back space for the small number of remaining operational staff. The gain is included in the profit for the year in the statement of other comprehensive income. 2021 £000 Proceeds 3,118 Less NBV of subsidiary at date of disposal (3,077) Profit on disposal 41 The assets transferred to assets held for sale on 30 September 2020, and associated liabilities relate to the Group’s subsidiary Fisher Moy International Limited. These were both also disposed of during the year as the Group sold Fisher Moy International on 7 December 2020 to Neon Agency Ltd for £50,000 cash consideration and £134,000 deferred consideration. This generated a profit on sale of £164,000. 2021 £000 Proceeds 184 Less NBV of subsidiary at date of disposal (20) Profit on disposal 164 At the time of its sale, FMI had cash in the bank of £52,000. This has been deducted from the proceeds from the sale of Budworth and cash consideration from the sale of FMI in arriving at the Sale of assets held for sale figure of £3,116,000 per the Statement of Cash Flows."
"Trade and other payables Group Non-current 2021 £000 2020 £000 Lease liabilities 4,666 4,132 4,666 4,132 Current 2021 £000 2020 £000 Trade payables 52,776 57,150 Payables in respect of cards and vouchers 25,302 17,060 Lease liabilities 563 219 Other taxes and social security payable 1,211 1,025 Other payables 2,765 2,317 Accruals 2,501 1,733 7,040 5,294 Deferred income 11,152 7,359 96,270 86,863 Notes to the Accounts continued Corporate Governance Trade payables fall due as follows: 2021 £000 2020 £000 Not later than one month 52,683 57,150 Later than one month and not later than three months 93 – 52,776 57,150 Trade payables include savers’ prepayments for products that will be supplied prior to Christmas 2021, upon confirmation of order. Until orders are confirmed, savers’ prepayments are repayable on demand. Within the other taxes and social security payable balance is £697,954 of VAT deferred after taking advantage of the government’s COVID-19 VAT deferral scheme. This will be repaid in full during the new financial year. Payables in respect of cards and vouchers fall due as follows: 2021 £000 2020 £000 Not later than one month 24,822 16,927 Later than one month and not later than three months 480 133 25,302 17,060 Payables in respect of cards and vouchers include balances due to both customers and retailers in respect of flexecash cards, and amounts due to retailers for Love2shop vouchers. Other payables are due within one month. Deferred income is in respect of multi-retailer redemption products. Revenue is deferred for service fees and breakage, net of discount. The movement in deferred revenue is as follows: 2021 £000 2020 £000 At 1 April 7,359 6,983 Revenue deferred in the period 8,363 5,774 Revenue recognised in the period (4,570) (5,398) At 31 March 11,152 7,359 Revenue is recognized when the customer redeems their product or when charges are levied. Over 90% of multi-retailer redemption products are redeemed within 12 months of issue, with the associated revenue being recognized in the same period. Company 2021 £000 2020 £000 Trade payables – 2 Other taxes and social security payable 675 178 Payables to subsidiaries 46,131 46,571 Other payables 148 157 Accruals and deferred income 448 254 Total 47,402 47,162 Trade payables and other payables are due within one month. Payables to subsidiaries are not interest bearing and are repayable on demand. The voucher provision is made in respect of unredeemed vouchers which are included at the present value of expected redemption amounts. This comprises the anticipated amounts payable to retailers on redemption after applying an appropriate discount rate to take into account the expected timing of payments. The anticipated amounts payable to retailers are arrived at by reference to historical data as to voucher redemption patterns. Whilst the voucher redemption provision covers a number of years of expected redemptions, over 90% of vouchers are redeemed within 12 months of issue. Provision is made for redemption of corporate gifted cards where the cardholder does not have the right of redemption. The unwinding of the discount recorded on initial recognition in respect of vouchers and cards is included within cost of sales in the statement of profit or loss. The discount rate used is 0.105% (2020: 0.117%). The payment protection insurance provision is in respect of future expected settlements of claims arising from the mis-selling of payment protection insurance. The Group ceased to sell this insurance in 2007 when it closed its loan broking business. The directors have reviewed the information up to the date of the signing of the financial statements and have closed all claims due to a significant amount of time passing without communications or update on the cases. The Group leases many assets including land and buildings and plant and equipment. Information about leases for which the Group is a lessee is presented below. Right of Use Assets Land and Buildings £000 Plant and Equipment £000 Total £000 Cost or valuation At 1 April 2020 4,003 75 4,078 Additions 404 641 1,045 Disposals (100) (74) (174) At 31 March 2021 4,307 642 4,949 Accumulated depreciation At 1 April 2020 262 17 279 Charge in year 344 78 422 Disposals (84) (41) (125) At 31 March 2021 522 54 576 Net Book Amount At 31 March 2021 3,785 588 4,373 The Group’s largest land and buildings leases relate to floors 3 and 4, 20 Chapel Street Liverpool, which were signed in the previous financial year."
"The increase in land and buildings right of use assets in the period is the result of two new leases for part of the ground floor of the main office, and the HSV building and Units 10 and 11, of the Valley Road site. The Valley Road site itself was sold during the year, and the Group entered into these two long-term leases for a small area of the site. The increase in plant and equipment right of use assets in the period is the result of the leasing of data hosting equipment at a location in Liverpool. There are no securities held or financial covenants required to be maintained in respect of these leases. There is a dilapidation provision of £50,000 related to the Chapel Street lease. Lease Liabilities Land and Buildings £000 Plant and Equipment £000 Total £000 At 1 April 2020 4,293 58 4,351 New Leases 404 621 1,025 Interest Expense 238 7 245 Lease Payments (262) (80) (342) Disposals (16) (34) (50) At 31 March 2021 4,657 572 5,229 Maturity Analysis – contractual undiscounted cash flows 2021 £000 2020 £000 Less than One Year 563 219 One to Five Years 2,563 1,662 More than Five Years 4,021 4,555 Undiscounted lease liabilities at 31 March 7,147 6,436 Lease Liabilities included in the Statement of Financial Position 2021 £000 2020 £000 Current 563 219 Non-current 4,666 4,132 Discounted lease liabilities at 31 March 5,229 4,351 Amounts recognized in the statement of profit or loss 2021 £000 2020 £000 Interest on Lease Liabilities 245 177 Expense relating to short-term leases (included within administrative expenses) 305 10 Expense relating to leases of low value assets excluding short term leases (included within administrative expenses) – 1 Variable lease payments not included in the measurement of lease liabilities – – Gain arising from subletting Right of Use Assets – (1) Total amount recognized in the statement of profit or loss for the year ended 31 March 550 187 Amounts Recognized in the statement of cash flows 2021 £000 2020 £000 Total Cash Outflows for leases for the year ended 31 March 342 81 The Group leases land and buildings for its head office and operations facilities. The operations facilities leases are the two new leases signed in the year for parts of the Valley Road site. The lease for the Group’s head office runs for 10 years, and operations facilities for between 5 to 7 years. The head office lease includes an option to renew the lease for a period of up to 5 years at the end of the contract term. During the year, the Group signed two additional leases of less than one year in length for further areas of the Valley Road site, being the Mojo building and the Cold Store. These leases are short term. The Group elected not to recognize right-of-use assets and lease liabilities for these leases. The 10 year head office lease contains an extension option of 5 years. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the option if there is a significant event or significant change in the circumstances within its control. The head office has been accounted for on the basis that the extension option will be taken and is therefore accounted for on a 15 year basis. During the year, the Group signed two leases relating to data hosting equipment, one of which had a term of 3 years, the other an initial term of 12 months with an automatic rolling 12 months extension option if not cancelled. The 12 month rolling lease with the rolling 12 months renewal options has been capitalized on a 3 year basis. This was done as the Group believes it is almost certain to extend the lease past the initial period as data hosting is critical to the operation of the business, and a 3 year period will bring the total lease length in line with the other lease for data hosting equipment. The Group previously sub-let part of an office building in Oxford that it leased in February 2018."
"Due to the fact that at 1 April 2019 the lease had only 3 months left the income was treated in the accounts as operating lease income. This was accounted for within other income in the year ended 31 March 2020. In November 2019 the Group sublet a further portion of its Oxford office building. The Group classified the sub-lease as a finance lease, because the sub-lease was for the whole remaining term of the head lease, which ended 31 January 2021. This lease was disposed of in December 2020 when the Group sold its subsidiary company FMI, which held both the Oxford office building lease and sub-lease. The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments to be received after the reporting date. Finance Leases Maturity Analysis – contractual undiscounted cash flows 2021 £000 2020 £000 Less than One Year – 9 One to Five Years – – Total undiscounted lease payments receivable as at 31 March – 9 Unearned finance income – – Net Investment in the lease as at 31 March – 9 These are included within other receivables. The Group operates two defined benefit pension schemes, Park Food Group plc Pension Scheme and Park Group Pension Scheme, providing benefits based on final pensionable pay. Both schemes are closed to future accrual of benefit based on service. The assets of the schemes are held separately from those of the company in trustee administered funds. Contributions to the schemes are determined by a qualified actuary on the basis of triennial valuations. The company operates the PF defined benefit scheme. Both schemes are subject to the funding legislation which came into force on 30 December 2005, outlined in the Pensions Act 2004. This, together with documents issued by the Pensions Regulator, the Guidance Notes adopted by the Financial Reporting Council, set out the framework for funding defined benefit occupational pension plans in the UK. The trustees of the schemes are required to act in the best interests of the schemes beneficiaries and are responsible for setting the investment, funding and governance policies of the fund. The schemes are administered by an independent trustee appointed by the Group. Appointment of the trustees is determined by the schemes’ trust documentation. The present value of the scheme liabilities is measured by discounting the best estimate of future cashflows to be paid out of the scheme using the projected unit credit method. All actuarial gains and losses have been recognized in the period in which they occur in other comprehensive income. There have been no scheme amendments, curtailments or settlements in the year. For the purposes of IAS 19 the preliminary results of the actuarial valuation as at 31 March 2019, for both schemes, which was carried out by a qualified independent actuary, have been updated on an approximate basis to 31 March 2021. There have been no changes in the valuation methodology adopted for this period’s disclosures compared to the previous period’s disclosures. The schemes typically expose the Group to actuarial risks such as investment risk, interest rate risk, salary growth risk, mortality risk and longevity risk. The amounts recognized in the statement of financial position are as follows: Group Company 2021 £000 2020 £000 2021 £000 2020 £000 Present value of pension obligation (23,360) (19,683) (1,577) (1,544) Fair value of scheme assets 25,446 23,889 3,515 3,528 Net pension surplus 2,086 4,206 1,938 1,984 - comprising schemes in asset surplus 2,086 4,206 1,938 1,984 - comprising schemes in asset deficit – – – – The amounts recognized in the statement of profit or loss are as follows: Group Company 2021 £000 2020 £000 2021 £000 2020 £000 Past service cost 73 – – – Net interest income (99) (44) (47) (39) Components of defined benefit income recognized in the statement of profit or loss (26) (44) (47) (39) Following a High Court ruling in October 2018 the Group is required to equalize Guaranteed Minimum Payments for men and women. The impact of this for the year to 31 March 2021 was £73,000 (2020: £nil). The costs are all recognized within administration expenses in the statement of profit or loss."
"Analysis of amount to be recognized in the statement of comprehensive income: Group Company 2021 £000 2020 £000 2021 £000 2020 £000 Return on scheme assets 1,525 (892) 4 (30) Experience gains arising on the defined benefit obligation 147 528 23 197 Effects of changes in the demographic assumptions underlying the present value of the defined benefit obligation (377) 326 2 (60) Effects of changes in the financial assumptions underlying the present value of the defined benefit obligation (3,441) 2,273 (122) 123 Remeasurements of defined benefit schemes recognized in the statement of comprehensive income (2,146) 2,235 (93) 230 Scheme assets It is the policy of the trustees of the company to review the investment strategy at the time of each funding valuation. The trustees’ investment objectives and the processes undertaken to measure and manage the risks inherent in the scheme’s investment strategy are documented in the scheme’s Statement of Investment Principles. Fair value of scheme assets: Group Company 2021 £000 2020 £000 2021 £000 2020 £000 Fixed Interest Gilt Fund 1,483 – – – Diversified Growth Assets 3,393 5,641 – – Gilts 3,473 3,492 3,473 3,492 LDI 3,110 4,784 Loan Fund 3,012 1,970 Multi Asset Credit 4,463 3,286 Index Linked Gilts 5,433 4,687 Cash and other 1,079 29 42 36 Total assets 25,446 23,889 3,515 3,528 None of the fair values of the assets shown above include any of the company’s own financial instruments or any property occupied by, or other assets used by, Appreciate Group plc. All of the scheme's assets have a quoted market price in an active market with the exception of the trustee’s bank account balance. Notes to the Accounts continued Appreciate 36523 AR2021 BOOK Prf11.indb 110 Appreciate 36523 AR2021 BOOK Prf11.indb 110 28/07/2021 16:51 28/07/2021 16:51 Corporate Governance Appreciate Group plc Annual report and accounts 2021 Strategic Report Financial Statements The movement in the fair value of scheme assets is as follows: Group Company 2021 2020 2021 2020 Fair value of scheme assets at the start of the period 23,889 24,814 3,528 3,577 Interest income 566 564 83 81 Return on scheme assets 1,525 (892) 4 (30) Contributions by employer Contributions by employees Benefits paid (534) (597) (100) (100) Fair value of plan assets at the end of the period 25,446 23,889 3,515 3,528 Actual return on scheme assets for the year to 31 March 2021 was £2,004,000 for the PG scheme and £87,000 for the PF scheme. Present value of obligations The movement in the present value of the defined benefit obligation is as follows: Group Company 2021 2020 2021 2020 Opening defined benefit obligation 19,683 22,887 1,544 1,862 Interest cost 467 520 36 42 Actuarial gains due to scheme experience (147) (528) (23) (197) Actuarial gains or losses due to changes in demographic assumptions 377 (326) (2) 60 Actuarial gains or losses due to changes in financial assumptions 3,441 (2,273) 122 (123) Benefits paid (534) (597) (100) (100) Past service costs 73 Closing defined benefit obligation 23,360 19,683 1,577 1,544 The average duration of the defined benefit obligation at 31 March 2021 is 19 years for both schemes. Significant actuarial assumptions The following are the principal actuarial assumptions at the reporting date expressed as weighted averages: The following information relates to both the PG and PF schemes unless otherwise stated. 2021 % per annum 2020 % per annum Financial and related actuarial assumptions: Discount rate 2.10 2.40 Inflation RPI 3.30 2.60 Inflation CPI 2.70 1.80 Future salary increases 2.70 1.80 Allowance for revaluation of deferred pensions of RPI or 8.5% pa if less 3.30 2.70 Allowance for revaluation of deferred pensions of CPI or 5% pa if less 2.70 1.80 Allowance for revaluation of deferred pensions of CPI or 2.5% pa if less 2.50 1.80 Allowance for pension in payment increases of CPI or 5% pa if less 2.70 1.90 Allowance for pension in payment increases of CPI or 3% pa if less 2.20 1.70 Allowance for pension in payment increases of CPI or 2.5% pa if less 1.90 1.50 Allowance for commutation of pension for cash at retirement 100% of Post A Day 100% of Post A Day The mortality assumptions adopted for the PG scheme are 105% of the standard tables S2PxA, year of birth, no age rating for males and females, projected using Continuous Mortality Investigation CMI 2020 converging to 1% pa."
"These imply the following life expectancies: 2021 Years 2020 Years Life expectancy at age 65 for: Male retiring in 2021 21.3 21.2 Female retiring in 2021 23.2 23.1 Male retiring in 2041 22.3 22.3 Female retiring in 2041 24.4 24.4 The mortality assumptions adopted for the PF scheme are 89% of the standard tables S2PxA, year of birth, no age rating for males and females, projected using Continuous Mortality Investigation CMI 2020 converging to 1% pa. These imply the following life expectancies: 2021 Years 2020 Years Life expectancy at age 65 for: Male retiring in 2021 22.5 21.2 Female retiring in 2021 24.4 23.1 Male retiring in 2041 23.5 22.3 Female retiring in 2041 25.7 24.4 Sensitivity analysis on significant actuarial assumptions: The following table summarises the impact on the defined benefit obligation at the end of the reporting period, if each of the significant actuarial assumptions above were changed, in isolation. The inflation sensitivity includes the impact of changes to the assumptions for revaluation, pension increases and salary growth. The sensitivities shown below are approximate. Change in assumption Change in liabilities PG scheme: Discount rate decrease of 0.25% pa increase by 4.4% Rate of inflation increase of 0.25% pa increase by 2.6% Rate of mortality increase in life expectancy of 1 year increase by 2.8% PF scheme: Discount rate decrease of 0.25% pa increase by 2.5% Rate of inflation increase of 0.25% pa increase by 2.7% Rate of mortality increase in life expectancy of 1 year increase by 5.7% The sensitivity assumption used in the year was 0.25%. This is in line with the standard sensitivity analysis used by pension advice providers in their disclosures to clients. The schemes typically expose the Group to actuarial risks such as investment risk, interest rate risk, salary growth risk, mortality risk and longevity risk. A decrease in corporate bond yields, a rise in inflation or an increase in life expectancy would result in an increase to the schemes liabilities. This would detrimentally impact the statement of financial position and may give rise to increased charges in future statements of profit or loss. This effect would be partially offset by an increase in the value of the schemes bond holdings. Additionally, caps on inflationary increases are in place to protect the scheme against extreme inflation. Funding The Group expects to contribute £nil to the PG scheme for the accounting period commencing 1 April 2021. This is based upon the current schedule of contributions following the actuarial valuation carried out as at 31 March 2019. The best estimate of contributions to be paid to the PF scheme is £nil per annum. Defined contribution plan The Group makes contributions to a defined contribution pension scheme which is insured with Aviva. It also makes contributions to a defined contribution stakeholder pension plan, insured with NEST, for employees who are not eligible to join the Aviva defined contribution scheme, as well as to individual personal pension plans for certain employees. The total pension charge for the year to 31 March 2021 was £834,000 for the defined contribution pension schemes. At 31 March 2021, contributions of £71,000 were outstanding, which represented the contributions for the month of March. Notes to the Accounts continued Appreciate 36523 AR2021 BOOK Prf11.indb 112 Appreciate 36523 AR2021 BOOK Prf11.indb 112 28/07/2021 16:51 28/07/2021 16:51 Corporate Governance Appreciate Group plc Annual report and accounts 2021 Strategic Report Financial Statements Employees and directors Group Employee benefit expense for the Group during the year including executive directors 2021 2020 Wages and salaries 14,997 13,396 Social security costs 1,510 1,326 Other pension costs 807 869 Share-based payments 247 233 Other benefits 60 75 17,621 15,899 Included within the above are staff costs of £2,106,000 which have been capitalised as intangible assets. During the year there were redundancy costs of £639,000 which relate to a one-off redundancy exercise. The driving force behind this exercise was the closure of the hamper packing part of the business. Average monthly number of people including executive directors employed 2021 Number 2020 Number Consumer 174 196 Corporate 170 175 All other segments 11 11 Average number employed 355 382 Key management compensation 2021 2020 Salaries and short term employee benefits 1,689 1,980 Post employment benefits 49 71 Gain on exercise of share options and LTIPs Share-based payments 204 200 1,942 2,251 Key management are deemed to be the Group’s executive and non-executive directors and the senior leadership team."
"Details of directors’ emoluments including those of the highest paid, pension contributions and details of share awards including options can be found in the Remuneration Report on pages 56 and 57. Share capital Group and Company No of shares £'000 Authorised: Ordinary shares of 2p each At 31 March 2020 and 2021 195,000,000 3,900 Allotted, called up and fully paid At 31 March 2020 and 2021 186,347,228 3,727 Appreciate 36523 AR2021 BOOK Prf11.indb 113 Appreciate 36523 AR2021 BOOK Prf11.indb 113 28/07/2021 16:51 28/07/2021 16:51 Corporate Governance Appreciate Group plc Annual report and accounts 2021 Share-based payments SGP On 21 December 2018, the Park Group Strategic Growth Plan was adopted by the remuneration committee. This plan is for the benefit of certain employees selected at the discretion of the committee. The plan provides the participants with a pool of shares with a value equal to 10% of any cumulative shareholder value created above a compound hurdle of 10% per annum over a performance period between 1 October 2018 and 30 September 2023. Each participant is allocated a share of the pool. An overall cap on the maximum number of shares that can be granted under the SGP is set at 5% of the outstanding share capital at grant, to prevent excessive payouts or dilution. Further details can be found in the Remuneration Report on pages 54 to 57. Appreciate Group plc 2009 LTIP In June 2010, an LTIP was adopted by the remuneration committee 2009 LTIP. This plan was for the benefit of certain employees selected at the discretion of the committee. The awards consist of allocations of shares, the final distribution of which is dependent on market performance targets. Each participating employee can be awarded shares up to a maximum value of 100% of salary. SAYE This scheme is open to all employees. Under this scheme employees enter into a savings contract for a period of three years and agree to save a regular amount each month between £5 and £500. Options are granted on commencement of the contract and exercisable using the amount saved under the contract at the time it terminates. Options under the scheme are granted at a discount of 10% to the market price at the start of the contract and are not subject to performance conditions. Exercise of options is subject to continued employment. Options lapse if an individual leaves the company by resigning or if they choose to stop paying into their savings accounts. In either instance they can withdraw their money they have already saved but cannot exercise their options. Options must be exercised within six months after the end of the three year savings period. The tables below summarise the outstanding options and awards: SGP 2021 2020 Number Weighted average exercise price p Number Weighted average exercise price p Outstanding at 1 April and 31 March 6,520,942 6,520,942 Exerciseable at 31 March 2021 2020 SGP awards outstanding at end of period Weighted average remaining contractual life 2.5 years 3.5 years LTIP 2021 2020 Number Weighted average exercise price p Number Weighted average exercise price p Outstanding at 1 April 162,877 268,877 Expired 162,877 106,000 Outstanding at 31 March Exerciseable at 31 March 2021 2020 LTIP awards outstanding at end of period Weighted average remaining contractual life 0.0 years 0.2 years Notes to the Accounts continued Appreciate 36523 AR2021 BOOK Prf11.indb 114 Appreciate 36523 AR2021 BOOK Prf11.indb 114 28/07/2021 16:51 28/07/2021 16:51 Corporate Governance Appreciate Group plc Annual report and accounts 2021 SAYE 2021 2020 Number Weighted average exercise price p Number Weighted average exercise price p Outstanding at 1 April 619,176 12.20 739,523 12.20 Cancelled 107,782 12.20 71,675 12.20 Forfeited 191,644 12.20 48,672 12.20 Outstanding at 31 March 319,750 12.20 619,176 12.20 Exerciseable at 31 March 2021 2020 SAYE awards outstanding at end of period Weighted average remaining contractual life 0.9 years 1.9 years Details of the weighted average fair value of the awards made in the year, together with how this value was calculated, can be found below. The fair values of awards under the LTIP and the SAYE are calculated at the date of grant using the Monte Carlo simulation model and the binomial option pricing model respectively."
"The significant inputs into the model and assumptions used in the calculations are as follows: LTIP 2017-20 SAYE 2018-21 SGP 2018-23 Grant date 02.10.17 23.07.18 21.12.18 Share price at grant date 82.00p 72.75p 71.50p Exercise price Nil 67.30p Nil Number of shares under option or provisionally awarded 1,483,583 811,734 N/A Option or award life years 2.69 3.11 5.00 Expected volatility 33% 28% 29% Risk free rate 0.76% 0.80% 0.91% Expected dividend yield 4.00% 4.19% 4.34% Forfeiture rate 0% 0% 0% Fair value per option or award 42.80p 12.00p N/A Total fair value of awards N/A N/A £990,000 In respect of LTIP awards the expected volatility of the share price was based on historical movements in the share price, calculated as the standard deviation of percentage returns on the shares in the period since 2006. The risk free interest rate is based on the yield available on zero coupon UK Government bonds of a term consistent with the assumed option life. Projected dividend yield was based on historical dividend payments in the three years prior to the dates of the awards, relative to the average annual share prices in that period. A forfeiture rate of nil is assumed on the basis that awards are granted to senior management. In respect of SGP, the expected volatility of the share price has been calculated using the volatility of the company’s TSR using daily data over a period commensurate with the remaining performance period as at the date of grant. The risk free interest rate has been set as the yield as at the calculation date on zero coupon Government bonds with remaining term commensurate with the projection period of the award life. Projected dividend yield was based on actual dividend yield at the date of grant. A forfeiture rate of nil is assumed on the basis that awards are granted to senior management. The scheme rules for the LTIP include a provision which gives the remuneration committee the discretion to settle up to 50% of the value of shares to be awarded in cash. On the assumption that Appreciate intends to settle the entire obligation in shares, there is considered to be no present obligation and so these awards have been valued and accounted for as equity settled share-based payments. All LTIP awards and the SGP incorporate a market condition TSR, which is taken into account in the grant date measurement of fair value. Appreciate Group plc Annual report and accounts 2021. The Group recognized a total charge of £247,000 related to equity settled share-based transactions during the year ended 31 March 2021. This charge was split across the schemes as follows: LTIP 2016 to 2019, LTIP 2017 to 2020, LTIP 2021 to 2024, SGP 2018 to 2023, and SAYE 2018 to 2021. Amounts recognized as distributed to equity holders in the year included an interim dividend of 0.40p per share in respect of the financial year ended 31 March 2021, which was paid on 6 April 2021. The directors proposed a final dividend in respect of the financial year ended 31 March 2021 of 0.60p per share, which will absorb an estimated £1,118,000 of shareholders’ funds. The final dividend will be paid on 1 October 2021 to shareholders who are on the register of members at the close of business on 27 August 2021. In the prior year, due to the outbreak of the Covid-19 pandemic and the uncertain UK trading conditions, the Board decided it was not prudent to recommend a dividend for the financial year ended 31 March 2020. Reconciliation of profit for the year to net cash inflow from operating activities showed a profit for the year of £851,000. Adjustments included tax, interest income, interest expense, depreciation and amortization, and impairment of assets. The net cash inflow from operating activities was £4,918,000. The Group's activities expose it to a variety of risks: market risk, credit risk, and liquidity risk. The Group has in place risk management policies to limit the adverse effect on financial performance. The financial assets and liabilities of the Group are detailed, including cash at bank, trade receivables, and other receivables. The Group manages liquidity risk by continuously monitoring actual and forecast cash flows. The Group maintains an e-money float, regulated by the Financial Conduct Authority. In August 2020, the Group agreed a committed £15 million revolving credit facility with Santander. Directors include I O'Doherty, T Clancy, L Carstensen, J Gittins, and Sally Cabrini. The registered office is located at Valley Road, Birkenhead, CH41 7ED."
"Argo Blockchain PLC Annual report and financial statements for the year ended 31 December 2022. Directors include M I Shaw, R Chopra, M Perrella, P G Wall, and A Appleton. The registered office is located at Eastcastle House, 27/28 Eastcastle Street, London, United Kingdom. 2022 was a year of transformation for Argo Blockchain. In the first half of the year, the development and construction of the Helios facility in Dickens County, Texas was completed. Helios was energized in May 2022 and began mining. We increased our total hashrate capacity by more than 50%. However, we faced numerous headwinds as our business model was challenged by sharp declines in Bitcoin price, increases in the global network hashrate, increases in energy prices, and macroeconomic and geopolitical factors. At the end of 2022, we made the strategic decision to sell the Helios facility and use the proceeds to reduce debt on our balance sheet. Following the transaction, we strengthened Argo’s management team, renewed our emphasis on financial discipline and operational excellence, and crafted a strategy to resume our growth. With these steps, we are in a much better position to improve our mining operations and grow the business. 2022 in Review Our main focus in 2022 was to complete the build-out and energization of the Helios facility. In Q1 2022, we raised additional financing in the form of secured debt from NYDIG to complete construction at Helios. On May 5, 2022, we successfully energized Helios and commenced mining operations. With 180 MW of capacity and utilizing 100% immersion cooling technology, the Helios facility is one of the largest and most technologically advanced Bitcoin mining facilities in the United States. In the same month, we began taking delivery of the new Bitmain Antminer S19J Pro machines that we ordered in September 2021. We installed the new machines in monthly batches and grew our total hashrate capacity by more than 50% from 1.6 EH/s in April 2022 to 2.5 EH/s in September 2022. As we brought operations online at Helios, we began to transition away from our hosted operations at facilities owned by Core Scientific. Between May and July 2022, we completed a machine swap with Core, whereby new-in-box Bitmain S19J Pro machines were delivered to Helios in exchange for Core taking over our existing fleet of Bitmain S19 machines hosted in its facilities. This machine swap mitigated the logistical challenges and downtime associated with unplugging and shipping the mining machines from Core’s facilities to Helios. After completion of the machine swap in July 2022, 100% of Argo’s mining machines were operating in our own facilities. One of the attributes that made the Helios project an attractive investment for Argo was its location in the Texas Panhandle, where more than 85% of the installed power generation capacity comes from wind and solar. Not only is this strategy consistent with our stated goal of using renewable sources of energy to power our mining operations, but Texas has long been known for having low-cost electricity due to the high percentage of renewable power on its grid. Several external factors, however, resulted in elevated electricity prices during Q2 and Q3 of 2022 when we were commencing operations at Helios. Russia’s invasion of Ukraine and the subsequent sanctions on Russian petroleum exports disrupted the energy markets. This, along with unusually low stocks of natural gas in US storage facilities, resulted in a historic spike in the price of natural gas. While Texas has a large amount of renewable energy generation, it also has a significant amount of natural gas-fired generation. The increased natural gas price also caused an increase in electricity prices, making it cost prohibitive to sign a fixed price power purchase agreement. This had a negative impact on our mining performance and profitability. Additionally, the global network hashrate continued to increase throughout 2022 despite the material decline in Bitcoin price. The depressed price of Bitcoin and the elevated global hashrate caused hashprice, the primary measure of mining profitability, to reach all-time lows in Q4 2022. The low hashprice and elevated power prices significantly reduced Argo’s profitability and ability to generate free cash flow. During Q4 2022, we evaluated several strategic alternatives to restructure our balance sheet and improve our cash flow. On December 28, 2022, we announced a series of transactions with Galaxy Digital Holdings that strengthened our balance sheet, improved our liquidity position, and enabled us to continue mining operations."
"As part of the transactions, we sold the Helios facility and real property in Dickens County, Texas to Galaxy for £54 million and refinanced existing asset-backed loans via a new £29 million, three-year asset-backed loan with Galaxy. The transactions reduced total indebtedness by £34 million and allowed us to simplify our operating structure. Importantly, we maintained ownership of our entire fleet of more than 27,000 mining machines. Pursuant to a new two-year hosting services agreement with Galaxy, our 23,650 Bitmain S19J Pro mining machines at Helios will remain in operation at that facility. Under the hosting agreement, we have access to the base power rate that Galaxy obtains through its power purchase agreement, and we pay them an incremental hosting fee based on our actual electricity usage. The hosting agreement with Galaxy allowed us to keep our mining machines operating at Helios and mitigated any mining machine downtime from the sale of the Helios facility. Furthermore, we believe that the immersion cooling system we developed and implemented at Helios provides for a superior operating environment for our mining machines. After the year-end, we completed the transition of operations at Helios over to the Galaxy team, and we have been working closely with them to optimize our mining operations and performance. We continue to operate both data centers that we own in Quebec, Canada. Our Baie Comeau site is over 40,000 square feet and has 15 MW of 99% renewable power capacity sourced from the nearby Baie Comeau hydroelectric dam. Our Mirabel facility, located adjacent to the Mirabel airport near Montreal, has approximately 30,000 square feet of mining space with 5 MW of 99% renewable power capacity sourced from Hydro-Quebec. We also operate a cleaning and repair center at Mirabel, along with servers and computing equipment for proof-of-stake activities and other blockchain infrastructure needs. Going forward, in the near term we will be focusing on optimization by improving the operational efficiency of our Quebec facilities and utilizing excess capacity at these sites. Both data centers have access to 99% renewable electricity from hydropower at competitive power prices. Additionally, we are expecting the delivery of 2,870 units of the ePIC Blockchain machine, known as the BlockMiner machine, in early Q3 2023. These new BlockMiner machines, representing an incremental 300 PH/s of hashrate capacity, will be deployed at our Quebec facilities. Financial results Revenue in 2022 was £47.4 million compared to £74.2 million in 2021. Adjusted EBITDA was £1.0 million compared to £55.0 million in 2021. Loss attributable to shareholders totaled £199.5 million. In 2022, total capital expenditures, net of disposals, were £5.4 million, with nearly all going towards Helios infrastructure construction and the purchase of mining machines. Operating results In line with Argo’s expansion of mining operations in 2022, the Group’s total hashrate capacity increased by more than 50% from 1.6 EH/s in April 2022 to 2.5 EH/s by September 2022. The Group also has 280 Megasols of Z-cash mining capacity on Equihash. Argo’s mining margin averaged 54% for the full year 2022, which is lower than the 84% mining margin achieved in 2021. The decrease in mining margin from 2021 was driven by the decrease in the Bitcoin price, the increase in energy costs, and the increase in global hashrate and associated increase in network difficulty. Bitcoin macro environment The decrease in the price of Bitcoin throughout 2022 was accompanied by a change in monetary policy by central banks and a significant drawdown across all digital assets. In March 2022, the US Federal Reserve raised interest rates for the first time since 2018 as it began to address rising inflation. Assets that were considered higher risk, including high-growth technology stocks and highly correlated digital assets, including Bitcoin, saw outflows as investors factored in higher forecasted interest rates and reduced market liquidity. In May 2022, the collapse of the Luna/UST stablecoin caused turmoil in the crypto market as forced liquidations continued to put downward pressure on digital assets. Several high-profile collapses subsequently followed, including hedge fund Three Arrows Capital, Celsius, and most significantly FTX and Alameda Ventures. In the midst of this crypto downturn, the price of Bitcoin reached a low of less than $16,000 in November 2022. Despite the 77% drop in the price of Bitcoin from its all-time highs in November 2021, the network hashrate continued to increase for the twelfth consecutive year."
"Additionally, even though Bitcoin miners like Argo faced increased network difficulty and lower profitability, they continued to validate transactions and secure the network; in total, approximately 53,000 blocks were mined in 2022, generating over $10 billion in aggregate revenue for Bitcoin miners. Commitment to Sustainability Since inception, Argo has always maintained a strong focus on environmental sustainability. This is why we located our mining operations in Quebec, where they are powered by hydroelectricity, and the Texas Panhandle, where more than 85% of the installed generation capacity comes from renewable sources. Since 2021, Argo has been committed to achieving net-zero carbon emissions. The Company has also released a full climate strategy and became the first Bitcoin mining company to announce climate positive status. We achieved this through our use of renewable energy to power mining operations and by offsetting more scope 2 and 3 greenhouse gas emissions than we emitted in both 2020 and 2021. We are in the process of accounting for our greenhouse gas emissions for 2022. To our knowledge, we are the first publicly traded cryptocurrency mining company to publish a report in accordance with the Task Force on Climate-related Financial Disclosures Recommendations and Recommended Disclosures. Leadership changes In February 2022, Argo expanded its board by appointing Raghav Chopra as an independent non-executive director. In March 2022, the Company hired Seif El-Bakly as Chief Operating Officer. Following the end of the period, on January 30, 2023, Chief Financial Officer and Executive Director Alex Appleton resigned from his positions to pursue other opportunities. After a formal recruitment process led by an executive search firm, the Board appointed Jim MacCallum as Chief Financial Officer effective April 5, 2023. On February 9, 2023, Chief Executive Officer and Interim Chairman Peter Wall resigned from his positions to pursue other opportunities. Matthew Shaw became Chairman of the Board, and the Board appointed Chief Operating Officer Seif El-Bakly to serve as Interim CEO. Strategic focus in 2023 With the completion of the Helios sale to Galaxy at the end of 2022 and the leadership changes in Q1 2023, Argo is entering a new chapter in its story. As 2023 progresses, we are focused on growing our business with a strong emphasis on operational excellence and financial discipline. Specifically, we intend to optimize our mining operations across our Quebec facilities and the Helios facility, control operating expenses and maximize cash flow, strengthen the balance sheet, and explore organic and inorganic growth opportunities. On behalf of the Board, I would like to thank all of our shareholders and stakeholders. I am excited for Argo to continue in its mission of powering the world’s most innovative and sustainable blockchain infrastructure. Matthew Shaw Chairman of the Board April 28, 2023 BOARD OF DIRECTORS Matthew Shaw (Chairman of the Board) Matthew Shaw became Chairman of the Board in February 2023. He brings over 25 years of experience as an international banker, corporate adviser, and serial entrepreneur. He has been specializing in the blockchain and cryptocurrency sector since 2017. He is currently CEO of Webslinger Advisors, a specialist web3 advisory and administration firm which provides services to Cayman Foundations and DAOs. He previously co-founded Protos Asset Management, a Swiss company that manages a cryptocurrency fund, and co-founded DeFi Yield Technologies, a DeFi firm acquired by Dispersion Holdings. He is also currently CEO of Blimp Technologies and president of a proprietary family investment company. Raghav Chopra (Non-Executive Director) Raghav Chopra is an investor with over 16 years of experience and is currently Managing Partner of Tephra Digital, a digital assets focused investment firm. He was most recently a Portfolio Manager for AllianceBernstein LP, and he has over a decade of experience in managing a significant and wide range of technology investments at leading hedge funds. Prior to that, Mr. Chopra was an Associate in private equity at The Carlyle Group and an Analyst in investment banking at Goldman Sachs. Mr. Chopra serves on the Board of the Harvard Club of New York City Foundation and is a member of the Economic Club of New York. Maria Perrella (Non-Executive Director) Maria Perrella most recently served as the Chief Financial Officer of MDA, a Canadian-based international space mission partner, and the previous twelve years at Automation Tooling Systems, a TSX-listed automation company with over 4,500 employees across six countries."
"Her various roles have allowed her to develop skills in financial planning and corporate governance and compliance, and her many years as a Chief Financial Officer have provided her with extensive experience in M&A, capital markets, and strategic corporate finance. Maria is a Chartered Public Accountant in Ontario, Canada. Peter Wall (Former CEO and Interim Executive Chairman) Alex Appleton (Former CFO and Executive Director) Sarah Gow (Former Non-Executive Director) STRATEGIC REPORT The directors present their strategic report on the Group for the year ended December 31, 2022. Principal activity The Group’s principal activity is that of cryptocurrency mining. Review of the business and future developments Argo Blockchain plc was incorporated on December 5, 2017. Argo Blockchain plc is the parent holding company of the Argo group of companies including Argo Innovation Labs Inc., a British Columbia, Canada Corporation, and Argo Innovation Facilities, a Delaware, United States Corporation. On August 3, 2018, the Company’s Ordinary Shares were admitted to the standard segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange. The Company’s Ordinary Shares traded on the OTCQB Venture Market under the ticker symbol ARBKF from January 13, 2021, until February 23, 2021, and traded on the OTCQX from February 24, 2021, to December 31, 2022. The Company’s American Depositary Shares have traded on the Nasdaq Stock Market since September 24, 2021. My Chairman’s statement provides an in-depth review of 2022; rather than repeating that, I have concentrated on looking forward in this report. Argo entered 2023 on the heels of a transformational series of transactions with Galaxy. The strategic sale of the Helios facility enabled us to strengthen our balance sheet by reducing debt, increase our liquidity and cash position, and streamline our operations. We also reduced our headcount by 54%, which lowered our G&A expenses. Perhaps most importantly, the transactions with Galaxy allowed us to maintain ownership of our entire mining fleet and to continue with mining operations. Bitcoin was one of the best performing assets during the first quarter of 2023, with its price appreciating by more than 70% compared to the Nasdaq Composite Index, the S&P 500, and the FTSE 100. One factor that may be contributing to Bitcoin’s performance is the market expectation that the Federal Reserve is nearing the end of its tightening cycle and may even reduce interest rates within the next year. Additionally, Bitcoin adoption continues to grow globally, as evidenced by the increase in the number of Bitcoin wallet addresses with non-zero balances. Argo is one of the longest-tenured publicly traded mining companies in the market. We have a rich history, a tremendous culture, and a demonstrated track record of developing world-class Bitcoin mining facilities. With a seasoned management team in place, the Company looks forward to growing the business with a strong emphasis on operational excellence and financial discipline. Group strategy and business model We are targeting a balance between owning and operating our own mining facilities and utilizing third-party facilities with access to reliable, low-cost, and renewable energy. Throughout the Company’s history, we have invested in purchasing, building, and operating mining facilities. We will continue to explore the acquisition and development of future mining facilities that provide opportunities to utilize wasted or stranded energy. This could include using mobile and/or modular mining infrastructure. We will continue to evaluate opportunities from hosting providers that would offer reliable, low-cost, renewable power in order to balance the gap between our available capacity and the power needed to run our mining operations. We believe the combination of increased mining difficulty, driven by greater network hashrate, and the periodic adjustment of reward rates, such as the halving of Bitcoin rewards, will drive the increasing importance of power efficiency in cryptocurrency mining over the long term. As a result, we are focused on deploying our mining machines at locations with access to reliable renewable power sources, as successfully doing so should enable us to reduce our power costs. Over the long term, we will look to diversify our sources of revenue and value creation by investing in and developing other commercial opportunities at the intersection of energy, finance, and technology. We plan on leveraging our team’s expertise and relationships in the industry to invest in or develop mining advisory services, software, or financial services related to blockchain technology or to the cryptocurrency mining industry. Communications with shareholders are given a high priority."
"In addition to the publication of an annual report and an interim report, there is regular dialogue with shareholders and analysts. The Annual General Meeting is viewed as a forum for communicating with shareholders, particularly private investors. Shareholders may question the Chairman and other members of the Board at the Annual General Meeting. All published information for shareholders is also available on the Company website, including annual and interim reports, circulars, announcements, and significant shareholdings. The Board presents a balanced and understandable assessment of the Company's position and prospects in all interim and price-sensitive reports to regulators as well as in the information required to be presented by statutory requirements. The Company’s Audit Committee has responsibility to supervise and review the Company’s audit and financial procedures. In relation to the activities of the Audit Committee during the year, please see the Audit Committee Report in this Annual Report. The Board has responsibility for designing and implementing systems of internal control and for reviewing the effectiveness of these systems. The risk management process and systems of internal control are designed to manage rather than eliminate the risk of the Company failing to achieve its strategic objectives. It should be recognized that such systems can only provide reasonable and not absolute assurance against material misstatement or loss. As the Group has expanded, the Company has reviewed and developed its internal systems and processes and will continue to do so going forward. The Group did not make any political donations or expenditure. The Company maintains directors’ and officers’ liability insurance, which gives appropriate cover for legal action brought against its directors. Qualifying third-party indemnity provisions for the benefit of the Company’s directors, secretary, and other officers were in force during the year ended 31 December 2022 and to the date of this report. In addition, the Company has agreed to indemnify former directors of the Company in respect of their appointments as directors. Information about the use of financial instruments by the Company and its subsidiaries is given in note 27 to the financial statements. During the year under review, the Group did not have any material activities in the field of research and development. Effective 30 January 2023, Alex Appleton resigned from his positions as Chief Financial Officer and executive director to pursue other opportunities. Effective 8 February 2023, Sarah Gow resigned from her position as non-executive director on the board of directors due to health reasons. Effective 9 February 2023, Peter Wall resigned from his positions as Chief Executive Officer and Interim Chairman of the board of directors to pursue other opportunities. Effective 9 February 2023, the Company appointed Matthew Shaw as the Chairman of the Board. Effective 9 February 2023, the Board appointed Seif El-Bakly as the Company’s Interim Chief Executive Officer; he retained his position as the Company’s Chief Operating Officer. Effective 5 April 2023, the Company appointed Jim MacCallum as the Company’s Chief Financial Officer. The directors who held office during the period and up to the date of signature of the financial statements were as follows: Director: Appointment/resignation during the year Peter Wall: Appointed 1 January 2020, Resigned 9 February 2023 Matthew Shaw (Chairman of the Board, Chair of the Nomination Committee): Appointed 17 July 2019 Alex Appleton: Appointed 29 July 2021, Resigned 30 January 2023 Maria Perrella (Chair of the Audit and Remuneration Committees, Member of the Nomination Committee): Appointed 29 July 2021 Sarah Gow: Appointed 29 July 2021, Resigned 8 February 2023 Raghav Chopra (Member of the Audit and Remuneration Committees): Appointed 23 February 2022 Directors’ shareholdings: Director: Ordinary Shares and ADSs at 31 December 2022: Percentage of Issued Share Capital Maria Perrella: 6,000 ADSs, 0.01% Matthew Shaw: 137,289 Ordinary Shares, 0.03% Peter Wall: 1,560,000 Ordinary Shares, 0.32% Alex Appleton: 39,415 Ordinary Shares, 0.001% Sarah Gow: 2,760,000 Ordinary Shares, 0.58% Peter Wall resigned as a director with effect from 9 February 2023. Alex Appleton resigned as a director with effect from 30 January 2023. Sarah Gow resigned as a director with effect from 8 February 2023."
"Directors’ option holdings: Name: Date of Grant: Aggregate number of options over Ordinary Shares granted: Exercise Price: Exercise Conditions: Lapse Date Peter Wall: 25 July 2018: 1,000,000: 16 pence: 1/3 on the first anniversary of admission, 1/36 of the total options monthly thereafter: 25 July 2024 Peter Wall: 5 Feb 2020: 3,270,000: 7 pence: 1/12 per month commencing of 4th month from issue: Feb 2030 Matthew Shaw: 17 July 2019: 537,037: 16 pence: 1/3 on the first anniversary of admission, 1/36 of the total options monthly thereafter: 17 July 2025 Matthew Shaw: 5 Feb 2020: 294,048: 7 pence: 1/12 per month commencing of 4th month from issue: 4 Feb 2030 Alex Appleton: 3 Feb 2021: 158,898: 94 pence: 1/24/month starting on 4th month from issue: 2 Feb 2031 Alex Appleton: 22 Sept 2021: 1,250,000: 157 pence: 6/36th after 6 month anniversary, 1/36th thereafter: 21 Sept 2031 Matthew Shaw: 22 Sept 2021: 250,000: 157 pence: 6/36th after 6 month anniversary, 1/36th thereafter: 21 Sept 2031 Sarah Gow: 22 Sept 2021: 500,000: 157 pence: 6/36th after 6 month anniversary, 1/36th thereafter: 21 Sept 2031 Maria Perrella: 22 Sept 2021: 500,000: 157 pence: 6/36th after 6 month anniversary, 1/36th thereafter: 21 Sept 2031 Raghav Chopra: 23 May 2022: 500,000: 49 pence: 6/36th after 6 month anniversary, 1/36th thereafter: 23 May 2032 Peter Wall resigned as a director with effect from 9 February 2023. Alex Appleton resigned as a director with effect from 30 January 2023. Sarah Gow resigned as a director with effect from 8 February 2023. Going Concern: The directors, having made due and careful inquiry, are of the opinion that the Group has adequate working capital to meet its obligations over the next 12 months. The directors therefore have made an informed judgment, at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. As a result, the directors have adopted the going concern basis of accounting in the preparation of the annual financial statements; more detail can be found in the accounting policies. However, the Board notes that the significant debt service requirements and the volatile economic environment indicate the existence of material uncertainties that may cast significant doubt regarding the applicability of the going concern assumption, and the auditors have made reference to this in their audit report. Financial Risk Management: The Group has a simple capital structure and its principal financial assets are cash and digital assets. The Group is subject to market risk by way of being exposed to volatility in crypto asset value and variations in foreign exchange rates. The Group has little exposure to credit risk due to holding its reserves with credible institutions. The Group may also be exposed to liquidity and capital risk due to the nature of operations and the requirements for mining hardware acquisition. The Group manages these risks through portfolio management and maintenance of sufficient working capital. Further details of risks can be seen within the Strategic Report or in the Notes to the accounts. Capital Structure: The Company’s capital structure is comprised of one class of ordinary shares. There are no restrictions on the transfer of the ordinary shares, and there are no persons holding securities carrying special rights regarding the control of the Company. The rights over shares under the Company’s employee share schemes are set out in Note 22 of the financial statements. There are no restrictions on voting rights nor, so far as the Company is aware, any agreements between holders of securities that may restrict the transfer of securities or voting rights. Substantial shareholders: There are no substantial shareholders as at the date of the report. Controlling shareholder: The Group does not have a controlling shareholder. Directors: The Company’s directors are appointed in accordance with, and have the powers and authorities set out in, the Company’s articles of association. Takeovers: There are no significant agreements that take effect, alter, or terminate on a change of control of the Company following a takeover. Other than the entitlement to a notice period and reimbursement of expenses in the normal manner, there are no agreements with the Company and its directors or employees for compensation for loss of office or employment as a result of a takeover bid. Greenhouse gas emissions: Details about the Group’s greenhouse gas emissions, energy consumption, energy efficiency disclosures, and broader climate risk management strategies are included in the TCFD Report on page 36."
"Employee and business relationships: The Group consists of the Chief Executive Officer (interim), the Chief Financial Officer, three non-executive directors, and eight key management personnel, which facilitates the direct and frequent communication between all parties and thereby the interests of all concerned are considered on a regular basis. Due to the nature of a small team and the wide and varied skills possessed, key strategic business decisions are generally discussed and analyzed by all concerned. A significant part of any business is maintaining a good relationship with its suppliers, and the Group is well aware of the need to ensure that its current main supplier, Galaxy, which provides hosting services for the Group’s machines at Helios and has provided the Group an asset-backed loan, is managed carefully. We maintain a close working relationship with Galaxy with regular meetings and an open dialogue, and we continue to meet our accounts payable as they fall due. As a result, the Group has considered the strategic and longer-term impact of decisions relating to its current and future relationships with its material suppliers and lenders and has sought to ensure that any decisions made appropriately balance the short, medium, and long-term objectives of the Group, with a view to generating and maintaining long-term shareholder value. Diversity Policy: The Company does not currently have a formal written policy on diversity as it was previously not of a size or stage of development to warrant one. However, all decisions made during the year under review were made on merit and without regard to protected characteristics. The Company will consider the adoption of a formal diversity policy in due course, having regard to the nature and scope of the Group’s operations. Provision of Information to Auditor: So far as each of the Directors is aware at the time this report is approved, there is no relevant audit information of which the Company's auditor is unaware, and the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. Auditors: The auditors, PKF Littlejohn LLP, have indicated their willingness to continue in office, and a resolution that they be re-appointed will be proposed at the annual general meeting. This report was approved by the Board on 28 April 2023 and signed on its behalf by Matthew Shaw, Chairman of the Board. Directors’ Remuneration Report 2022 key achievements: Adoption of new equity incentive plan to provide flexibility to offer suitably tailored equity incentivization to the Group’s employees across the globe. Comprehensive review of remuneration, including benchmarking of peers, to enable the Group to attract, retain, and develop talent in a competitive labor market while remaining mindful of challenging market conditions. Successfully managing retention during a period of uncertainty and change in the Group’s operations. 2023 areas of focus: Administration of the new equity incentive plan. Continue with comprehensive review of remuneration. Refine and improve employee retention strategies. Letter from the Chair of the Remuneration Committee: Dear Shareholder, I am pleased to introduce the Directors’ Remuneration Report for the year ended 31 December 2022. The Remuneration Committee met three times during the financial year, and all of the Directors on the Committee attended all of these meetings. Its role is to formally oversee matters relating to compensation, including benchmarking remuneration against comparable peers, the adoption of a new equity incentive plan, and the grant of awards under that plan to align the remuneration of our team with the interests of our shareholders. The Remuneration Committee consists of myself, as Chair, and Raghav Chopra as a member. In February 2023, I became Chair, replacing Sarah Gow who stepped down, Matthew Shaw moved off the Committee, and Raghav Chopra was appointed as his replacement. The Committee has discretion to invite members of the executive management of the Company to the meetings as required and considers the input and recommendation of executive management to be critical to ensuring a well-developed remuneration strategy. Therefore, executive management were invited to present to the committee at the appropriate junctures during the year. In order to ensure appropriate scrutiny of decisions, no director was present when their own remuneration was considered or approved or voted on their own remuneration. The Group’s primary remuneration challenge is the different market norms and expectations between the jurisdictions in which it operates."
"The reward markets in the UK and US have significant differences, particularly in the technology sector, and market expectations in the UK can present challenges to the Group in structuring attractive remuneration packages, particularly for the Company’s senior executive leadership. More generally, the Group is also competing against significantly larger and better-capitalized companies in the crypto asset sector, who do not have the same limitations. During the year under review, the Company’s remuneration strategy was to deliver remuneration packages consistent with the Company’s Remuneration Policy and market norms that provide a balanced structure of short, medium, and longer-term remuneration. Remuneration packages typically comprised a competitive base salary, appropriate annual bonuses, and longer-term equity incentivization. In addition, the Company has offered competitive benefit and pension offerings based on the market norms in the country in which the relevant team member is engaged. The Committee took the following key decisions in relation to remuneration during the year: Recommended seeking shareholder approval of the Company’s new equity incentive plan at the 2022 AGM (such approval was subsequently obtained). Designed and oversaw implementation of retention bonuses for key personnel in line with typical market norms to reflect the effect of both the challenging market conditions and the significant uncertainty in the sector and the impact of the proposed disposal of Helios on the Group. In recognition of the additional time, effort, and commitment required in connection with the admission of the Company’s shares to Nasdaq in 2021, during 2022 the Company awarded cash bonuses to Peter Wall and Alex Appleton. The Committee has also considered the impact of inflationary pressures on both the Group and its staff and made cost of living salary increases for each of its staff in respect of fiscal year 2023. The Committee remains focused on ensuring that the Group’s remuneration policy is implemented through an appropriate remuneration strategy that enables the Group to attract, retain, and develop appropriately skilled and experienced staff sufficient for the Group’s present and anticipated requirements. The Committee is also determined to ensure that remuneration incentivizes staff to deliver on both financial and non-financial objectives. Following the end of the financial year. Peter Wall and Alex Appleton resigned as CEO and CFO of the Company, respectively. Sarah Gow stepped down as a non-executive director of the Company. Seif El-Bakly was appointed as Interim CEO, and Jim MacCallum was appointed as the Company’s CFO. Following the year under review, the Company made payments in lieu of notice of CAD 834,850 to Peter Wall in respect of his resignation and £145,833 to Alex Appleton in respect of his resignation. Sarah Gow waived her entitlement to notice pay in connection with her resignation. Details of these payments will be included in the Company’s next annual report. The Committee determined Mr. El-Bakly’s and Mr. MacCallum’s remuneration for serving as Interim CEO and CFO, respectively, based on a review of benchmarking against relevant comparables in the market. For the coming year, the Committee considers the following as the key strategic remuneration priorities: oversight and administration of the new equity incentive plan and continuing with a comprehensive review of employee remuneration, award, and retention strategies, including long-term equity-based remuneration. Maria Perrella, Chair of the Remuneration Committee, 28 April 2023. ARGO BLOCKCHAIN PLC, Directors Remuneration Report. Membership of the Remuneration Committee: During the year, the Company’s Remuneration Committee consisted of Matthew Shaw, Maria Perrella, and Sarah Gow. Sarah Gow served as Chair of the committee. Following the end of the year under review, Sarah Gow resigned as a director of the Company, and Maria Perrella was appointed as the Chair of the Remuneration Committee. The Committee would like to thank Sarah for her contribution to the Committee during the year. Role of the Remuneration Committee: The Remuneration Committee’s role is to determine and operate a remuneration policy that supports the Company’s strategy and promotes long-term sustainable success and aligns the interests of directors with shareholders. The Remuneration Committee’s primary responsibilities include: identifying, reviewing, and proposing policies relevant to executive officer compensation; evaluating each executive officer’s performance in light of such policies and reporting to the Board; determining any equity long-term incentive component of each executive officer’s compensation in line with the remuneration policy and reviewing its executive officer compensation and benefits policies generally; and reviewing and assessing risks arising from the Company’s compensation policies and practices. Advisors to the Committee: None."
"Directors' remuneration (audited): Details of directors’ remuneration during the year ended 31 December 2022 are as follows: Director, Salary and fees, Bonus, Gain on exercise of options/warrants, Loss of office, 2022 Total, Fixed element, Variable element. Executive Directors: P Wall: 339,223, 150,883, 180,600, -, 670,706, 339,223, 331,483 A Appleton: 281,023, 97,139, -, -, 387,162, 281,023, 97,139 Non-executive Directors: S Gow: 70,399, -, -, -, 70,399, 70,399, - M Perrella: 121,391, -, -, -, 121,391, 121,391, - M Shaw: 118,030, -, -, -, 118,030, 118,030, - R Chopra: 105,492, -, -, -, 105,492, 105,492, - Total: 1,035,558, 248,022, 180,600, nil, 1,464,180, 1,464,180, 428,622. Peter Wall resigned as a director with effect from 9 February 2023. Alex Appleton resigned as a director with effect from 30 January 2023. Sarah Gow resigned as a director with effect from 8 February 2023. Amounts shown reflect the discretionary cash bonuses that our Board awarded to the Executive Directors in 2022 for performance in 2021. ARGO BLOCKCHAIN PLC, Details of directors’ remuneration during the year ended 31 December 2021: Note – there were no taxable benefits or pension paid to any of the directors during the year. Fees from when he became a director on 29 July 2021. Ian MacLeod resigned on 28 July 2021, Marco D’Attanasio and James Savage both resigned on 29 July 2021, Colleen Sullivan resigned on 8 November 2021. Please refer to Directors’ Report for dates of appointments during the 2021 financial year. Ian MacLeod’s compensation for loss of office was calculated in accordance with giving 12 months’ notice, which is in line with other executive directors and is comparable with other publicly listed entities. Details of the share options and warrants granted to the directors during the period are included within the Directors’ Report. These shares were issued in accordance with the terms of the relevant scheme or deed governing their grant. The option awards to directors are based on a fixed exercise price and, once vested in accordance with their terms, are not subject to further adjustment in light of share price appreciation or depreciation. The awards to the directors were not based on a target share price, and therefore share price has not been considered in determining vesting of the awards. Total pension entitlements (audited): The Company does not currently have any pension plans for any of the directors and does not pay pension amounts in relation to their remuneration. The Company has not paid out any excess retirement benefits to any directors or past directors. Payments to past directors (audited): The Company has not paid any compensation to past Directors. Director, Salary and fees, Bonus, Gain on exercise of options/warrants, Loss of office, 2021 Total, Fixed element, Variable element. Executive Directors: P Wall: 221,404, 221,404, 3,611,369, -, 4,054,177, 221,404, 3,832,773 A Appleton: 66,968, 148,877, -, -, 215,844, 66,968, 148,877 I MacLeod: 77,000, -, 2,014,087, 132,100, 2,223,187, 77,000, 2,146,187 Non-executive Directors: S Gow: 16,282, -, -, -, 16,282, 16,282, - M Perrella: 16,282, -, -, -, 16,282, 16,282, - M Shaw: 36,769, -, 1,203,810, -, 1,240,579, 36,769, 1,203,810 M D’Attanasio: 25,000, -, -, -, 25,000, 25,000, - J Savage: 25,577, -, -, -, 25,577, 25,577, - C Sullivan: -, -, -, -, -, - Total: 485,282, 370,281, 6,829,266, 132,100, 7,816,929, 485,282, 7,331,647. ARGO BLOCKCHAIN PLC, Statement of directors’ shareholding and share interests (audited): The Directors who held office at 31 December 2022 and who had beneficial interests in the Ordinary Shares of the Company are summarised as follows: Director, Position Peter Wall: Chief Executive Officer and Chairman Alex Appleton: Chief Financial Officer Sarah Gow: Non-Executive Director Maria Perrella: Non-Executive Director Matthew Shaw: Non-Executive Director Details of these beneficial interests can be found in the Directors' Report. Service Agreements and Letters of Appointment: On 21 March 22, the Company entered into an employment contract with Seif El-Bakly, pursuant to which Mr. El-Bakly serves as our Chief Operating Officer. Under the terms of the EB Employment Agreement, Mr. El-Bakly is entitled to receive a base salary annually, participate in the Company’s group health benefits, participate in the Company’s group employer-match RRSP program, and earn a bonus as determined by the Board. Mr. El-Bakly's compensation increased when he accepted the role of Interim CEO. Under the EB Employment Agreement, we may terminate Mr. El-Bakly’s employment by providing Mr."
"El-Bakly with the minimum notice, or pay in lieu thereof, or some combination of the two, severance pay (if applicable), period of benefits continuation, vacation pay, and other entitlements, if any, as required by Employment Standards Act within the Province of Quebec, and in each case, subject to the severance provision with the EB Employment Agreement, provided that we may terminate the services of Mr. El-Bakly at any time with immediate effect for certain reasons including misconduct, criminal offense, or other reasons for cause under the Employment Standards Act within the Province of Quebec. Mr. El-Bakly may terminate his contract with us by providing the company with a minimum of 3 months' notice. The EB Employment Agreement also contains restrictive covenants pursuant to which Mr. El-Bakly has agreed to refrain from competing with us or soliciting any persons who could materially damage our interests if involved in a competing business, for a period of twelve months following his termination of services. Prior to their respective resignations, the service contracts with Peter Wall and Alex Appleton were on a continuous basis, subject to customary termination provisions, and terminable upon 12 months’ and 4 weeks’ notice, respectively, given by either party. The appointments of Maria Perrella, Matthew Shaw, and Raghav Chopra are subject to a 3-year term and to termination upon 3 months’ notice given by either party. Prior to her resignation, Sarah Gow was engaged on the same terms. Terms of appointment: The services of the directors engaged during the year under review were provided under the terms of agreement with the Group are dated as follows: Director, Year of appointment, Number of years completed, Date of current engagement letter Peter Wall (resigned 9 February 2023): 2020, 4, 14 January 2020 Matthew Shaw: 2019, 4, 7 September 2019 Alex Appleton (resigned 30 January 2023): 2021, 2, 4 September 2020 Maria Perrella: 2021, 2, 21 July 2021 Sarah Gow (resigned 8 February 2023): 2021, 2, 21 July 2021 Raghav Chopra: 2022, 1, 23 February 2022 Performance relative to market index: Comparing the total shareholder return of an ordinary share in Argo Blockchain plc against the total shareholder return of the FTSE All-share index. For the year ended 2022, ARB saw a fall in share price from 97.8p to 6.3p, a 94% decrease. In the same period, FTAS fell from 4,208.02 to 4,075.13, a decrease of 3%. UK 10-year CEO table and UK percentage change table: The directors have considered the requirement for a UK 10-year CEO table and UK percentage change table. The directors do not currently consider that including these tables would be meaningful because the CEO remuneration is not currently linked to performance, therefore any comparison across years or with the employee group would be significantly skewed and would not add any information of value to shareholders. The CEO’s remuneration is disclosed in full in the directors’ remuneration section. The directors will review the inclusion of this table for future reports. Relative importance of spend on pay: The directors have considered the requirement to present information on the relative importance of spend on pay compared to shareholder dividends paid. Given that the Company does not currently pay dividends, this would not provide meaningful disclosure to shareholders. Description: 2022 Wages, salaries, and remuneration: 1,036 Bonus: 248 Compensation for loss of office: nil Share-based payment: 1,522 Total: 2,806 Consideration of shareholder views: The Board will consider shareholder feedback received and guidance from shareholder bodies. This feedback, plus any additional feedback received from time to time, is considered as part of the Group’s annual policy on remuneration. At the general meeting held on 6 September 2021, the following votes were cast on the remuneration policy, equity incentive plan, and equity awards for non-executives: Resolution, For, Against To approve the remuneration policy: 77%, 23% To approve the equity incentive plan: 33%, 67% To approve equity awards for non-executives: 82%, 18% In light of shareholder feedback, the Company amended the equity incentive plan and put it to shareholders at the Company’s 2022 AGM, where the votes cast were as follows: Resolution, For, Against To approve the equity incentive plan: 71%, 29% Policy for new appointments: Base salary levels will take into account market data for the relevant role, internal relativities, the individual’s experience, and their current base salary. Where an individual is recruited at below market norms, they may be realigned over time, subject to performance in the role. Benefits will generally be in accordance with the approved policy."
"For external and internal appointments, the Board may agree that the Group will meet certain relocation and/or incidental expenses as appropriate. ARGO BLOCKCHAIN PLC, Other matters: The Company does not currently have any annual or long-term incentive schemes in place for any of the directors, and as such, there are no disclosures in this respect. The share options granted are discussed above. Maria Perrella, Chair of the Remuneration Committee, 28 April 2023. ARGO BLOCKCHAIN PLC, NOMINATION COMMITTEE REPORT. Letter from the Chair of the Nomination Committee: Dear Shareholder, I am pleased to present the Nomination Committee’s report for the year ended 31 December 2022. The Nomination Committee met three times during the financial year under review, and all of the directors on the Committee attended all three of these meetings. At a high level, its role is to: draw up selection criteria and appointment procedures for board members; recommend nominees for election to its Board and its corresponding committees; and assess the functioning of individual members of the Board and executive officers and report the results of such assessment to the Board. Composition of the Committee: The Nomination Committee as originally constituted consisted of myself, as Chair, Sarah Gow, and Maria Perrella. Sarah Gow resigned as a director following the end of the year under review, and we thank Sarah for her contribution to the Committee. The Nomination Committee met three times during the financial year, and all of the directors on the Committee attended all of these meetings. In light of the current structure of the Board, in the near term, the Nomination Committee will be comprised of me, as Chair, and Maria Perrella. The membership of the committee will be reviewed on an ongoing basis, particularly in light of the wider composition of the Board, and any changes announced in due course. The Committee has discretion to invite members of the executive management of the Company to its meetings as required and considers the input and recommendation of executive management to be critical to ensuring the Committee’s activities reflect the ongoing needs of the Company. Therefore, executive management were invited to present to the committee at the appropriate junctures during the year. Focus of the Committee: During the year under review, the Committee’s focus was on the appropriate size and makeup of the Board, any appropriate changes and/or additions to the Board, and the identification, recruitment, and screening of potential candidates. On an ongoing basis, the Committee carefully considers the structure of the Board and executive management and ensures that the Board and executive management have an appropriate balance of skills, expertise, and talent. The Committee and the Board are committed to ensuring that appointments are based on merit and objective criteria aligned with the Company’s needs, and that every effort is made to ensure equality, diversity, and inclusion are at the heart of the appointment process. Appointments: During the year under review, Raghav Chopra was appointed as a non-executive director of the Company filling a vacancy following Colleen Sullivan’s resignation in 2021. Mr. Chopra brought a wealth of experience within the capital markets and financial technology sectors that complemented the skillsets of the remaining members of the Board. Following the year under review, Peter Wall and Alex Appleton resigned as CEO and CFO respectively, and Sarah Gow resigned as a non-executive director of the Company. Following consideration of the Company’s immediate requirements by the Committee and the Board, Seif El-Bakly was appointed as Interim CEO and Jim MacCallum was appointed as the Company’s new Chief Financial Officer. As these are not currently board roles, neither Seif nor Jim will be subject to re-election at the upcoming AGM. Matthew Shaw was appointed as a director of the Company by shareholders at the Company’s 2020 AGM, and as such, each must retire and seek re-appointment at the Company’s 2023 AGM. ARGO BLOCKCHAIN PLC, Equality, Diversity, and Inclusion: The Company does not currently have a formal written policy on diversity as it was previously not of a size or stage of development to warrant one. However, all decisions made during the year under review were made on merit and without regard to protected characteristics. The Company will consider the adoption of a formal diversity policy in due course, having regard to the nature and scope of the Group’s operations."
"Future Work: As part of its work during the coming year, the Committee will consider the Company’s present and near future requirements and will review the composition of the Board, succession planning for management, the role of the CEO, and the structure of the overall management of the Company going forwards. Further announcements will be made in due course. Matthew Shaw, Chair of the Nomination Committee, 28 April 2023. ARGO BLOCKCHAIN PLC, AUDIT COMMITTEE REPORT. Letter from the Chair of the Audit Committee Dear Shareholder, I am pleased to present the Audit Committee’s report for the year ended 31 December 2022. The Audit Committee met six times during the financial year under review, and all of the directors on the Committee attended all of these meetings. At a high level, the Audit Committee is responsible for, among other things: - The appointment, compensation, retention and oversight of the work and termination of any independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit services. - Pre-approving the audit services and non-audit services to be provided by its independent auditor before the auditor is engaged to render such services. - Evaluating the independent auditor’s qualifications, performance and independence, and presenting its conclusions to the full Board on at least an annual basis. - Reviewing and discussing with the executive officers, the Board and the independent auditor its financial statements and its financial reporting process. - Approving or ratifying any related person transaction in accordance with its related person transaction policy. - Reviewing and overseeing the adequacy and effectiveness of its financial reporting and internal control policies and systems. - Reviewing and recommending amendments to the Code of Business Conduct and Ethics. Composition of the Committee The Audit Committee as originally constituted consisted of myself, as Chair, Matthew Shaw and Sarah Gow. Sarah Gow resigned as a director following the end of the year under review, and we thank Sarah for her contribution to the Committee. In light of the current structure of the Board, in the near term the Audit Committee will be comprised of myself, as Chair, Raghav Chopra, and Matthew Shaw. Brief biographies of each of the members of the Committee, including their professional experience and qualifications, are set out on page 8. As required by the Disclosure Guidance and Transparency Rules, Nasdaq Rule 5605(c)(2)(A)(ii), section 301 of the Sarbanes-Oxley Act 2002 and Rule 10A-3 of the Exchange Act, the Committee comprises: - A majority of independent directors. - At least one member with competence in accounting or auditing, or both. - As a whole, competence relevant to the sector in which the Group is operating. The Board considers that, in light of their respective professional experience and expertise, the members of the Committee have recent and relevant financial experience, including competence in accounting matters relevant to the sector of operation, and operational experience in businesses at a similar stage of development. Committee Meetings The Committee has discretion to invite members of the executive management of the Company to its meetings as required and considers the input and recommendation of executive management to be critical to ensuring the Committee’s activities reflect the ongoing needs of the Company. Therefore, executive management were invited to present to the Committee at the appropriate junctures during the year. Where the Committee considers matters relating to the audit of the Group, the Committee invited David Thompson, the lead audit partner for the Group at PKF Littlejohn LLP, to attend the meeting. His attendance was critical to ensuring the Committee has access to Mr. Thompson’s independent judgment and ensuring the Committee can solicit his views on matters to be considered or addressed as part of the audit. The Committee also meets independently to consider matters relating to financial management and audit, providing a forum for discussion of the agenda for the year ahead and strategic priorities for the Committee. Focus of the Committee During the year under review, the Committee’s focus was on: - Reviewing the Company’s financial reporting processes, taking into account changes to the business during the year under review. - Working with the Group’s auditors to consider matters arising from the Group’s previous audit and the measures necessary to address them. - Monitoring the effectiveness of the internal control and risk management systems adopted by the Group, regarding financial reporting of the Group. - Reviewing the audit of the Group, in particular noting areas for potential improvement."
"- Considering the independence and suitability for reappointment of the Group’s auditors, PKF Littlejohn LLP. - Communicating with the Board the findings of the audit, and its contribution to the integrity of the Group’s financial reporting. - Considering the integrity of the Company’s and the Group’s financial statements, the processes and procedures for the Company’s monthly operational updates and reviewing significant financial issues and judgments contained in them. - Reviewing the Group’s internal financial reporting function, in particular its structure, staffing and resources. - Considering the Group’s management and internal reporting metrics. As a result of its work, the Committee brought in a new CFO subsequent to 31 December 2022 and recommended the reappointment of PKF Littlejohn LLP. Following the year under review, the Audit Committee has considered its priorities for the year ahead. The sale of Helios to Galaxy resulted in a significant change to the nature and scale of the Group’s operations, and therefore the Audit Committee will consider the impact of the transaction on the Group’s systems, processes and controls with a view to ensuring they remain appropriate for the Group’s ongoing requirements. Performance Evaluation The year under review was the first year the Group had established a formal audit committee. As such, the year under review was the first opportunity for the Audit Committee to establish its processes and approach to delivering on its responsibilities. Given the significant change to the Group at the year end, the Audit Committee intends to review its performance and objectives in light of the Group’s ongoing requirements. Given the nature and scope of the Group, the Committee does not currently consider an external performance review would be of significant benefit to the Group, however the Committee will continue to review the appropriateness of such a review on an ongoing basis. Significant Judgment in relation to financial statements The Committee has considered the following matters, being significant accounting areas which required the exercise of judgment or a high degree of estimation during the year, together with details of how these were addressed. Some of the matters considered were of a one-off nature, while others will have a continuing applicability to the Group’s business. Significant issue and explanation Impairment for Mining Machines The Group is required to perform impairment reviews of its capital assets on an annual basis to determine the appropriate value of those assets. Following the disposal of Helios, the Group’s principal capital assets are its data centers in Canada and its fleet of mining machines. While properties are long life assets, mining machines have a finite useful life, and therefore it is imperative the Group correctly accounts for the impairment based on the Group’s current expectations of the machines’ useful life. The Committee has considered management’s assessments of the appropriate value of the Company’s mining machines at the reporting date. This included specifically considering and approving the predicted useful life remaining, the market value of the machines, the relative profitability of the machines compared with other alternatives available in the market. Impairment was also a significant issue for the Group’s auditors, who reported its findings to us. Going concern basis for the financial statements and viability statement The Committee reviewed and challenged management’s assessment of forecast cash flows, including applying appropriate sensitivities, and the potential impact of future uncertainties, the Group’s financial resources and potential sources of additional liquidity. The Committee was satisfied that the application of the going concern basis for the preparation of the financial statements remained appropriate. External Audit During the year, the Audit Committee assessed the independence and effectiveness of PKF Littlejohn LLP and considers that they remain independent from the Group and provide an effective external audit of the Group. The Committee has therefore recommended that PKF Littlejohn LLP be proposed for reappointment at the upcoming Annual General Meeting. PKF Littlejohn LLP has been the auditor of the Company since its inception in December 2017, and David Thompson, lead audit partner for the Group at PKF Littlejohn has led the Group’s audit since 2020. While retendering and change of personnel is not currently required as a result of these requirements, the Group and PKF Littlejohn LLP will comply with the restrictions and limitations applicable to reappointment of auditors and maximum terms of audit personnel, which require PKF Littlejohn LLP to rotate audit personnel engaged on the Group’s audit and impose a maximum engagement period for PKF Littlejohn LLP as the Company’s auditor."
"Non-audit services During the year, PKF Littlejohn did not provide any non-audit services to the Group and therefore no issues regarding the objectivity or independence of PKF Littlejohn LLP arose from the provision of non-audit services. Maria Perrella Chair of the Audit Committee 28 April 2023 ARGO BLOCKCHAIN PLC CORPORATE GOVERNANCE REPORT The QCA 10 Principles of Corporate Governance The board of directors of Argo Blockchain PLC recognizes the importance of corporate governance and has decided to apply the Corporate Governance Code published by the Quoted Companies Alliance. A copy of the QCA Code is available at the QCA website. The QCA Code sets out a standard of best practice for small and midsize quoted companies. The QCA’s ten principles of corporate governance are set out below, along with a description of the Company’s approach to the relevant principle. Principle 1: Establish a strategy and business model which promotes long-term value for shareholders The Group is a UK based provider of cryptocurrency mining with its mining operations located in Canada and the US. The business focuses on acquiring the most up to date and efficient hardware to support its mining facilities with a focus on return on investment and prioritizes the utilization of renewable energy sources wherever possible at the most competitive prices. Principle 2: Seek to understand and meet shareholder needs and expectations The Group seeks to communicate with shareholders to ensure that its financial performance and strategy are clearly understood. This is achieved through regular updates by RNS to the London Stock Exchange, filings with the Security and Exchange Commission in the United States and meetings with various shareholders. The Group attends investor conferences in the UK and USA and ensures its website provides accurate information and is kept up to date. Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long term success Our stakeholder groups include our employees in Canada, the United Kingdom, United States of America and our business partners. Employees are kept informed of the Company’s progress and development by way of semi-monthly meetings and have access to the Board at all times. We aim to recruit and retain our staff by ensuring our pay and conditions are competitive in the marketplace and offer training and career development where appropriate. We seek to maintain a good business relationship with our business partners who are well-respected experts in their field. Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation The Group considers robust systems and controls will enhance the Group’s ability to manage and respond to challenges and opportunities. The Group previously had a small number of employees and had adopted systems and controls commensurate with the nature and scale of its operations. During the year under review, the Group significantly increased its headcount, particularly in connection with the development of Helios. As such, the Group developed more defined and robust systems, controls and processes to provide the ability to continue to scale as necessary. With the sale of Helios to Galaxy, the Group is in the process of adopting revised systems and controls in line with its agreements with Galaxy, while simultaneously reviewing its systems for its owned and managed properties to ensure they remain appropriate for the size and nature of operations. The Board is responsible for overall supervision of the Group’s operations while the Company’s CEO and CFO are responsible for the implementation of the systems and controls across the Group and recommending improvements and revisions to the Board for consideration. As part of its systems and controls, the Group has adopted clearly defined roles and responsibilities, with clear lines of reporting and supervision. Given the Group’s current stage of development, the Group considers the processes and procedures adopted provide the necessary framework for effective risk management throughout the organisation, while retaining flexibility and the opportunity to continue to develop in line with the Group’s future strategy. Principle 5: Maintain the Board as a well-functioning, balanced team led by the chair The Board is led by Matthew Shaw as the Company’s Chairman, supported by the senior management team and other non-executive directors. Matthew Shaw was appointed as the Company’s Chairman following the departure of the Company’s previous Interim Chairman, Peter Wall, in February 2023. He is supported by Seif El-Bakly, the Company’s Interim Chief Executive Officer, Jim MacCallum, the Company’s Chief Financial Officer, and the Company’s two other non-executive directors."
"Members of the Company’s senior management team are invited to Board meetings as necessary and appropriate. The Board considers that each director has the required level of expertise and experience in his or her field, and regular Board meetings are held to discuss all key matters and the Board functions well and is appropriately led. Principle 6: Ensure that, between them, the directors have the necessary up-to-date experience, skills and capabilities The Board is comprised of individuals with appropriate expertise and experience, each of whom brings a differing but complementary skillset to the Board. All the directors receive regular updates on the Group’s operational and financial performance and attend frequent Board meetings where key issues are discussed at length. The Board is responsible for the appointment, removal and re-election of directors and when such a decision is required it will take account of the Company’s need for a balance of market, operational and financial expertise. All directors have the ability to take independent professional advice at the Company’s expense where they consider it necessary to ensure they fulfill their duties in an appropriate manner. Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement The Board is constantly reviewing the Group’s and its own performance based on internally set performance indicators and utilizes those performance evaluations and indicators to identify areas of success and the potential for improvement. Principle 8: Promote a corporate culture that is based on ethical values and behaviours The Board, together with the Company’s senior management team, is conscious to impart and maintain a forward-looking corporate culture throughout the Group, based on ethical values and respect for the contributions of the Company’s staff. The Board leads by example and sets high standards and expectations for the Company’s staff. Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision making by the Board As a company with a Standard Listing, the Company is not required to comply with the provisions of the Corporate Governance Code published by the Financial Reporting Council. However, in the interests of observing best practice on corporate governance, the Company intends to comply with the provisions of the QCA Code insofar as is appropriate having regard to the size and nature of the Company and the size and composition of the Board. The Company’s Standard Listing means that it is also not required to comply with those provisions of the Listing Rules which only apply to companies on the Premium List. The UK Listing Authority will not have the authority to monitor the Company’s compliance with any of the Listing Rules which the Company has indicated that it intends to comply with on a voluntary basis, nor to impose sanctions in respect of any failure by the Company so to comply. Principle 10: Communicate how the Company is governed and is performing by maintaining dialogue with shareholders and other relevant stakeholders The Company is proactive in communicating with shareholders and other relevant stakeholders, on an annual basis by way of the Annual Report and the financial statements, and more regularly through the half year Interims, monthly operational updates and regulatory announcements. Outside of formal communications, the Company engages with shareholders and interested parties through Q&A sessions and other informal updates. The Company maintains a comprehensive website, which is available at the Argo Blockchain website. TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURE REPORT Argo recognizes the adverse effects caused by climate change and is committed to assessing and managing both the impact of climate change on our operations and our impact on the planet. Investors, employees, regulators, members of the community in which we operate and other stakeholders want to understand how we are planning for and adapting to climate change. The Task Force on Climate-related Disclosures provides a framework that enables companies to communicate climate-related financial risks to this audience. At Argo, our stakeholders have high expectations of how we operate as a business. Since the Company’s inception, Argo has been committed to sustainability which includes the objectives of minimizing our waste and carbon footprint as well as creating disclosures on an annual basis that align with our stakeholders’ expectations. We have made considerable progress with our climate strategy since 2020, whose adoption and acceptance have been well received by our organization and external stakeholders, and we became a climate positive company in 2021. In compliance with Listing Rule 14.3.27(2)R, our climate-related financial disclosures are set out below."
"These are a mixture of fully and partially compliant with the TCFD Recommendations and Recommended Disclosures. We have structured the report so that it follows the 4 TCFD pillars with the 11 recommended disclosures set out in Figure 4 of Section C of the TCFD Annex entitled Guidance for All Sectors. When drafting this report, we also reviewed whether any of the sector-specific Supplemental guidance within Section E of the TCFD Annex entitled Supplemental Guidance for Non-financial Groups was relevant; however it was deemed that Argo could not be categorized within one of the sectors provided within these supplements. All TCFD related disclosures are included below and our sustainability report for 2022 will be produced as a standalone report later in 2023. The Company has decided not to gain assurance for the content of this report nor the GHG emissions or other KPIs included within. The Company consists of a small team and hence is still developing the resources in order to be fully compliant with all the TCFD’s Recommendations and Recommended Disclosures. Since this is our first year publishing a TCFD-aligned report, we recognize the gaps that we must cover in order to achieve full compliance with the TCFD’s Recommendations and Recommended Disclosures. In the future, we intend to evaluate our practices and consider opportunities to enhance our disclosures on an ongoing basis consistent with our objective to incorporate and expand our best practice reporting. Over the next year we will create a roadmap to full compliance, whilst acknowledging that it is not only the Company’s reporting that can be improved. We need to build on what we have done this year and ensure the Company is implementing the necessary strategies, structures, resources, and tools to manage the risks and opportunities posed by climate change. We will also consider the work being conducted by the Transition Plan Taskforce so that we are aligning our climate-related reporting with best practices, which goes beyond our regulatory requirements. Obligations. By next year, the company expects to have made progress against the governance, strategy, and risk management pillars. This is expected to be done by further formalizing the company’s ESG-related governance structure, developing the scenario analysis conducted, and by expanding the company’s risk management process. In accordance with LSE Listing Rule 14.3.27(2), the table below sets out whether Argo has made disclosures fully or partially consistent with the TCFD recommended disclosures: TCFD Pillar TCFD Recommended Disclosures Compliance Status Disclosure Location (page) Governance Board’s oversight of climate-related risks and opportunities Partial 37 Management’s role in assessing and managing climate-related risks and opportunities Partial 38 Strategy Climate-related risks and opportunities the organization has identified over the short, medium, and long term Full 38 Impact of climate-related risks and opportunities on the business, strategy, and financial planning Partial 42 Resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario Full 44 Risk Management Organization’s processes for identifying and assessing climate-related risks Partial 46 Organization’s processes for managing climate-related risks Partial 46 Processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management Partial 46 Metrics and targets Metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process Partial 46 Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas emissions and the related risks Partial 47 Targets used by the organization to manage climate-related risks and opportunities and performance against targets Partial 48 Governance Recommended disclosure: a. Describe the Board’s oversight of climate-related risks and opportunities. The board of directors monitors the company’s overall sustainability performance against its stated ambition and targets. It therefore has oversight responsibility for Argo’s climate strategy and performance, whereas the CEO has ultimate responsibility for setting Argo’s ESG strategy and performance objectives as well as oversight of its implementation and execution. The board is informed about the company’s climate-related progress through board meetings and annual reports from the ESG committee. It is the CEO who reports to the board on ESG and climate-related issues at each board meeting on an ad-hoc basis as required. The board uses climate-related issues to guide them when: Finalizing annual budgets (purchase of renewable electricity credits, verifiable emissions reductions as well as the costs associated with efficiency gains, data collection, and calculation). Monitoring implementation and performance (with regards to the metrics outlined on page 48)."
"Overseeing major capital expenditures (ensuring our facilities are located on low carbon emission grids and built to be as efficient as possible). Recommended disclosure: b. Describe management’s role in assessing and managing climate-related risks and opportunities. The CEO is responsible for achieving Argo’s strategy and ESG objectives, whereas day-to-day responsibility for such tasks is delegated to the ESG committee. The ESG committee is chaired by the CEO and includes the COO, VP of Technology and Development, VP of Mining, and VP of Investor Relations. The ESG committee has climate-related expertise and is supported by external climate experts on a regular basis providing the company with both data proficiency and strategic advisory. The committee is responsible for the management and implementation of ESG initiatives and directives. To do this, the committee meets semi-monthly to assess climate-related issues, develop and discuss the status of ongoing climate-related initiatives, and monitor and track progress against certain KPIs. One of the major challenges that the Bitcoin mining industry faces is its reputation regarding energy consumption and greenhouse gas emissions. Hence, over the past year, the ESG committee has taken a stakeholder focus and created initiatives focused on supporting, and in some cases educating, certain stakeholder groups to ensure that the company’s climate change strategy is in line with their expectations. We identify key stakeholders according to Argo’s impact on their interests as well as their ability to influence our strategy and objectives. Hence, management’s role is to engage with our key stakeholders which includes shareholders, suppliers, employees, local communities, society, and local governments on climate-related issues. Strategy Recommended disclosure: a. Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term. We recognize that climate-related risks and opportunities present a potential material impact to our business and are committed to taking the necessary steps recommended by the TCFD to assess the severity of the business risks and the value of the opportunities on our business. This year we worked with a third-party consultant to conduct a climate screening and opportunity exercise, including interviews with key internal stakeholders across the group. The process involved exploring the range of climate impacts that may present material risks and opportunities across three time horizons: Short-term (0-1 years): Aligned to our financial planning cycle. Medium-term (Up to 5 years): This period is considered the timeframe for major product and market shifts. Long-term (5-25 years): This time horizon helps to capture the potential physical/transitional risks and opportunities that reflect the commitments made by national governments and the long-term damages associated with climate change. The tables below generally describe the climate-related risks that are considered by the company over the timeframes described above. We expect this list to grow as we further evaluate these risks and the associated business impacts: Climate-related Risks Transition Risks Climate Risk Drivers Summary Description and Business Impact Mitigation and Adaptation Main Affected Time Horizon Policy & Legal Increased costs for energy from carbon pricing Federal authorities may pursue and implement legislation and regulation that seeks to limit the amount of carbon dioxide produced from electric generation, which would affect the availability and price of electricity sourced from power grids that are dependent upon fossil fuel-fired sources of power generation. Where we purchase electricity from the grid, this could impact us in a potentially material adverse manner. The bankruptcy or insolvency of any power generator or wholesale market supplier from whom we expect to obtain supply for our mining operations could also result in a curtailment or loss of supply, which would have a material adverse effect on our ability to continue mining operations. We are focused on deploying our mining machines at locations with access to low-cost and reliable renewable power sources, as successfully doing so should enable us to reduce our power costs. Our Quebec facilities are primarily powered using renewable hydroelectric power, and our operations in Texas are in the Texas Panhandle, where more than 85% of the installed electricity generation capacity comes from renewable sources. We will continue to work with power grids and electric generators who have an abundance of remote renewable electricity because this aligns with the company sustainability principles and climate strategy. As an additional benefit, the use of lower-emission sources reduces our risk exposure to the potential introduction of carbon pricing and associated reduced availability of fossil fuel-fired electric generation."
"Medium to Long term Market Increased costs of ASIC mining machines There are risks related to the potential disruption of our global supply chain by climate-related issues for cryptocurrency mining hardware, and difficulty in obtaining new mining machines that may have a negative effect on our business. While we have typically purchased our mining machines from Bitmain, we have diversified our access to mining machines by establishing a relationship with ePIC Blockchain Technologies. We are purchasing ePIC’s new mining machines that utilize Intel’s Blockscale ASIC chip. We will continue to assess our supply chain management and opportunities to reduce our risk exposure to any disruption to our key suppliers. Medium to Long term Reputational Damage Increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by Argo or other companies in our industry could harm our reputation. This could therefore have a material adverse effect on our financial position, results of operations, and cash flows. Argo’s stakeholders and society in general are becoming increasingly climate conscious. Argo recognizes this – we have always been, and always will be, committed to promoting sustainability. We routinely emphasize our commitment to sustainability through our ongoing public relations and communications efforts. Additionally, we are involved in several initiatives that focus on educating these stakeholders on the positive impact that Bitcoin mining operations can have for the energy transition, including the incentivization of renewable energy development and stabilization of power grids via demand response. We have also put in place an ambitious climate strategy and attained a climate positive status in 2021. Short to Long term Physical Risks Climate Risk Drivers Summary Description and Business Impact Mitigation and Adaptation Main Affected Time Horizon Acute Disruptions to our facilities and operations Extreme weather events have the potential to disrupt or damage Argo’s operations. Flooding, heatwaves, wildfires, droughts, and rising sea levels could all impact the business. Insufficiently prepared facilities could be unable to deal with more frequent and intense occurrences of such events. Due to the nature of our operations and facility ownership structure, Argo is in a position to be able to locate its operations in areas that are of relatively lower risk or relocate mining machines if there are ongoing operational disruptions related to acute weather disruptions. We will explore assessing the risk exposure of our current sites and develop location-specific business continuity plans. Medium to Long term Chronic An increasing number of volatile weather conditions, particularly unusually hot or mild summers could impact the price of energy. Due to Argo’s electricity demand from the grid, it could be that Bitcoin mining companies are requested to shut down leading to a material adverse effect on the company’s revenue. Variability in weather conditions have already impacted Argo’s operations. In Quebec, Argo curtails its operations in the winter months to help stabilize the power grid. In Texas, Argo voluntarily curtails operations when electricity prices are high, which often occurs during extreme weather events. While our property strategy takes climate-related issues into account, we will seek to explore incorporating these weather-related risks into our potential site location decisions. Short to Long term Climate-related Opportunities Transition Opportunities Climate Risk Drivers Summary Description and Business Impact Mitigation and Adaptation Main Affected Time Horizon Resource Efficiency Enhancing our Bitcoin mining operational efficiency presents an opportunity to reduce operating costs and bolster our reputation. We compete against our peers on the efficiency of our operations and hence improving it is a cornerstone to our strategy. Our mining hardware primarily consists of Bitmain Antminer T17, S17, S19, and Z11 machines, featuring the latest application-specific integrated circuits for cryptocurrency mining. These machines offer superior speed and efficiency in cryptocurrency mining compared to general computing hardware. In addition, our operations in Texas utilize immersion cooling technology, which improves efficiency, extends the lifespan of the mining machines, and reduces costs. Due to the infancy of these machines, moving forward Argo will continue to explore the large opportunities for improvement with regards to efficiency. Short to Long term Energy Source Renewable energy procurement and deployment Bitcoin miners may have the potential to enhance the shift toward decentralized energy generation by co-locating near renewable energy producers and acting as a sink for excess energy production. Serving as a sink or flexible load is valuable as it provides a market mechanism for use of excess electricity, allowing generators to increase intermittent renewable energy generation into the grid without fear that it won’t be used and uncompensated for."
"This may reduce operating costs and increase revenue, capital availability, and reputation. Bitcoin mining’s unique ability to serve as a buyer of last resort for excess energy encourages further investment in renewable projects. This, in conjunction with demand response, enhances grid resilience. Bitcoin mining can play a valuable role in the transition to a low carbon economy. Bitcoin mining has the capability to balance the grid and hence provide value to power producers who deploy renewable energy generation. In the short term, Texas provides the greatest opportunity for this as the grid operator has worked with Bitcoin miners to assist with increased integration of renewable energy into the grid. Bitcoin mining therefore indirectly supports the deployment of additional renewable electricity and in the long term could be deployed in other regions. We will continue to explore opportunities to foster strategic relationships with independent power producers. Short to Long term New Products and Services Argo’s stakeholders and society in general are increasingly climate conscious. Those who invest in Bitcoin may want to be assured that the cryptocurrency they buy has a low-carbon intensity. This has led to the development of market-based tools to incentivize sustainable production of Bitcoin. Argo has actively explored and pursued various opportunities to promote the sustainable production of Bitcoin. In 2021, we announced the creation of the world’s first Bitcoin mining pool powered by clean power, Terra Pool. Short to Long term Markets Ability to form new and strategic partnerships As the world is transitioning its energy system, there will be pressure on companies to reduce their greenhouse gas emissions and by-products that impact the environment negatively. In order to deal with these impacts, companies will need to collaborate with each other to find solutions and reduce the risk of regulatory action and reputational damage. Argo has a unique opportunity to enable the transition to a net zero economy through the use of its Bitcoin mining operations. Below are three examples of potential strategic partnerships that the company is exploring: Independent power producers Oil and gas producers Local municipalities Please see below for an expansion of how Argo can foster these relationships. Short to Long Term Recommended disclosure: b. Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning. In 2020 we defined our climate-related goals and ambitions with specific targets identified to guide our activities, and we set our objective of being a climate positive company. Our strategy to be a climate positive company is based on six steps: 1. Minimizing emissions at the outset – intentionally locating our own operations on grids with low emissions as well as investing in energy saving and efficiency measures at our own facilities. 2. Scope 1 emissions – No scope 1 emissions as we have no power generation or generator use at our own facilities. 3. Scope 2 emissions – Minimize scope 2 emissions through the use of low-emission grids. For any residual scope 2 emissions, renewable electricity credits are purchased at owned or hosted facilities for emissions created by electricity use. 4. Scope 3 emissions – Verifiable emissions reductions purchased for emissions resulting from all Argo activities in its value chain. 5. Additional verifiable emissions reductions – Additional verifiable emissions reductions purchased to become climate positive. 6. Third-party verification – Argo assessment validated by an accredited third-party verification consultant. In alignment with these targets, we are focused on addressing the risks and opportunities identified above by integrating climate considerations in our: Strategic Partnerships Argo continually seeks potential opportunities and looks for new ways for our Bitcoin mining operations to provide value to other corporations, utility companies, and government agencies. Below is a non-exhaustive list of some examples of ideas that we are in the process of evaluating: Electricity generators or independent power producers – We are evaluating opportunities to co-locate our mining operations with renewable energy producers in order to gain access to behind-the-meter electricity. This type of relationship with a power generator can be symbiotic because we can gain access to low-cost electricity and the power producer will have a buyer of last resort for its electricity regardless of the market price obtainable through the power grid. Local municipalities – Exploring partnerships with local municipalities to use waste heat from our facilities and provide this heat to the municipality or nearby facilities such as greenhouses that can make use of the heat. This creates a savings for the greenhouse as they can reduce the heat they need."
"In addition to creating an economic opportunity for both parties, this also saves energy and reduces our collective environmental impact. Oil and gas producers – There is potential for partnerships with oil and gas companies who produce natural gas as an unwanted by-product of their oil production. Currently, oil and gas producers typically dispose of the unwanted natural gas via venting or flaring, which releases methane into the atmosphere. On a 100-year timescale, methane has 28 times greater global warming potential than carbon dioxide and is 84 times more potent on a 20-year timescale. Instead of venting or flaring the waste gas, it can be combusted in a generator to provide electricity for Bitcoin mining operations. Combusting the natural gas reduces methane emissions by up to 99% when compared to venting or flaring. This therefore provides an opportunity for both parties since a Bitcoin miner can help reduce the methane emissions of oil and gas producers while the Bitcoin miner gains access to low-cost energy for its Bitcoin mining machines. Energy/Resource Efficiency Additionally, we have worked on becoming more efficient with the energy we use through purchasing more energy-efficient technologies. These initiatives have included: Locating the Helios site in the West Load Zone of Texas where more than 85% of the installed generation capacity is renewable. Constructing the Helios facility so that it uses high-efficiency immersion cooling technology. Purchasing the most efficient Bitcoin mining machines on the market. These initiatives ensure that we keep pace with the transition to a net-zero economy by proactively complying with evolving regulation, providing energy-efficient technology, and maintaining a strong reputation amongst our stakeholders. Stakeholder engagement We have taken a proactive approach to developing a more efficient and cleaner industry through the promotion of transparency, sharing of best practices, and education to the public about the benefits of Bitcoin and Bitcoin mining. We have done this through several avenues: Argo is a founding member of the Bitcoin Mining Council, which educates the public on the increasing amount of renewable energy used for Bitcoin mining. It also seeks to improve reporting and increase the amount of data available on the use of renewable energy within the sector. Argo is a signatory of the Crypto Climate Accord, which is a private sector-led initiative for the entire crypto community focused on achieving net-zero emissions from electricity consumption by 2030 for its signatories. Argo is a member of the UNFCCC Climate Neutral Now initiative, committing the company to measure, reduce, contribute, and report emissions on a yearly basis. Engage with regulators and policymakers at the state and federal level to educate them on the benefits of Bitcoin mining. Site location Our property strategy includes criteria that considers the availability of renewable electricity and the sites’ exposure to the physical risks of climate change. Our application of materiality: For the purposes of determining whether the financial statements are free from material misstatement, we define materiality as the magnitude of misstatement that makes it probable that the economic decisions of a reasonably knowledgeable person, relying on the financial statements, would be changed or influenced. We also determine a level of performance materiality which we use to assess the extent of testing needed to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. The group materiality for the financial statements as a whole was set at £763,000 (2021: £758,400). This was calculated based on an average of 1% of total revenue for the year and 2.5% of the loss before tax (2021: 1% of total revenue for the year). The change in the basis for calculation was a result of the change in focus during the year following a decrease in hashprice, increased power costs, and the resulting sale of the Helios facility due to the position the entity was in. Therefore, the key factor in determining performance has been to assess not just revenues but results for the year. The percentage used is a reflection of the perceived risk in the industry and the significant growth of the group, which enabled greater coverage of revenue from the audit procedures undertaken. The parent company materiality for the financial statements as a whole was set at £457,800 (2021: £118,700). This was calculated based on 2% of total expenditure, which was the same benchmark used in the prior year."
"However, as per ISA 600 requirements, this has been capped at an amount lower than group materiality, which we assessed in line with the group performance materiality threshold. We have determined this to be the principal benchmark of the parent company, as revenue is generated solely through its subsidiaries. A key management target is to minimize parent company expenditure in order to maximize the utilization of funds within the trading subsidiary. In addition to this, legal and professional fees have significantly increased in the year through the sale of Helios and other advice obtained, and this is the key figure within expenses in the current year. Materiality for the subsidiaries has been calculated on individual levels either on the same basis as that of the group, capped at group performance materiality, 2% of net assets, and 1% of gross assets. These significant components of the group were audited to a level of materiality ranging from £44,174 to £457,800. Performance materiality was set at 60%. Performance materiality for the group financial statements was set at £457,800 (2021: £455,000) and the parent company was set at £274,680 (2021: £83,000), being 60% of materiality for the financial statements as a whole. The performance materiality for the group and all subsidiaries is based on our assessment of the relevant risk factors, such as previous experience of misstatements, management’s attitude towards proposed adjustments, and the level of estimation inherent within the group and the subsidiaries, including the parent company. We agreed to report to those charged with governance all corrected and uncorrected misstatements we identified through our audit with a value in excess of £38,150 (2021: £37,920) for the group and for the parent company a value in excess of £22,890 (2021: £5,935). We also agreed to report any other audit misstatements below that threshold that we believe warranted reporting on qualitative grounds. Our approach to the audit: The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for materiality determine the scope of our audit and the nature, timing, and extent of our audit procedures. In particular, we looked at areas involving significant accounting estimates and judgment by the directors, and those areas assessed to be key audit matters as presented below. We also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We assessed all components of the group for their significance in order to determine the extent of the work to be performed on them in order to obtain sufficient and appropriate audit evidence on which to base the group audit opinion. Those entities of the group which were considered to be significant components, being Argo Blockchain plc, Argo Innovation Labs Inc, Argo Innovation Facilities (US) Inc., GPU.One 9377-2556 Inc., GPU.One 9366-5230 Inc., and Argo Operating US LLC, were subject to full scope audit procedures by PKF Littlejohn LLP. Procedures were performed to address the assessed risks of material misstatement. We did not rely on the work of any component auditors. Key audit matters: Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement, whether or not due to fraud, we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key Audit Matter: Recognition and valuation of cryptocurrency assets (Note 21). This is considered a key audit matter because the crypto assets’ value at reporting date is subject to management judgment and estimation uncertainty for those holdings which are not frequently or not yet traded. In addition to this, the group holds different tokens for different purposes which attract differing accounting treatments, and therefore the incorrect treatment applied may have a material impact on the financial statements. The volatility of the crypto assets’ values increases the valuation risk also."
"Moreover, the crypto assets are held across numerous wallets, both internal and external, which gives rise to increased completeness and existence risks. The group during the year entered into material transactions involving the purchase, mining, and disposal of crypto assets. The type and form of these assets can differ significantly with regard to the ability to make payments, trade, or exchange. In addition, not all crypto assets have an active market whereby transactions in the digital currencies take place with sufficient frequency and volume in order to provide pricing information on an ongoing basis. Crypto assets can be subject to high levels of volatility. Therefore, there is a significant risk of material misstatement of said assets, due to both the significant management estimate involved and the volatility attributed to crypto assets. In responding to the identified key audit matter, we completed the following audit procedures: confirming good title to and quantities of the crypto assets within the group’s wallets and obtaining direct confirmation from relevant custodians; reviewing and testing underlying agreements giving rise to the receipt of crypto assets; performing an assessment of the fair values attributed to the crypto assets at the transaction date and year-end date, by vouching the value of quantities held to a third-party website; assessing the crypto portfolio held at the year-end and ensuring that only the cryptocurrencies traded on active liquid markets have been measured at Level 2 on the fair value hierarchy table; for those digital assets which arise from Single Agreements For Future Tokens (SAFTs), parachain auction funds, and staked tokens with vesting periods, obtaining evidence of the contribution made and assessing for evidence of impairment or future trading; performing an assessment of the liquidity of the tokens held and any impact on the subsequent measurement thereto; and discussing with management the strategy for the holding of said digital assets and reviewing the relevant accounting treatment applied. Key observations: We are satisfied that those currencies which are actively traded are recorded at their fair value based on an active market, and those which are not are recorded at a true reflection of their fair value. We are satisfied that the group has title to the digital assets as recorded within these financial statements. Accounting treatment of the disposal of Helios and accounting implications of the subsequent hosting agreement including an assessment of whether this meets the criteria of a Right of Use asset under IFRS. In responding to the identified key audit matter, we completed the following audit procedures: vouching the consideration relating to the disposal to supporting documentation; obtaining management's calculation of the disposal of the Helios facility and performing a recalculation of the resulting gain or loss through vouching to the purchase agreement; obtaining a copy of the hosting agreement and reviewing management's technical accounting paper of whether the criteria of IFRS 16 is met and challenging thereto; and reviewing the post-year-end performance of the group following the implementation of the hosting agreement to ensure consistency with conclusions reached by management in respect of the Right of Use asset. Key observations: We are satisfied that management has appropriately reflected the disposal of the Helios facility and the new hosting agreement in place with Galaxy does not meet the criteria for a Right of Use asset to be calculated and recognized, and therefore is appropriately reflected in the financial statements. Carrying value of mining machines (Note 19): The group holds a significant value of mining machines at the year-end, which is made up of newly acquired machines in the year as well as those in place from prior periods. The machines acquired in the current year were at a significantly higher price than the current value of the same machine. This is directly a result of the crash in the price of Bitcoin during the year. The prices fluctuate based on the hashpower rating and the price of Bitcoin. The acquisitions were made while the price of Bitcoin was high, and they were delivered and installed following the price crash. In addition to this, there has been a significant increase in power costs incurred within the Helios facility, which therefore gives rise to longer payback periods, which has triggered an impairment indicator under IAS 36, and thus management is required to prepare an assessment of the recoverable amount of said machines, being the higher of their fair value less costs to sell and the value in use."
"This was deemed to be a key audit matter as a result of the areas of management judgment and estimation uncertainty into the value in use calculation. In responding to the identified key audit matter, we completed the following audit procedures: reviewing the technical accounting memo and value in use calculations prepared by BDO, challenging the assumptions made thereto including obtaining both corroborative and contradictory evidence of the key inputs; obtaining evidence of current selling prices of new and used machines in order to assess the recoverable value if the machines were to be sold to a third party and to also assess the validity of the salvage value as part of the value in use calculation; performing sensitivity analysis on the key inputs in the value in use calculations prepared; engaging the PKF internal valuation team to perform a WACC calculation to compare against the discount rate applied by management in their assessment; and reviewing the disclosures in the financial statements and ensuring they provide a true and fair view of management’s assessment performed. Key observations: We are satisfied that the inputs into this model reflect management’s best assessment of the carrying value and have been appropriately applied and disclosed. Other information: The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006: In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit, the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception: In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion, adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Responsibilities of directors: As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the group and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error."
"In preparing the group and parent company financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements: Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: We obtained an understanding of the group and parent company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management, industry research, and application of cumulative audit knowledge and experience of the sector. We determined the principal laws and regulations relevant to the group and parent company in this regard to be those arising from Companies Act 2006, Canada Business Corporations Act, Securities Law, Anti Money Laundering Legislation, Disclosure Rules and Transparency rules for listed entities, SEC regulations, and local tax laws and regulations. We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group and parent company with those laws and regulations. These procedures included, but were not limited to: A review of the Board minutes throughout the year and post year-end. A review of the RNS announcements. A review of general ledger transactions. Discussion with management. Obtained confirmation from legal advisors. We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, the risk relating to the valuation of digital assets and the impairment assessment of property, plant, and equipment to be an area of potential for management bias. The valuation of the digital assets held at the year-end has been classified as level 2 in the fair value hierarchy table, and supporting evidence has been obtained from a relevant trading platform to support the fair value of assets held. In all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to, the testing of journals, reviewing accounting estimates for evidence of bias, and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission, or misrepresentation. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. ARGO BLOCKCHAIN PLC. Other matters which we are required to address. We were appointed by the Board on 26 February 2021 to audit the financial statements for the period ending 31 December 2020 and subsequent financial periods."
"Our total uninterrupted period of engagement is 4 years, covering the periods ending 31 December 2018 to 31 December 2021. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting our audit. Our audit opinion is consistent with the additional report to the audit committee. Use of our report. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. David Thompson, Senior Statutory Auditor, 15 Westferry Circus, For and on behalf of PKF Littlejohn LLP, Canary Wharf, Statutory Auditor, London E14 4HD, 28 April 2023. ARGO BLOCKCHAIN PLC. GROUP STATEMENT OF COMPREHENSIVE INCOME Year ended December 2022. Year ended December 2021. Continuing operations. Note £000 £000 Revenues 7 47,363 74,204 Direct costs 8 (38,183) (22,186) Change in fair value of digital currencies 21 (43,640) 1,628 Gross loss/profit (34,460) 53,646 Operating costs and expenses 8 (27,534) (8,887) Share based payment charge 22 (4,928) (1,938) Gain on hedging 7 1,695 - Operating loss/profit (65,227) 42,821 Fair value revaluation of variable consideration 25 4,038 236 Fair value loss/gain of investments 15 (328) 183 Loss on sale of subsidiary and investment 14 (44,804) (629) Loss on disposal of fixed assets 19 (18,779) - Finance costs 8 (18,321) (2,142) Other income 7 3,012 - Impairment of tangible fixed assets 19 (45,143) - Impairment of intangible assets 18 (4,168) - Equity accounted loss from associate 16 (4,872) (1,198) Loss/profit before taxation (194,592) 39,271 Tax credit/expense 13 361 (8,506) Loss/profit after taxation (194,231) 30,765 Other comprehensive income. Items which may be subsequently reclassified to profit or loss: Currency translation reserve 1,735 (410) Equity accounted OCI from associate 16 (6,571) 6,571 Fair value gains on intangible digital assets (414) 414 Total other comprehensive loss/income, net of tax (5,250) 6,575 Total comprehensive loss/income attributable to the equity holders of the Company (199,481) 37,340 Earnings per share attributable to equity owners (pence) Basic loss/earnings per share (40.98p) 7.7p Diluted loss/earnings per share (40.98p) 7.4p The income statement has been prepared on the basis that all operations are continuing operations. ARGO BLOCKCHAIN PLC. GROUP STATEMENT OF FINANCIAL POSITION As at 31 December 2022. As at 31 December 2021. Note £000 £000 ASSETS Non-current assets. Investments at fair value through profit or loss 15 344 403 Investments accounted for using the equity method 16 2,374 13,817 Intangible fixed assets 18 1,744 5,604 Property, plant and equipment 19 63,850 111,604 Right of use assets 19 435 350 Total non-current assets 68,747 131,778 Current assets. Trade and other receivables 20 5,641 63,359 Digital assets 21 368 80,759 Cash and cash equivalents 16,662 11,803 Total current assets 22,671 155,921 Total assets 91,418 287,699 EQUITY AND LIABILITIES Equity. Share Capital 23 478 468 Share Premium 23 143,748 139,581 Share based payment reserve 24 6,801 1,905 Fair value reserve 24 - 414 Currency translation reserve 24 1,768 33 Other comprehensive income of equity accounted associates 24 - 6,571 Accumulated surplus/loss 24 (141,393) 52,838 Total equity 11,402 201,810 Current liabilities. Trade and other payables 25 8,310 15,245 Contingent consideration 25 - 8,071 Loans and borrowings 26 9,624 23,391 Income tax 13 - 7,679 Deferred tax 13 2,196 286 Lease liability 4 7 Total current liabilities 20,134 54,679 Non-current liabilities. Deferred tax 13 6,586 541 Issued debt - bond 27 31,356 26,908 Loans 26 21,492 3,391 Lease liability 448 370 Total liabilities 59,882 85,889 Total equity and liabilities 91,418 287,699. ARGO BLOCKCHAIN PLC. The Group financial statements were approved by the Board of Directors on 28 April 2023 and authorised for issue; they are signed on its behalf by Seif El-Bakly, Chief Executive Officer (Interim). The accounting policies and notes on pages 69 to 109 form part of the financial statements. Registered number 11097258. ARGO BLOCKCHAIN PLC. COMPANY STATEMENT OF FINANCIAL POSITION As at December 2022. As at December 2021. Note £000 £000 ASSETS Non-current assets."
"Investment in subsidiaries 14 53,495 12,181 Investments at fair value through profit or loss 15 73 73 Investments accounted for using the equity method 16 2,374 13,817 Tangible fixed assets 18 1,821 - Total non-current assets 57,763 26,071 Current assets. Trade and other receivables 20 456 8,598 Intercompany receivable, net 20 8,572 175,859 Cash and cash equivalents 115 126 Total current assets 9,143 184,583 Total assets 66,906 210,654 EQUITY AND LIABILITIES Equity. Share Capital 23 478 468 Share Premium 23 143,748 139,581 Share based payment reserve 24 6,801 1,905 Other comprehensive income of equity accounted associates 24 - 6,571 Accumulated loss/surplus 24 (120,113) 18,986 Total equity 30,914 167,511 Current liabilities. Trade and other payables 25 4,636 8,164 Contingent consideration 25 - 8,071 Total current liabilities 4,636 16,235 Non-current liabilities. Loans and borrowings 26 31,356 26,908 Total liabilities 31,356 43,143 Total equity and liabilities 66,906 210,654. As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s total comprehensive loss for the year was £139.1m (2021: loss of £3.6m). The Group financial statements were approved by the board of directors on 28 April 2023 and authorised for issue; they are signed on its behalf by Seif El-Bakly, Chief Executive Officer (Interim). The accounting policies and notes on pages 69 to 109 form part of the financial statements. Registered number 11097258. ARGO BLOCKCHAIN PLC. GROUP STATEMENT OF CHANGES IN EQUITY. Share Capital. Share Premium. Currency translation reserve. Share based payment reserve. Fair Revaluation Reserve. Other comprehensive income of associates. Accumulated surplus/deficit. Total £000 £000 £000 £000 £000 £000 £000 £000 Balance at 1 January 2022 468 139,581 33 1,905 414 6,571 - 52,838 201,810 Total comprehensive income for the period: Profit for the period - - - - - - (194,231) (194,231) Other comprehensive income - - 1,735 - (414) (6,571) - (5,250) Total comprehensive income for the period - - 1,735 - (414) (6,571) (194,231) (199,481) Transactions with equity owners: Share capital issued 10 4,167 - - - - - 4,177 Share based payment charge - - - 4,928 - - - 4,928 Share options/warrants exercised - - - (32) - - - (32) Total transactions with equity owners 10 4,167 - 4,896 - - - 9,073 Balance at 31 December 2022 478 143,748 1,768 6,801 - - (141,393) 11,402. ARGO BLOCKCHAIN PLC. GROUP STATEMENT OF CHANGES IN EQUITY. Share Capital. Share Premium. Currency translation reserve. Share based payment reserve. Fair Revaluation Reserve. Other comprehensive income of associates. Accumulated surplus/deficit. Total £000 £000 £000 £000 £000 £000 £000 £000 Balance at 1 January 2021 304 1,540 443 75 - - 21,965 24,327 Total comprehensive income for the period: Profit for the period - - - - - 30,765 30,765 Other comprehensive income - - (410) - 414 6,571 - 6,575 Total comprehensive income for the period - - (410) - 414 6,571 30,765 37,340 Transactions with equity owners: Share capital issued 164 150,977 - - - - - 151,141 Issue costs of share capital - (12,936) - - - - - (12,936) Share based payment charge - - - 1,938 - - - 1,938 Share options/warrants exercised - - - (108) - - 108 - Total transactions with equity owners 164 138,041 - 1,830 - - 108 140,143 Balance at 31 December 2021 468 139,581 33 1,905 414 6,571 52,838 201,810. ARGO BLOCKCHAIN PLC. COMPANY STATEMENT OF CHANGES IN EQUITY. Share Capital. Share Premium. Share based payment reserve. Other comprehensive income of associates. Accumulated surplus/deficit. Total £000 £000 £000 £000 £000 £000 Balance at 1 January 2022 468 139,581 1,905 6,571 18,986 167,511 Total comprehensive income for the period: Loss for the period - - - - (139,098) (139,098) Other comprehensive income - - - (6,571) - (6,571) Total comprehensive income for the period - - - (6,571) (139,098) (146,830) Transactions with equity owners: Share capital issued 10 4,167 - - - 4,177 Share based payments charge - - 4,928 - - 4,928 Share options/warrants exercised - - - - Total transactions with equity owners 10 4,167 4,896 - - 9,073 Balance at 31 December 2022 478 143,748 6,801 - (120,112) 30,915. ARGO BLOCKCHAIN PLC. Share Capital. Share Premium. Share based payment reserve. Other comprehensive income of associates. Accumulated surplus/deficit."
"Total £000 £000 £000 £000 £000 £000 Balance at 1 January 2021 304 1,540 75 - 22,429 24,348 Total comprehensive income for the period: Loss for the period - - - - (3,551) (3,551) Other comprehensive income - - - 6,571 - 6,571 Total comprehensive income for the period - - - 6,571 (3,551) 3,020 Transactions with equity owners: Share capital issued 164 150,977 - - - 151,141 Issue costs of share capital - (12,936) - (12,936) Share based payments charge - - 1,938 - - 1,938 Share options/warrants exercised - - (108) - 108 - Total transactions with equity owners 164 138,041 1,830 - 108 140,143 Balance at 31 December 2021 468 139,581 1,905 6,571 18,986 167,511. ARGO BLOCKCHAIN PLC. GROUP STATEMENT OF CASH FLOWS Year ended December 2022. Year ended December 2021. Note £000 £000 Cash flows from operating activities. Loss/profit before tax (194,592) 39,271 Adjustments for: Depreciation/Amortisation 18, 19 23,449 11,511 Foreign exchange movements (17,250) 589 Loss on disposal of tangible assets 18,779 - Finance cost 18,321 2,142 Loss on sale of subsidiary and investment 14 44,804 629 Fair value change in digital assets through profit or loss 21 43,640 (1,628) Impairment of intangible digital assets 18 4,168 535 Impairment of property, plant and equipment 19 45,143 - Investment fair value movement 15 328 (183) Share of loss from associate 16 4,872 1,198 Non-cash settlement of management fees 8 - (1,561) Revaluation of contingent consideration 25 (4,038) (236) Derecognition of contingent consideration - (352) Hedging gain (1,695) - Share based payment expense 22 4,928 1,938 Working capital changes: Increase/decrease in trade and other receivables 20 (15,250) (13,628) Increase or decrease in trade and other payables 25 (83,021) 12,289 Decrease or increase in digital assets 21 36,751 (80,331) Net cash generated or used in from operating activities (70,663) (27,817) Investing activities Investment at fair value through profit or loss 15 - (220) Acquisition of subsidiaries, net of cash acquired 17 - (664) Cash disposed of on disposal of subsidiary 19 (1,357) - Investment in associate 16 - (7,353) Proceeds from sale of investment 15 - 772 Purchase of tangible fixed assets 19 (87,353) (78,972) Proceeds from disposal of tangible fixed assets 10,028 - Purchase of digital assets 21 - (15,009) Proceeds from sale of digital assets 21 84,225 11,308 Mining equipment prepayment - (47,426) Net cash generated from or used in investing activities 5,543 (137,564) Financing activities Increase or decrease in loans 78,418 22,239 Proceeds from issue of loan in conjunction with the disposal of subsidiary 14 8,033 - Lease payments (75) (7,379) Loan repayments - (1,196) Interest paid (18,321) (122) Proceeds from debt issue net of issue costs 26 - 26,908 Proceeds from shares issued net of issue costs 23 - 134,684 Net cash used in or generated from financing activities (68,055) 175,133 Net increase in cash and cash equivalents 2,935 9,752 Effect of foreign exchange on cash and cash equivalents 1,924 - Cash and cash equivalents at beginning of period 11,803 2,051 Cash and cash equivalents at end of period 16,662 11,803 Material non-cash movements The Group sold its Helios facility during the year, in exchange for paying down existing debt and obtaining new debt. See Note 19 for additional details. In March 2022, the Group entered into an agreement to exchange mining machines and terminate a hosting agreement. See Note 19 for additional details. Group net debt reconciliation Year ended 31 December 2022 Year ended 31 December 2021 £000 £000 Current loans and borrowings 26 (9,624) (23,391) Current lease liability (4) (7) Non-current issued debt bonds 26 (31,356) (26,908) Non-current loans and borrowings 26 (21,492) (3,391) Non-current liability lease (448) (370) Cash and cash equivalents 16,662 11,803 Total net debt (46,262) (42,264) The directors also consider their digital assets of £2.1 million (2021 - £80.7 million) as a liquid holding and as such net funds or debt would be £(44.2 million) (2021 - £65.4 million)."
"ARGO BLOCKCHAIN PLC COMPANY STATEMENT OF CASH FLOWS Year ended December 2022 Year ended December 2021 Note £000 £000 Cash flows from operating activities Loss before tax (138,633) (3,551) Adjustments for Share of loss from associate 4,872 1,198 Fair value adjustment on contingent consideration (4,038) (409) Foreign exchange movements (6,158) - Share based payment expense 4,928 1,938 Loss on disposal of investment in subsidiary 104,252 - Impairment of assets 15,120 - Working capital changes Increase or decrease in trade and other receivables 20 8,142 (8,411) Increase or decrease in trade and other payables 25 (3,328) 7,741 Net cash used in operating activities (14,843) (1,494) Investing activities Purchase of investments 8 - (7,353) Increase or decrease in loan to subsidiary 13 14,832 (154,075) Net cash used in or generated from investing activities 14,832 (161,428) Financing activities Proceeds from debt issue net of issue costs 26 - 26,908 Proceeds from shares issued net of issue costs - 134,684 Net cash generated from financing activities - 161,592 Net decrease or increase in cash and cash equivalents (11) (1,330) Cash and cash equivalents at beginning of period 126 1,456 Cash and cash equivalents at end of period 115 126 Company net debt reconciliation Year ended 31 December 2022 Year ended 31 December 2021 £000 £000 Non-current loans and borrowings 26 (31,356) (26,908) Cash and cash equivalents 115 126 Total net debt or asset (31,241) (26,782) ARGO BLOCKCHAIN PLC NOTES TO THE FINANCIAL STATEMENTS 1. COMPANY INFORMATION Argo Blockchain PLC the company is a public company limited by shares and incorporated in England and Wales. The registered office is Eastcastle House, 27-28 Eastcastle Street, London, W1W 8DH. The company was incorporated on 5 December 2017 as GoSun Blockchain Limited and changed its name to Argo Blockchain Limited on 21 December 2017. Also on 21 December 2017, the company re-registered as a public company, Argo Blockchain plc. Argo Blockchain plc acquired a 100% subsidiary, Argo Innovation Labs Inc. together the Group incorporated in Canada on 12 January 2018. On 4 March 2021 the Group acquired 100% of the share capital of DPN LLC and was merged into new US entity Argo Innovation Facilities US Inc also 100% owned by Argo Blockchain plc. On 11 May 2021 the Group acquired 100% of the share capital of 9377-2556 Quebec Inc and 9366-5230 Quebec Inc. These are held by Argo Innovation Labs Inc. Canada. On 22 November 2022, the Group formed Argo Operating US LLC and Argo Holdings US Inc. On 21 December 2022, Argo Innovation Facilities US Inc became Galaxy Power LLC. On 28 December 2022, the Group sold Galaxy Power LLC. The principal activity of the group is that of Bitcoin mining. The common shares of the Group are listed under the trading symbol ARB on the London Stock Exchange. The American Depositary Receipt of the Group are listed under the trading symbol ARBK on Nasdaq. The Group bond is listed on the Nasdaq Global Select Market under the trading symbol ARBKL. The financial statements cover the year ended 31 December 2022. 2. BASIS OF PREPARATION The financial statements have been prepared in accordance with UK adopted international accounting standards and with the requirements of the Companies Act 2006. The financial statements have been prepared under the historical cost convention, except for the measurement to fair value certain financial and digital assets and financial instruments as described in the accounting policies below. The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest thousand GBP. Argo Innovations Labs Inc., 9377-2556 Quebec Inc, and 9366-5230 Quebec Inc’s functional currency is Canadian Dollars; Argo Operating US LLC and Argo Holdings US Inc’s functional currency is United States Dollars; all entries from these entities are presented in the Group’s presentational currency of Sterling. Where the subsidiaries functional currency is different from the parent, the assets and liabilities presented are translated at the closing rate as at the Statement of Financial Position date. Income and expenses are translated at average exchange rates unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions."
"ARGO BLOCKCHAIN PLC Critical accounting judgments and key sources of estimation uncertainty The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty are disclosed in Note 6. 3. ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. Going Concern The preparation of consolidated financial statements requires an assessment on the validity of the going concern assumption. 2022 was a challenging year for Bitcoin miners: the depressed price of Bitcoin and the elevated global hashrate caused hashprice, the primary measure of mining profitability, to reach all-time lows in Q4 2022. In addition, global events resulted in disruption to fossil fuel energy markets which resulted in a significant increase in electricity prices. The low hashprice and elevated power prices significantly reduced Argo’s profitability and its ability to generate free cash flow. During Q4 2022, the Group evaluated several strategic alternatives to restructure our balance sheet and improve our cash flow. On 28 December 2022, the Group announced a series of transactions with Galaxy Digital Holdings Ltd. Galaxy that improved the Group’s liquidity position and enabled the Group to continue its mining operations. As part of the transactions, Argo sold the Helios facility and real property in Dickens County, Texas to Galaxy for £54 million and refinanced existing asset-backed loans via a new £29 million three-year asset-backed loan with Galaxy. The transactions reduced total indebtedness by £34 million and allowed Argo to simplify its operating structure. While the Galaxy transactions strengthened the Group’s balance sheet, material uncertainties exist that may cast significant doubt regarding the Group’s ability to continue as a going concern and meet its liabilities as they come due. The significant uncertainties are 1) The Group’s debt service obligations of approximately £22 million to 30 June 2024. Please see the net debt tables under the Group and Company cash flow statements for further information of the Group’s exposure to liabilities and net position at the year end. 2) The Group’s exposure to Bitcoin prices, power prices, and hashprice, each of which have shown volatility over recent years and have a significant impact on the Group’s future profitability. The Group may have difficulty meeting its liabilities if there are significant declines to the hashprice assumption or significant increases to the power price, particularly where there is a combination of both factors. The Directors’ assessment of going concern includes a forecast drawn up to 30 June 2024 using the Group’s estimate of the forecasted hashprice. Power costs are now also partially fixed per kilowatt hour as Galaxy has hedged the majority of the power obligations at Helios and as per the hosting agreement in place, the Group has access to this power. Anticipated power costs based on this arrangement are reflected in the forecast prepared. Offsetting these potential risks to the Group’s cash flow are the Group’s current cash balance, the Group’s ability to generate additional funds by issuing equity for cash proceeds and selling certain non-core Group assets. Based on information from Management, as well as independent advisors, the Directors have considered the period to 30 June 2024 as a reasonable time period given the variable outlook of cryptocurrencies and the Bitcoin halving due in May 2024. Based on the above considerations, the Board believes it is appropriate to adopt the going concern basis in the preparation of the Financial Statements. However, the Board notes that the significant debt service requirements and the volatile economic environment indicate the existence of material uncertainties that may cast significant doubt regarding the applicability of the going concern assumption and the auditors have made reference to this in their audit report. ARGO BLOCKCHAIN PLC Revenue and Other Income Recognition Mined income: The Group recognized revenue during the period in relation to mined crypto. The Group enters into contracts with the mining pool. The performance obligation is identified to be the delivery of crypto into the Group’s wallet once an algorithm has been solved. The transaction price is the fair value of crypto mined, being the fair value per the prevailing market rate for that cryptocurrency on the transaction date, and this is allocated to the number of crypto mined."
"These criteria for performance obligation are assessed to have occurred once the crypto has been received in the Group’s wallet. Mining earnings are made up of the baseline block reward and transaction fees of between 5% to 10%, however, these are bundled together in the daily deposits from mining and therefore are not capable of being analyzed separately. Management fees: The Group recognized management fees on the services provided to third parties for management of mining machines on their behalf, ensuring the machines are optimized and mining as efficiently as possible. The performance obligation is identified as the services are performed, and thus revenue is recorded over time. Other Income: The Group receives credits and or coupons for the purchase and use of Application Specific Integrated Circuits ASICs on a periodic basis for Bitcoin Mining. These credits are provided to the Group after it purchases ASICs based on the variance between the price paid by the Group versus the reduction in ASIC prices. The credits are transferable. The Group elects to sell the credits at the market rate to willing buyers upon receipt of the credits. Other income is recognized at the date the sale is completed. Derivative Contracts Hedging: In 2022, the Group used derivatives contracts in connection with some of its lending activities and its treasury management. Derivative contracts are susceptible to additional risks that can result in a loss of all or part of the investment. The Group’s derivative activities and exposure to derivative contracts are subject to interest rate risk, credit risk, foreign exchange risk, and macroeconomic risks. In addition, Argo is also subject to additional counterparty risks due to its potential inability of its counterparties to meet the terms of their contracts. The Group participates in both Future and Forward contracts as well as option contracts. Some of these derivatives are listed on exchange whereas some of these are traded over the counter. Basis of consolidation Subsidiaries are all entities including structured entities over which the Group has control. The Group controls an entity when the Group is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. The group consists of Argo Blockchain plc and its wholly owned subsidiaries Argo Innovation Labs Inc, Argo Operating US LLC and Argo Holdings US Inc., 9366-5230 and 9377-2556 and Argo Innovation Labs Ltd. Argo Innovation Labs Ltd has been dormant since incorporation. In the parent company financial statements, investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment. The consolidated financial statements incorporate those of Argo Blockchain plc and all of its subsidiaries i.e., entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits. Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes. On the basis that Argo Innovation Labs Limited was dormant during the year and is immaterial to the Group, it was not included in these consolidated financial statements. All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group. All intra-group transactions, balances and unrealized gains on transactions between group companies are eliminated on consolidation. ARGO BLOCKCHAIN PLC Business Combinations The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement."
"Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognizes any non-controlling interest in the acquiree on an acquisition by acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets. Acquisition related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss. Contingent consideration is classified either as equity or as a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognized in profit or loss. Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income is reclassified to profit or loss where appropriate. The Group’s share of post-acquisition profit or loss is recognized in the income statement, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount adjacent to share of profit or loss of associates in the income statement. Gains and losses resulting from upstream and downstream transactions between the Group and its associate are recognized in the Group’s financial statements only to the extent of unrelated investors’ interests in the associates. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments in associates are recognized in the income statement. Segmental reporting operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the CEO or equivalent. The directors consider that the Group has only one significant reporting segment being crypto mining which is fully earned by a Canadian and USA subsidiary for the financial year ended 31 December 2022. Loans and issued debt are recognized initially at fair value, net of transaction costs incurred. Loans and issued debt are subsequently carried at amortized cost; any difference between the proceeds and the redemption value is recognized in the income statement over the period of the borrowings, using the effective interest method. Loans and issued debt are removed from the statement of financial position when the obligation specified in the contract is discharged, canceled, or expired. Loans and borrowings and issued debt are classified as current liabilities unless the Group has an unconditional right to defer settlement of a liability for at least 12 months after the end of the reporting period. Intangible fixed assets comprise of the Group’s website and digital assets that were not mined by the Group and are held by Argo Labs as investments. The Group’s website is recognized at cost and is subsequently measured at cost less accumulated amortization and accumulated impairment losses. Amortization is recorded within administration expenses."
"Digital assets recorded under IAS 38 have an indefinite useful life initially measured at cost, and subsequently measured at fair value. Argo’s primary business is focused on cryptocurrency mining. Argo Labs is an in-house innovation arm focused on identifying opportunities within the disruptive and innovative sectors of the broader cryptocurrency ecosystem. Argo Labs uses a portion of Argo’s crypto assets to deploy into various blockchain projects. Increases in the carrying amount arising on revaluation of digital assets are credited to other comprehensive income and shown as other reserves in shareholders’ equity. Decreases that offset previous increases of the same asset are charged in other comprehensive income and debited against the fair value reserve directly in equity; all other decreases are charged to the income statement. The fair value of intangible cryptocurrencies on hand at the end of the reporting period is calculated as the quantity of cryptocurrencies on hand multiplied by the price quoted on www.coingecko.com, one of the leading crypto websites, as at the reporting date. Costs relating to the development of the website are capitalized once all the development phase recognition criteria of IAS 38 ""Intangible Assets"" are met. Amortization is charged on a straight-line basis over the estimated useful life of 5 years. The useful life represents management's view of the expected period over which the Group will receive benefits from the website, as well as anticipation of future events which may impact their useful life, such as changes in technology. Goodwill is initially measured at cost, being the excess of the consideration transferred and the amount recognized for non-controlling interests and any previous interest held of the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the difference is recognized in profit or loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognized in profit or loss. Tangible fixed assets comprise of right of use assets, office equipment, mining and computer equipment, data centers, leasehold improvements, and electrical equipment. Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of the right of use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right of use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. Office equipment assets are measured at cost, less any accumulated depreciation and impairment losses. Office equipment is depreciated over 3 years on a straight-line basis. Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of amortization and any impairment losses. Cost includes the original purchase price of the asset and any costs attributable to bringing the asset to its working condition for its intended use. An item of property, plant, and equipment is recognized as an asset if it is probable that future economic benefits associated with the asset will flow to the entity, and the cost of the asset can be measured reliably. Depreciation on the data centers is recognized so as to write off the cost or valuation of assets less their residual values over their estimated useful lives of 25 years on a straight-line basis from when they are brought into use. Depreciation is recorded in the income statement within general administrative expenses once the asset is brought into use. Any land component is not depreciated. Mining and computer equipment and leasehold improvements: Depreciation is recognized so as to write off the cost or valuation of assets less their residual values over their estimated useful lives. It is 3 to 4 years in the case of mining and computer equipment and 5 years in the case of the leasehold improvements, on a straight-line basis. Depreciation is recorded in the statement of comprehensive income within direct costs. Electrical equipment: Depreciation is recognized on a straight-line basis to write off the cost less their residual values over their estimated useful lives of 3 years. Management assesses the useful lives based on historical experience with similar assets as well as anticipation of future events which may impact their useful life."
"At each reporting period end date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Group and Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Digital assets consist of mined bitcoin and do not qualify for recognition as cash and cash equivalents or financial assets and have an active market which provides pricing information on an ongoing basis. The Group has assessed that it acts in a capacity as a commodity broker-trader as defined in IAS 2, Inventories, in characterizing its holding of digital assets as inventory. If assets held by commodity broker-traders are principally acquired for the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’ margin, such assets are accounted for as inventory, and changes in fair value, less costs to sell, are recognized in profit or loss. Digital assets are initially measured at fair value. Subsequently, digital assets are measured at fair value with gains and losses recognized directly in profit or loss. Digital assets are included in current assets as management intends to dispose of them within 12 months of the end of the reporting period. Digital assets are cryptocurrencies mined by the Group. Cryptocurrencies not mined by the Group are recorded as intangible assets. Cash and cash equivalents comprise cash at bank and in hand and demand deposits with banks and other financial institutions that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. The Group considers the credit risk on cash and cash equivalents to be limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. Financial assets are recognized in the statement of financial position when the Group becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories. The classification depends on the nature and purpose of the financial assets and is determined at the time of recognition. Financial assets are subsequently measured at amortized cost, fair value through other comprehensive income, or fair value through profit and loss. The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. The Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. In order for a financial asset to be classified and measured at amortized cost, it needs to give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. For purposes of subsequent measurement, financial assets are classified in four categories: financial assets at amortized cost, financial assets at fair value through other comprehensive income with recycling of cumulative gains and losses, financial assets designated at fair value through other comprehensive income with no recycling of cumulative gains and losses upon derecognition, and financial assets at fair value through profit or loss. The Group subsequently measures all equity investments at fair value. Dividends from such investments continue to be recognized in profit or loss as other income when the Group’s right to receive payments is established. Changes in the fair value of financial assets at fair value through profit or loss are recognized in other gains or losses in the statement of profit or loss as applicable."
"The Group measures financial assets at amortized cost if both of the following conditions are met: the financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortized cost are subsequently measured using the effective interest rate method and are subject to impairment. Interest received is recognized as part of finance income in the statement of profit or loss and other comprehensive income. Gains and losses are recognized in profit or loss when the asset is derecognized, modified, or impaired. The Group’s financial assets at amortized cost include other receivables and cash and cash equivalents. A financial asset is primarily derecognized when the rights to receive cash flows from the asset have expired or the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either the Group has transferred substantially all the risks and rewards of the asset, or the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognize the transferred asset to the extent of its continuing involvement. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. The Group recognizes an allowance for expected credit losses for all debt instruments not held at fair value through profit or loss. Expected credit losses are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. The Group recognizes an allowance for expected credit losses for all debt instruments not held at fair value through profit or loss. Expected credit losses are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, expected credit losses are provided for credit losses that result from default events that are possible within the next 12 months. For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default. For the years ended 31 December 2022 and 2021, the Group has not recognized any expected credit losses. For other receivables due in less than 12 months, the Group applies the simplified approach in calculating expected credit losses, as permitted by IFRS 9. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on the financial asset’s lifetime expected credit loss at each reporting date. The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity."
"At each reporting date, the Group assesses whether financial assets carried at amortized cost are credit impaired. A financial asset is credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. The Company has an intercompany loan due from its 100% Canadian subsidiary for which there is no formal agreement including payment date and therefore it cannot be considered to be in breach of an agreement and accordingly the loan is not subject to adjustments and is maintained at its book value in the financial statements. Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables and loans. After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortized cost using the effective interest rate method. Gains and losses are recognized in the statement of profit or loss and other comprehensive income when the liabilities are derecognized, as well as through the effective interest rate amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortization is included as finance costs in the statement of profit or loss and other comprehensive income. This category generally applies to trade and other payables. A financial liability is derecognized when the associated obligation is discharged or canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in profit or loss or other comprehensive income. Equity instruments issued by the Group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognized as liabilities once they are no longer at the discretion of the Group. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16. The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case, the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate."
"The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased. The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Taxation The tax expense represents the sum of tax currently payable or receivable and deferred tax. Current tax: The tax currently payable or receivable is based on taxable profit or loss for the year. Taxable profit or loss differs from net profit or loss as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date. Deferred tax: Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Deferred income tax assets are recognized on deductible temporary differences arising from investments in subsidiaries, associates, and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realized. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority. Employee benefits The costs of short-term employee benefits are recognized as a liability and an expense unless those costs are required to be recognized as part of non-current assets. The cost of any unused holiday entitlement is recognized in the period in which the employee’s services are received. Termination benefits are recognized immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits. The Group does not have any pension schemes. Share-based payments Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black-Scholes model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity. When the terms and conditions of equity settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognized over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value. Cancellations or settlements are treated as an acceleration of vesting and the amount that would have been recognized over the remaining vesting period is recognized immediately."
"As a result of the increase in share price and the impact of the estimation of share-based payments, the Group has now recognized an expense for the outstanding share options and warrants. Foreign exchange Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are determined in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the income statement for the period. At each reporting end date, non-monetary assets and liabilities that are determined in foreign currencies are retranslated at the rates prevailing on the opening balance sheet date. Gains and losses arising on translation of subsidiary undertakings are included in other comprehensive income and contained within the foreign currency translation reserve. Earnings per share Basic earnings per share is calculated by dividing the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding, assuming the conversion of all dilutive potential ordinary shares. Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk, credit risk, and liquidity risk. The Group’s overall risk management program seeks to minimize potential adverse effects on the Group’s financial performance. Risk management is undertaken by the Board of Directors. Market risk The Group is dependent on the state of the cryptocurrency market, sentiments of crypto assets as a whole, as well as general economic conditions and their effect on exchange rates, interest rates, and inflation rates. During the year, the Group sold its digital assets held at 31 December 2021 at a significant loss. The Group now sells its Bitcoin production as it is mined to reduce the impact of Bitcoin prices. The Group is also subject to market fluctuations in foreign exchange rates. The subsidiary Argo Innovation Labs Inc. is based in Canada and transacts in CAD, USD, and GBP. 9377-2556 Quebec Inc. and 9366-5230 Quebec Inc. are based in Canada and transact in CAD. Argo Innovations Facilities (US) Inc., Argo Holdings US Inc., and Argo Operating US LLC are located in the United States of America and transact in USD. The Group bond is denominated in USD. Cryptocurrency is primarily convertible into fiat through USD currency pairs and through USD denominated stable coins and is the primary method for the Group for conversion into cash. The Group maintains bank accounts in all applicable currency denominations. Foreign currency sensitivity The following tables demonstrate the sensitivity to a reasonable possible change in USD and CAD exchange rates, with all other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities. Change in USD rate Effect on profit before tax Effect on pre-tax equity 2022 +/-10% +/-4,302 - 2021 +/-10% +/-250 +/-87 Change in CAD rate Effect on profit before tax Effect on pre-tax equity 2022 +/-10% +/-1,471 - 2021 +/-10% +/-1,611 +/-3,208 Interest rate sensitivity The following table demonstrates the sensitivity to a reasonable possible change in interest rates on the portion of the loans and borrowings affected. With other variables held constant, the impact on the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows. Increase/decrease in basis points Effect on profit before tax 2022 +/-180 +/-522 2021 0% +/-0 Credit risk Credit risk arises from cash and cash equivalents as well as any outstanding receivables. Management does not expect any losses from non-performance of these receivables. The amount of exposure to any individual counterparty is subject to a limit, which is assessed by the Board. The Group considers the credit risk on cash and cash equivalents to be limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies."
"However, the banking sector is not currently favorable toward crypto-based businesses in all of the jurisdictions that the Group operates and as such the Group has opened accounts with a number of Tier 2 banks in order to mitigate the risk of an account being deactivated or closed by the bank. Management continues to assess various opportunities to partner with FDIC-insured banks and or financial institutions. The Company considers the intercompany loan to its subsidiary Argo Innovation Labs Inc. to be fully recoverable based on review of projected cash flows and acceptance of regular payments directly to the Company’s creditors. The carrying amount of financial assets recorded in the financial statements represents the Group’s and Company’s maximum exposure to credit risk. The Group and Company do not hold any collateral or other credit enhancements to cover this credit risk. Liquidity risk Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. Management updates cash flow projections on a regular basis and closely monitors the cryptocurrency market on a daily basis. Accordingly, the Group’s controls over expenditure are carefully managed in order to maintain its cash reserves. The Treasury committee meets on a weekly basis to make decisions around future cash flows and working capital requirements. Decisions may include considering debt/equity options alongside selling Bitcoin. The table below analyzes the Group’s non-derivative financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings, based on the remaining period at the Statement of Financial Position to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows. The Group complied with all covenants during the year and through to the reporting date. Less than 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years At 31 December 2022 Loans 9,624 11,314 10,178 - Lease liabilities 4 8 12 424 Issued debt – bonds - - 31,356 - At December 2021 Loans 23,901 2,188 693 - Lease liabilities 21 42 63 251 Issued debt – bonds - - 26,908 - Capital risk management The Group’s objectives when managing capital is to safeguard the Group’s ability to continue as a going concern, in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, or issue new shares. The Group carefully monitors its EBITDA vs. debt, net assets vs. debt, and market capitalization vs. debt ratios. Adoption of new and revised standards and interpretations The Group has adopted all recognition, measurement, and disclosure requirements of IFRS, including any new and revised standards and Interpretations of IFRS, in effect for annual periods commencing on or after 1 January 2022. The adoption of these standards and amendments did not have any material impact on the financial result or position of the Group. At the date of authorization of these financial statements, the following Standards and Interpretation, which have not yet been applied in these financial statements, were in issue but not yet effective: Standard or Interpretation Description Effective date for annual accounting period beginning on or after IAS 1 Amendments – Presentation and Classification of Liabilities TBC IFRS 16 Amendments – Lease liability in a sale and leaseback TBC IAS 1 Amendments – Disclosure of Accounting Policies 1 January 2023 IAS 8 Amendments – Definition of Accounting Estimates 1 January 2023 IAS 12 Amendments – Deferred Tax related to Assets and Liabilities arising from a Single Transaction 1 January 2023 IAS 17 Amendments – Insurance Contracts 1 January 2023 The Group has not early adopted any of the above standards and intends to adopt them when they become effective. Key judgments and estimates In the application of the Group’s accounting policies, the directors are required to make judgments, estimates, and assumptions about the carrying amount of Total revenue 47,363 74,204. Due to the nature of cryptocurrency mining, it is not possible to provide a geographical split of the revenue stream. Cryptocurrency mining revenues are recognized at a point in time. Cryptocurrency management fees are services recognized over time."
"Other income: Argo held 2,441 Bitcoin (fair valued at £80 million as at 31 December 2021) on its balance sheet at the beginning of 2022. The group used up to 1,504 Bitcoins as collateral with Galaxy Digital LP for a short-term payable on demand loan of USD 30 million (£22.2 million) taken out on December 23, 2021. To protect its Bitcoin holdings used as collateral for the loan and reduce overall exposure, Argo took positions in the markets which resulted in a net hedge gain of £1.7 million for 2022. 2022 2021 Gain on hedging £000 £000 Gain on hedging 1,695 - Total gain on hedging 1,695 - ARGO BLOCKCHAIN PLC 85 8. Expenses by nature 2022 2021 Direct costs £000 £000 Depreciation of mining hardware 16,549 11,129 Hosting and other costs 21,634 11,057 Total direct costs 38,183 22,186 2022 2021 Administrative expenses £000 £000 Legal, professional, and regulatory fees 12,763 1,533 Salary and other employee related costs 9,610 2,662 Depreciation and amortization 6,900 382 Insurance 6,027 1,408 Indirect taxes 3,684 - Freight, postage and delivery 1,314 - Consulting fees 828 684 Repairs and maintenance 863 692 Office general expenses 840 424 Travel 678 128 Public relations and associated activities 519 699 Impairment of intangible assets - 535 Hedging costs - 326 Carbon credits - 252 Audit fees 310 239 Bank charges 240 247 Capital loss 116 - Research costs 91 - Write off of variable contingent consideration - (352) Settlement re crypto mining management fees - (1,561) Foreign exchange gain (loss) (17,250) 589 Total operating costs and administrative expenses 27,533 8,887 2022 2021 Finance costs £000 £000 Interest on loans, including associated prepayment penalties 18,321 2,142 Total finance costs 18,321 2,142 9. Auditor’s remuneration 2022 2021 £000 £000 In relation to statutory audit services 251 170 Other audit assurance services 59 52 Total auditor’s remuneration 310 222 ARGO BLOCKCHAIN PLC 86 10. Employees The average monthly number of persons (including directors) employed by the group during the period was: 2022 2021 Number Number Directors and employees 82 26 Their aggregate remuneration comprised: 2022 2021 £000 £000 Wages and salaries 8,934 2,286 Social security costs 646 199 Pension costs 30 25 Share based payments 4,928 1,392 14,538 3,902 The average monthly number of persons (including directors) employed by the company during the period was: 2022 2021 Number Number Directors and employees 6 4 Their aggregate remuneration comprised: 2022 2021 £000 £000 Wages and salaries 1,072 406 Social security costs 44 8 Pension costs 12 1 Share based payments 4,928 330 6,056 745 ARGO BLOCKCHAIN PLC 87 11. Director’s remuneration 2022 2021 £000 £000 Director’s remuneration for qualifying services 1,284 856 Senior management loss of office - 132 Share based payments 1,522 431 Total remuneration for directors and key management 2,806 1,419 The amounts above are remunerated through both salaries (of which some are included in 10) and through service companies (as disclosed in note 29). Further details of directors’ remuneration are available in the remuneration report. The highest paid director during the year earned £588,000 (2021: £455,000). 12. Earnings per share The basic earnings per share is calculated by dividing the profit or loss attributable to equity shareholders by the weighted average number of shares in issue. The group and company has in issue 18,698,304 warrants and options at 31 December 2022 (2021: 17,688,897). 2022 2021 Net profit or loss for the period attributable to ordinary equity holders from continuing operations (£000) (194,321) 30,765 Weighted average number of ordinary shares in issue (‘000) 473,930 397,513 Basic earnings or loss per share for continuing operations (pence) (40.98) 7.7 Net profit or loss for the period attributable to ordinary equity holders for continuing operations (£000) (194,321) 30,765 Diluted number of ordinary shares in issue (‘000) 473,930 415,201 Diluted earnings or loss per share for continuing operations (pence) (40.98) 7.4 The diluted loss per ordinary share is calculated by adjusting the weighted average number of ordinary shares outstanding to consider the impact of options, warrants, and other dilutive securities. As the effect of potential dilutive ordinary shares in the current year would be anti-dilutive, they are not included in the above calculation of dilutive earnings per ordinary share for 2022. ARGO BLOCKCHAIN PLC 88 13."
"Taxation Current tax: 2022 £000 2021 £000 Current tax on loss or profit for the year (8,316) 7,679 Adjustments in respect of prior periods - - Total current tax (8,316) 7,679 Deferred tax: 2022 £000 2021 £000 Origination and reversal of temporary differences 7,955 827 Total deferred tax liability 7,955 827 Total tax credit or charge (361) 8,506 No deferred tax has been recognized on the losses brought forward and carried forward on the UK, Canada, and US losses given the uncertainty on the generation of future profits. Income tax expense The tax on the group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows: 2022 2021 £000 £000 Profit or loss before taxation (194,592) 39,271 Expected tax charge or recovery based on a weighted average of 25% (2021 - 25%) (UK, US, and Canada) (48,648) 9,746 Effect of expenses not deductible in determining taxable profit 26,406 1,779 Capital allowances in excess of depreciation 6,848 (3,770) Other tax adjustments 205 (137) Other timing differences - (385) Origination and reversal of temporary differences (827) 827 Unutilized tax losses carried forward 15,655 445 Taxation charge in the financial statements (361) 8,506 The group has tax losses available to be carried forward and used against trading profits arising in future periods of approximately £34,000,000 (2021 - £10,476,000). ARGO BLOCKCHAIN PLC 89 The weighted average applicable tax rate was 25% (2021: 25%). The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: Deferred tax liabilities 2022 £000 2021 £000 Digital assets (286) 286 Gain on fair value of property acquired (see note 17) 442 442 Share of other comprehensive income of associates - 99 Property, plant, and equipment 8,626 - Total deferred tax 8,782 827 Current portion 2,196 286 Non-current 6,586 541 A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, Her Majesty’s Revenue and Customs, the IRS, or another tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid between our affiliated companies pursuant to our intercompany arrangements and transfer pricing policies, including amounts paid with respect to our intellectual property development. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions. 14. Investment in subsidiaries and loss on sale of subsidiary Company Details of the company’s subsidiaries at 31 December 2022 and 31 December 2021 are as follows: Name of undertaking Country of incorporation Ownership interest (%) Voting power held (%) Nature of business Argo Innovation Labs Inc. Canada 100% 100% Argo Innovation Labs Limited UK 100% 100% Dormant Argo Innovation Facilities (US) Inc. USA 100% 100% 9377-2556 Quebec Inc. Canada 100% 100% 9366-5230 Quebec Inc. Canada 100% 100% Argo Holdings US Inc. USA 100% 100% Argo Operating US LLC USA 100% 100% The provision of cryptocurrency mining services The provision of cryptocurrency mining sites Converted from the provision of cryptocurrency mining services to cost center in 2022 Holding company ARGO BLOCKCHAIN PLC 90 Investment in subsidiaries 2022 £000 2021 £000 At 1 January 12,181 - Additions 53,494 12,181 Disposals (12,181) - At 31 December 53,494 12,181 The cost of the investment above is in respect of the DPN LLC acquisition further detail can be found in note 19. 9377-2556 Quebec Inc. and 9366-5230 Quebec Inc. are the GPUone subsidiaries acquired on 11 May 2021 with registered addresses of 8 Avenue William Dobell, Baie-Comeau, Quebec G4Z 1T7 and 10205 Irene Vachon, Mirabel, Quebec J7N 3E3 respectively. More information on this acquisition can be found in note 17. Argo Holdings US Inc. was incorporated on November 22, 2022, with a registered office of 1209 Orange Street, Wilmington, Delaware, USA, 19801. The company contributed shares in Argo Innovation Facilities (US) valued at £53.5 million. Argo Operations US LLC was formed on November 22, 2022, with a registered office of 1209 Orange Street, Wilmington, Delaware, USA, 19801. Argo Innovation Facilities (US) Inc. was incorporated on 25 February 2021 with a registered address of 2028 East Ben White Blvd, Austin, TX 78740. This entity held the Helios facility and real property in Dickens County, Texas."
"On 21 December 2022, Argo Innovation Facilities (US) Inc. was converted to Galaxy Power LLC. Galaxy Power LLC was sold on 28 December 2022 pursuant to an equity purchase agreement. The proceeds received for the sale were £53.0 million against a book value of £97.8 million resulting in a loss on sale for the group of £44.8 million. The effects of the disposal of Galaxy Power LLC on the cash flows of the group were: Group At 28 December 2023 £000 Carrying amounts of assets and liabilities as at the date of disposal: Cash and bank balances 1,357 Property, plant and equipment 104,888 Trade and other debtors 297 Total assets 106,542 Trade and other creditors 9,764 Total liabilities 9,764 Net assets disposed of 96,778 Cash flows arising from disposal: Proceeds used to pay down existing debt 45,298 Proceeds used for new loans 6,676 Total proceeds 51,974 Net assets disposed of (as above) 96,778 Loss on disposal (44,804) ARGO BLOCKCHAIN PLC 91 15. Investments at fair value through profit or loss Non-current group 2022 £000 2021 £000 At 1 January 403 1,393 Foreign exchange movement 20 - Additions 249 219 Fair value through profit or loss (328) 183 Disposals - (1,392) At 31 December 344 403 16. Investments accounted for using the equity method 2022 2021 £000 £000 Opening balance 13,817 - Acquired during the period - 8,444 Share of loss (4,872) (1,198) Share of fair value losses or gains on intangible assets through other comprehensive income (6,571) 6,571 Closing balance 2,374 13,817 Set out below are the associates of the group as at 31 December 2022, which, in the opinion of the directors, significant influence is held. The associate as listed below has share capital consisting solely of ordinary shares, which are held directly by the group. The country of incorporation or registration is also their principal place of business. Nature of investment in associates: Name of entity Address of the registered office % of ownership interest Nature of relationship Measurement method Emergent Entertainment PLC (Previously Pluto Digital PLC) Hill Dickinson LLP, 8th Floor The Broadgate Tower, 20 Primrose Street, London, United Kingdom, EC2A 2EW 19.94% Refer below Equity On 3 February 2021, Argo invested in Pluto Digital PLC, a crypto venture capital and technology company. The investment was satisfied with 75,000 Polkadot with a fair value at that date of £1.1 million. Further to this in a second round of funding, the group invested an additional £7.4 million on 8 March 2021. In addition, Argo holds 121,666,666 warrants at a price of £0.12 each and 35,450,000 warrants at a price of £0.06 each. If Pluto was fully diluted, Argo’s ownership would be 33.26% as at 31 December 2022 including the exercise of the share warrants. The warrants expired unexercised in February and March 2023. In October 2022, Pluto merged with Maze Theory to become Emergent Entertainment PLC. ARGO BLOCKCHAIN PLC 92 Argo owns 19.94% (2021 - 24.65%) of the total share capital and voting rights of the business. The group retains the right to appoint a board member from Argo on Emergent’s board based on its current ownership percentage. Emergent Entertainment PLC is a next-generation entertainment company that brings storytellers and their audiences closer together by harnessing new technologies including virtual reality, augmented reality, artificial intelligence, and blockchain. Emergent Entertainment is a private company and there is no quoted market price available for its shares. There are no contingent liabilities relating to the group’s interest in the associates. The audited financial information for the period ended 30 September 2021, together with the unaudited management accounts for the period from 1 October 2021 to 31 December 2022, have been made available by Emergent to the group and the figures in the above represent Argo’s share of the loss for the period and movements in the fair value of net assets (net of deferred tax). Summarised financial information for associates Set out below is the preliminary, unaudited financial information for Emergent Entertainment PLC which is accounted for using the equity method."
"Summarised statement of financial position Current As at December 31, 2022 £000 As at December 31, 2021 £000 Cash and cash equivalents 2,964 1,759 Other current assets (excluding cash) 3,650 335 Total current assets 6,614 2,094 Trade payables 280 88 Other current liabilities 74 1,494 Total current liabilities 354 1,582 Non-current Tangible fixed assets 106 49 Investments and other non-current assets 11,596 56,000 Total non-current assets 11,702 56,049 Financial liabilities 4,809 2,807 Total non-current liabilities 4,809 2,807 Net assets 13,153 53,754 ARGO BLOCKCHAIN PLC 93 Summarised statement of comprehensive income, Emergent Entertainment PLC 2022 January 12 to December 31, 2021 £000 £000 Revenue 352 - Cost of sales (224) - Gross profit 128 - Operating costs (12,088) 7,652 Revaluation loss – digital assets (12,810) (2,394) Loss from operations (24,770) 5,258 Non-operating costs - Income tax expense recovery 2,579 575 Post-tax loss (22,400) 4,867 Other comprehensive income (26,991) 26,991 Total comprehensive income loss (49,391) 21,824 The information above reflects the amounts presented in the financial statements of the associate and not Argo Blockchain Plc’s share of those amounts adjusted for differences in accounting policies between the Group and the associate. Reconciliation of summarised financial information 2022 £000s 2021 £000s Summarised financial information as adjusted Net assets opening 56,052 - Acquired during the period - 34,228 Profit loss for the period (22,400) (4,867) Other comprehensive income (26,991) 26,691 Closing net assets 6,661 56,052 Interest in associates 2022 19.94% 2021 24.65% 2,374 13,818 Goodwill - - Carrying value 2,374 13,818 The percentage share of the associate profit or loss for the year was calculated and recorded on a month by month basis based on the movements in the percentage ownership from the unaudited management accounts. ARGO BLOCKCHAIN PLC 94 17. BUSINESS COMBINATION GPUone subsidiaries acquired from GPUone Holding Inc. On 11 May 2021, the Group acquired 100% of the share capital of GPUone 9377 2556 Quebec Inc. and GPUone 9366 5230 Quebec Inc. from its shareholder GPUone Holding Inc. for a total consideration of £5.5m consisting of £212k being satisfied in cash and the balance satisfied by the cancellation of certain prepayments and deposits previously paid by Argo to the vendor. Each of these acquired entities owned and operated a data centre within which Argo was the lead tenant. The acquisition was performed to enable the Group to obtain control of its hosting facility and power costs across its facilities in Canada. From acquisition on 11 May 2021 to 31 December 2021 the GPUone subsidiaries loss amounted to £3.4m which is fully consolidated. No revenue has been generated from these entities since acquisition, however both entities have provided hosting services to Argo Innovation Labs Inc. Both GPUone entities were dormant up until the date of acquisition when the relevant assets and liabilities acquired were transferred by GPUone Holding Inc. to these entities immediately prior to acquisition. There is no difference between the amount consolidated within profit and loss and the amount which would have been consolidated if the acquisition happened on 1 January 2021. The consideration was negotiated on an arm’s length basis and primarily on the basis of the valuation of the land and buildings being acquired. The directors attribute the consideration as fair value of the land and buildings with no goodwill being recognised as currently Argo does not anticipate hosting any third parties at these sites in the medium term. The fair values of the acquisition date assets and liabilities together with any separately identifiable intangible assets have been provisionally determined at 30 September 2021 because the acquisition was completed late in the period. The Group is currently obtaining the information necessary to finalise its valuation. On a £1 for £1 basis certain deposits and other receivables totalling £668k were acquired. The directors consider these amounts fully recoverable and as such these receivables have not been impaired. Liabilities assumed are incorporated at their cost. The following table summarises the consideration paid for the GPUone subsidiaries and the fair value of assets acquired and liabilities assumed at the acquisition date: Consideration £000 Cash 213 Payment for deposits 668 Cancellation of prepayment and deposits 4,656 Total consideration 5,537 Recognised amounts of identifiable assets acquired and liabilities assumed £000 Cash and cash equivalents 4 Property plant and equipment 10,779 Trade and other receivables 387 Trade and other payables (326) Property mortgages (5,010) Lease liability (377) Goodwill 80 Total 5,537 Fair value of assets acquired was assessed in line with independent valuations provided by CBRE of the sites."
"Given the continued demand for power sites and data centres in North America the Directors consider the valuations to be prudent, however they are still in line with the fair value and consideration paid for the entities primarily for Argo to gain access to the low cost of power and direct control of management of the miners at those sites. No acquisition costs have been recognised in the above calculations. ARGO BLOCKCHAIN PLC 95 18. INTANGIBLE FIXED ASSETS Group Goodwill Digital assets Website 2022 Total £000 £000 £000 £000 Cost At 1 January 2022 80 5,303 671 6,054 Additions - 1,728 - 1,728 Disposals - (2,058) - (2,058) At 31 December 2022 80 4,973 671 5,724 Amortisation and impairment At 1 January 2022 - 121 450 571 Foreign exchange movement (1,413) (18) (1,431) Fair value movement 4,601 - 4,601 Amortisation charged during the period - - 147 147 At 31 December 2022 - 3,309 579 3,888 Balance At 31 December 2022 80 1,664 92 1,836 Group Goodwill Digital assets Website 2021 Total £000 £000 £000 £000 Cost At 1 January 2021 - - 671 671 Additions 80 18,216 - 18,296 Disposals - (12,792) - (12,792) At 31 December 2021 80 5,424 671 6,175 Amortisation and impairment At 1 January 2021 - - 303 303 Foreign exchange movement - - 9 9 Impairment - 535 - 535 Fair value gain (414) - (414) Amortisation charged during the period - - 138 138 At 31 December 2021 0 121 450 571 Balance At 31 December 2021 80 5,303 221 5,604 Digital assets are cryptocurrencies not mined by the Group. The Group held crypto assets during the year which are recorded at cost on the day of acquisition. Movements in fair value between acquisition date mined and disposal date sold and the movement in fair value in crypto assets held at the year end impairment of the intangible assets and any increase in fair value are recorded in the fair value reserve. The digital assets held below are held in Argo Labs as discussed above. The assets are all held in secure custodian wallets controlled by the Group team and not by individuals within the Argo Labs team. The assets detailed below are all accessible and liquid in nature. ARGO BLOCKCHAIN PLC 96 As at 31 December 2022 Crypto asset name Coins tokens Fair value £000 BTC 23 332 Polkadot DOT 32,964 118 Ethereum ETH 698 519 USDC stable coin fixed to USD 58,151 48 Alternative coins - 647 As at 31 December 2022 1,664 ARGO BLOCKCHAIN PLC 97 19."
"TANGIBLE FIXED ASSETS Group Right of use Assets Office Equipment Mining and Computer Equipment Machine components Assets Under Construction Leasehold Improvements Data centres Equipment Total £000 £000 £000 £000 £000 £000 £000 £000 £000 Cost At 1 January 2022 358 49 58,499 - 61,306 85 10,466 - 130,763 Foreign exchange movement cost 17 - 2,744 - 7,287 4 560 - 10,612 Additions 75 - 116,520 17,364 - 7 - 86 134,053 Transfers to another class cost - - - - (68,593) - 68,593 - - Disposals - (2) (60,083) - - (68,593) - (128,678) At 31 December 2022 450 47 117,680 17,364 - 96 11,026 86 146,749 Depreciation and impairment At 1 January 2022 8 - 18,507 - - 65 229 - 18,809 Foreign exchange movement - - 868 - - 3 11 - 882 Depreciation charged during the period 7 14 16,549 - - 19 6,846 12 23,448 Impairment in asset - - 29,797 15,121 - - 225 - 45,143 Disposals - - - - - - (5,817) - (5,817) At 31 December 2022 15 14 65,721 15,121 87 1,494 12 82,464 Carrying amount At 1 January 2022 350 49 39,992 - 61,306 20 10,237 - 111,954 At 31 December 2022 435 33 51,959 2,244 - 9 9,532 74 64,285 ARGO BLOCKCHAIN PLC 98 Group Right of use Assets Office Equipment Mining and Computer Equipment Assets Under Construction Leasehold Improvements Data centres Total £000 £000 £000 £000 £000 £000 £000 Cost At 1 January 2021 7,379 - 17,865 - 85 - 25,329 Foreign exchange movement - - (62) - - - (62) Acquisition through business combination 358 - - 12,180 - 10,466 23,004 Additions - 49 33,317 49,126 - - 82,492 Transfer to another class (7,379) - 7,379 - - - - At 31 December 2021 358 49 58,499 61,306 85 10,466 130,763 Depreciation and impairment At 1 January 2021 - - 7,443 - 48 - 7,491 Foreign exchange movement - - (65) - - - (65) Depreciation charged during the period 3,281 - 7,856 - 17 229 11,383 Transfer to another class (3,273) - 3,273 - - - - At 30 December 2021 8 - 18,507 - 65 229 18,809 Carrying amount At 1 January 2021 7,379 - 10,487 - - - 17,866 At 31 December 2021 350 49 39,992 61,306 20 10,237 111,954 ARGO BLOCKCHAIN PLC 99 All property plant and equipment is owned by the subsidiary Argo Innovation Labs Inc. During the year the lease for the right of use assets was settled by purchasing the mining equipment. Book balances were transferred to mining and computer equipment. Acquisition of DPN LLC On 8 March 2021 the Group completed the acquisition of DPN LLC to acquire 160 acres with option to purchase a further 157 acres of land in West Texas for the construction of a 200MW mining facility for completion mid 2022. The acquisition of DPN LLC effectively comprising the land acquisition in West Texas has been treated as an asset acquisition in the financial statements. The consideration for the acquisition was an initial price of GBP 3.6m satisfied by the issue and allotment to the shareholders of DPN LLC of 3,497,817 new ordinary shares in Argo with up to a further 8.6m of shares payable if certain contractual milestones related to the facility are fulfilled. Initial issue and allotment of GBP 3.6m has been recognised based on estimated fair value of assets received at acquisition in line with IFRS 2 Share based payments. Contingent consideration balance of this business combination has been subsequently measured at fair value with changes recognised in profit and loss in line with IFRS 9. Fair value of assets acquired was assessed in line with independent valuations of site by CBRE as well as external financial due diligence and financial modelling. Financial models used historical power purchase assumptions for the area and the Company’s internal hash rate and Bitcoin pricing assumptions to help the Company evaluate the financial benefits of developing a Bitcoin mining operation on the land. Work performed by DPN LLC from August 2019 when it purchased the land to March 2021 when it sold the land to the Company to prepare for a Bitcoin mining operation added to the value of the land for that purpose."
"Consideration at 8 March 2021 £000 Share based payment 3,521 Contingent consideration to be settled in shares 8,659 Total 12,180 Allocated as follows £000 Tangible fixed assets Asset under construction 12,180 Total 12,180 Property Plant and Equipment Impairments and Loss on Sale of Subsidiary The Group has a single line of business crypto mining. As such the Group has one cash generating unit CGU. At each reporting date the Group assesses whether there is an indication that an asset may be impaired. If an indication exists the Group estimates an asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. When the carrying value of an asset or CGU exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. In assessing fair value of Mining and Computer Equipment the Group used readily available tera hash pricing hashprice less a 15% discount for used equipment. In assessing value in use the discounted estimated future cash flows over the useful life of the mining machines using a pre-tax discount rate of 23.28%. As a result of the analysis an impairment of £24 million was recorded. A 5% change in the hashprice has a £6.1 million impact on the impact of the impairment. A 1% change in the discount rate has a £1.1 million impact on the impairment. In assessing the recoverable amount of the CGU the Group calculated the discounted cash flows of the CGU using a terminal growth rate of 3%. The pre-tax discount rate used was 23%. As a result of this analysis an impairment of £5.8 million was recorded which has also been attributed to Mining and Computer Equipment. ARGO BLOCKCHAIN PLC 100 Impairment of Chips In assessing the fair value of machine components the Group used readily available chip set prices and management’s estimate of other components in the chip sets to determine the value of chips on hand. As a result of this analysis an impairment of £15 million was recorded. Loss on Sale During the year the Group sold chips that were previously purchased. The proceeds on these chip sales were £10,029 and the group recorded a loss on disposal of fixed assets of £18,779. Mining Machine Swap In March 2022 the Group entered into an agreement to exchange mining machines and terminate a hosting agreement. With the completion of Helios the Group no longer required third party hosting services. The agreement provided the hosting provider with ownership of the Group's machines at their facilities in exchange for new mining machines for our Helios facility. The hash rate between the two groups of mining machines was similar. This transaction lacks commercial substance therefore IFRS 16 requires the mining machines acquired be recorded at the book value of the mining machines transferred to the hosting service provider. 20. TRADE AND OTHER RECEIVABLES INTERCOMPANY Group 2022 Company 2022 Group 2021 Company 2021 £000 £000 £000 £000 Trade and other receivables - - 13,194 8,008 Mining equipment prepayments 4,958 456 47,426 - Other taxation and social security 683 - 2,739 590 Total trade and other receivables 5,641 456 63,359 8,598 Mining equipment prepayments consist of payments made and due on mining equipment due to arrive in 2023. Other taxation and social security consist of purchase tax recoverable in Canada. GST and QST debtors are greater than 90 days as at 31 December 2022. COMPANY INTERCOMPANY Company 2022 Company 2021 £000 £000 Amounts due from group companies net 8,572 175,859 Funds advanced to group companies were used for operating expenses settle debt and purchase tangible and intangible assets. There are no terms of repayment. The amounts due are non-interest bearing. The decrease in 2022 is as a result of the debts from Argo Innovation Facilities US which were converted to shares to be issued prior to the sale. ARGO BLOCKCHAIN PLC 101 21. DIGITAL ASSETS The Group mined crypto assets during the period, which are recorded at fair value on the day of acquisition. Movements in fair value between acquisition (date mined) and disposal (date sold), and the movement in fair value in crypto assets held at the year end, are recorded in profit or loss. All of the Group's holdings in cryptocurrencies other than Bitcoin are now classified as intangible assets. At the period end, the Group held Bitcoin representing a fair value of £528,000."
"The breakdown of which can be seen below: Group 2022 £000 2021 £000 At 1 January 80,759 4,637 Additions Crypto assets purchased and received 207 16,569 Crypto assets mined 47,267 70,325 Total additions 47,474 86,894 Disposals Transferred to/from intangible assets 330 (5,424) Crypto assets sold (84,555) (6,976) Total disposals (84,225) (12,400) Fair value movements Gain/(loss) on crypto asset sales (43,526) 437 Movements on crypto assets held at the year end (114) 1,191 Total fair value movements (43,640) 1,628 At 31 December 368 80,759 Carrying value of digital assets pledged as collateral - 49,759 As at 31 December 2022, digital assets comprised 141 Bitcoin equivalents (2021: 2,441 Bitcoin). ARGO BLOCKCHAIN PLC 22. SHARE OPTIONS AND WARRANTS The following options and warrants over Ordinary Shares have been granted by the company and are outstanding: Options/Warrants Grant Date Expiry date Exercise Price Number of options/warrants outstanding 2022 '000 Number of options/warrants exercisable 2022 '000 Warrants 15 January 2021 15 January 2031 £1.25 240 240 Warrants 19 January 2021 18 January 2026 £0.90 110 110 Warrants 19 April 2021 19 March 2024 £1.35 224 224 Warrants 17 June 2021 19 March 2024 £1.50 22 22 Related party transactions. Key management compensation. Key management includes Directors (executive and non-executive) and senior management. The compensation paid to related parties in respect of key management for employee services during the period was made from Argo Innovation Labs Inc., amounting to: £118,030 (2021 - £36,769) paid to POMA Enterprises Limited in respect of fees of Matthew Shaw (Non-executive director); £182,759 (2021 - £566,591) due to Vernon Blockchain Inc in respect of fees of Peter Wall (CEO). Maria Perrella and Raghav Chopra (Non-executive directors) were paid £121,391 and £105,492 as at year-end respectively. From Argo Blockchain PLC, Alex Appleton (CFO) through Appleton Business Advisors Limited was paid £378,161 (2021 - £308,359). Controlling party. There is no controlling party of the Group. Post balance sheet events. In January 2023, Alex Appleton resigned from his position as Chief Financial Officer, Executive Director, and Secretary of the Group. In February 2023, Peter Wall resigned from his position as Chief Executive Officer and Interim Chairman, Sarah Gow resigned from her position as non-executive director on the Board. In April 2023, Jim MacCallum was appointed Chief Financial Officer of the Group. Aseana Properties Limited Annual Report 2022. Contents: Corporate Information, Corporate Strategy, Chairman’s Statement, Property Portfolio, Performance Summary, Financial Review, Corporate Social Responsibility, Board of Directors, Directors’ Report, Report of Directors’ Remuneration, Corporate Governance Statement, Independent Auditor’s Report, Financial Statements, Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows, Notes to the Financial Statements. Corporate Information. Non-executive Chairman: Nicholas John Paris. Non-executive Directors: Thomas Holland, Monica Lai, Voon Huey Hock Chye Tan, Helen Wong Siu Ming. Company Secretary and Registered Office: ICECAP (Secretaries) Limited, Osprey House, Old Street, St. Helier, Jersey JE2 3RG, Channel Islands. Website: www.aseanaproperties.com. Listing details: Main Market of the London Stock Exchange under the ticker symbol ASPL. Auditor: PKF Littlejohn LLP, 15 Westferry Circus, London E14 4HD, United Kingdom. Financial Adviser: Grant Thornton UK LLP, 30 Finsbury Square, London EC2A 1AG, United Kingdom. Registrar: Computershare Investor Services (Jersey) Limited, Queensway House, Hilgrove Street, St. Helier, Jersey JE1 1ES, Channel Islands. Corporate Strategy. Key facts: Exchange: London Stock Exchange, Main Market, Symbol: ASPL, Lookup: Reuters - ASPL.L, Bloomberg - ASPL:LN, Domicile: Jersey, Shares Issued: 212,025,002, Shares Held in Treasury: 13,334,000, Voting Share Capital: 198,691,002, Share Denomination: US Dollars, Admission Date: April 5, 2007. Aseana Properties Limited is a London-listed company incorporated in Jersey. The Company and its subsidiary undertakings were focused on property development opportunities in Malaysia and Vietnam. The routine operations of the Company are supervised by the Chairman and the Board, with a small team of finance professionals directly engaged to run our finances and operations. A Divestment Director was also designated from the existing Board with a specific focus to sell the Company’s remaining assets, in line with the Divestment Policy. When the Company was launched in 2007, the Board considered it desirable that Shareholders should have an opportunity to review the future of the Company at appropriate intervals. This will enable the realization of the Company’s assets in a controlled, orderly, and timely manner, with the objective of achieving a balance between periodically returning cash to Shareholders and maximizing the realization value of the Company’s investments."
"The Company will hold another discontinuation vote at a general meeting in May 2023; meanwhile, the Company continues to seek the disposal of its assets in a measured manner. To the extent that the Company has not disposed of all of its assets by May 2023, Shareholders will be provided with an opportunity to review the future of the Company, which would include the option for shareholders to vote for the continuation of the Company. The Directors have considered the appropriateness of preparing the accounts on a going concern basis in light of the decision to realize the Group’s investments in an orderly manner. There is no certainty over the timeframe over which the investments will be realized. The Directors note that other viable alternative strategies to a wind-down remain available, and they will continue to evaluate whether to propose continuation of the current divestment strategy or change to an alternative strategy. Chairman’s Statement. Dear Shareholders, Introduction: Asia began its recovery from the COVID-19 pandemic from the middle of 2022 onwards, as both Malaysia and Vietnam steadily lifted their restrictions on population movement and international travel. As a result, economic activity, and most importantly, the movement of first the domestic populations and then foreign tourists began to accelerate. These are very important to the Company as our assets comprised a hospital and development land in Vietnam (which have now been sold), a 5-star hotel and luxury residential apartments in Kuala Lumpur, a shopping mall, and a hotel in Sandakan and undeveloped beachfront land in Sabah. Commentary on the year: Our focus has been to minimize operating costs and net cash outflows at each of our properties while our Asset Divestment team seeks to dispose of them at reasonable prices. The sale of our Vietnam assets significantly reduced the project debts, reducing our debt servicing costs. I am pleased that shareholders are cooperating in the common aim of selling the Group’s assets and returning as much capital as possible to all shareholders. Economic overview: In 2022, the Malaysian economy recorded growth of 8.7% (2021: 3.1%) according to the Malaysian government as the economy rebounded from the easing of COVID-19 restrictions, but this forecast is expected to slow to 4.0% in 2023 according to the World Bank. Performance review: During 2022, the Company recorded a net loss after finance costs and before taxation of USD 17.6 million compared to a net loss before taxation of USD 5.8 million (restated) for the previous financial year. The net loss attributable to equity holders was USD 15.9 million for FY 2022, and the loss per share was US cents 7.99. Our NAV per Share as at 31 December 2022 fell to US cents 37. Our net cash inflow for the year was USD 0.1 million which reflected a foreign exchange gain effect of USD 2.9 million, net cash outflows from operating activities of USD 4.5 million offset by a cash inflow from investing and financing activities of USD 1.7 million. Our asset divestment programme: Progress on asset sales had been very difficult during the COVID restrictions, but in March 2022, we completed the sale of our two assets in Vietnam for a gross price of USD 95 million. We received a gross consideration of USD 18.3 million in cash, of which USD 8.9 million was used to pay down project debts owed in Malaysia. The balance was used for working capital purposes within the Group. Although we had to terminate a conditional agreement to sell the unsold apartments in The RuMa Residences in August 2022, other potential buyers have since appeared, and progress is being made to sell these and our other major assets. Announcements will be made about these when such discussions convert into detailed sale terms and signed commitments. Discontinuation vote in May: The Company is required to hold another discontinuation vote by the end of May 2023 so that shareholders can vote on the future of the Company. The Directors therefore intend to call an Extraordinary General Meeting on May 30, 2023, and current expectations are to also hold the Annual General Meeting on the same date. Acknowledgments: Once again, I would like to thank my colleagues on the Company’s Board of Directors, the staff operating at the level of the Group, and the staff working at each of the properties that we own for their tireless work on behalf of the Group and its shareholders. In addition, our external advisors and service providers provide invaluable assistance to the Company."
"On March 3, 2023, Hock Chye Tan joined the Board of Directors and the Audit Committee as an independent non-executive Director based in Malaysia. He is a corporate and finance professional bringing valuable expertise as a qualified accountant. Thank you. Nicholas John Paris, Chairman, April 28, 2023. Property portfolio as at 31 December 2022: Project Type, Effective Ownership, Approximate Gross Floor Area (sq m), Approximate Land Area (sq m). Completed projects: The RuMa Hotel and Residences, Kuala Lumpur, Malaysia, Luxury residential tower and bespoke hotel, 70.0%, 40,000, 4,000. Sandakan Harbour Square, Sandakan, Sabah, Malaysia, Hotel and retail mall, 100.0%, 126,000, 48,000. Undeveloped projects: Kota Kinabalu Seafront resort and residences, Land parcel approved for development of: (i) Boutique resort hotel and resort villas, (ii) Resort homes, 80.0%, n/a, 172,900. Divested projects: Phase 1: City International Hospital, International Healthcare Park, Ho Chi Minh City, Vietnam, Private general hospital, 73.04%, 48,000, 25,000. Other developments in International Healthcare Park, Ho Chi Minh City, Vietnam, Commercial development with healthcare theme, 73.04%, 972,000, 351,000. Performance summary: Year ended 31 December 2022, Year ended 31 December 2021. Total Returns since listing: Ordinary share price -86.00%, -80.00%. FTSE All-share index 22.31%, -26.30%. FTSE 350 Real Estate Index -57.47%, -33.88%. One Year Returns: Ordinary share price -30.00%, -37.50%. FTSE All-share index -3.16%, 14.55%. FTSE 350 Real Estate Index -35.67%, 26.19%. Capital Values (2021 restated): Total assets less current liabilities (USD million) 104.24, 126.09. Net asset value per share (USD) 0.41, 0.45. Ordinary share price (USD) 0.14, 0.20. FTSE 350 Real Estate Index 398.93, 620.13. Debt-to-equity ratio (2021 restated): Debt-to-equity ratio 1 102.21%, 92.52%. Net debt-to-equity ratio 2 91.50%, 84.52%. Loss/Earnings Per Share (2021 restated): Earnings per ordinary share - basic (US cents) -7.99, -2.90 - diluted (US cents) -7.99, -2.90. Notes: 1 Debt-to-equity ratio = (Total Borrowings ÷ Total Equity) x 100%. 2 Net debt-to-equity ratio = (Total Borrowings less Cash and Cash Equivalents ÷ Total Equity) x 100%. Financial review: Introduction: The Group recorded a consolidated comprehensive loss of USD 20.4 million for the financial year ended 31 December 2022 (year ended 31 December 2021 (restated): USD 12.6 million), largely due to impairment provided to inventory and amount due from a related party. Statement of comprehensive income: The Group recognized revenue of USD 1.0 million (2021 (restated): USD 0.6 million). Revenue of USD 36.4 million has been deferred until control of sold units in the leaseback program is passed to the buyer. The Group recorded a net loss before taxation of USD 17.6 million (2021 (restated): USD 5.8 million). The loss was largely due to impairment provided to inventory and amount due from a related party. Net loss attributable to equity holders of the parent company was USD 15.9 million (2021 (restated): USD 5.8 million). Tax expenses for the year were USD 0.3 million (2021 (restated): USD 0.1 million). The consolidated comprehensive loss was USD 20.3 million (2021 (restated): USD 12.6 million), which included a loss of USD 2.5 million (2021 (restated): USD 3.6 million) attributable to foreign currency translation differences for foreign operations due to an appreciation of the US Dollar against the Ringgit during the year. Basic and diluted loss per share were both US cents 7.99 (2021 (restated): US cents 2.90). Statement of financial position: Total assets were USD 157.2 million (2021 (restated): USD 190.4 million), representing a decrease of USD 31.9 million. This was mainly due to the disposal of assets held for sale with a carrying amount of USD 14.5 million and a decrease of USD 14.5 million in inventories that includes an impairment of USD 8.6 million. Total liabilities were USD 89.4 million (2021 (restated): USD 101.4 million), representing a decrease of. US 12.0 million. This was mainly due to a decrease of US 11.1 million in medium term notes which was partially repaid during the year. Net Asset Value per share was US 0.37 (31 December 2021 restated: US 0.46). Cash flow and funding cash generated from operations before interest and tax paid was US 1.1 million (2021 restated: US 6.2 million cash used). The Group generated net cash flow of US 10.5 million from investing activities (2021 restated: US 0.7 million). Some of the borrowings of the Group were repaid from divestment proceeds. As at 31 December 2022, the Group’s gross borrowings stood at US 32.9 million (31 December 2021 restated: US 44.0 million). Net debt to equity ratio was 91.50% (31 December 2021 restated: 84.52%)."
"Finance income was US 2.0 million for financial year ended 31 December 2022 (2021 restated: US 2.0 million) which included accrued income of US 1.5 million (2021 restated: US 1.3 million). Finance costs were US 3.3 million (2021 restated: US 3.6 million), which were mostly incurred by its operating assets. No dividend was declared or paid in the financial years 2022 and 2021. A review of the principal risks and uncertainties facing the Group is set out in the Directors’ Report of the Annual Report. The Group undertakes risk assessments and identifies the principal risks that affect its activities. The responsibility for the management of each key risk has been clearly identified and has been managed by the Board of Directors and the Board are closely involved in the day to day operation of the Group. A comprehensive discussion on the Group’s financial risk management policies is included in the notes to the financial statements of the Annual Report. Nicholas John Paris Director 28 April 2023. Aseana Properties is committed to making a positive difference in the world, whether it is for the local community or whether it is building a better working environment. The Company believes that being socially and environmentally responsible is good for people, the planet and for business. The following six core principles define the essence of corporate citizenship for the Company. Managing Corporate Responsibility The Board of Directors at Aseana Properties has oversight mechanisms, through corporate level policies and standards to ensure an effective CSR programme is delivered in the interest of its employees, shareholders and the community at large. It is determined to ensure that its CSR programme acts legally and responsibly on all matters and that the highest ethical standards are maintained. The Board recognizes this as a key part of its risk management strategy to protect the reputation of Aseana Properties and shareholders' values are enhanced. Employees In the current changing economic environment, with competing demands and stress, the welfare of employees is critical in order to ensure they are productive, creative and innovative. This is also in order to achieve the highest standard in the workplace. The Board works hard to ensure that employees are treated fairly and with dignity because it is the right thing to do and also to get the best out of them. Health and Safety Aseana Properties considers Health and Safety to be important because it protects the well being of employees, visitors and clients. Looking after Health and Safety makes good business sense and the Company works hard to provide a healthy workplace environment for its staff, contractors and visitors. Some of the organized efforts and procedures for reducing workplace accidents, risks and hazards, exposure to harmful solutions include paying particular attention to the regular maintenance of equipment, plant and systems to ensure a safe working environment. Providing sufficient information, instruction, training and supervision to enable all employees to avoid hazards and to contribute positively to their own safety and safe performance at work. Stakeholders Aseana Properties works collaboratively with its stakeholders to improve services and to ensure client satisfaction. The Company is committed to meaningful dialogue and encourages stakeholder participation through stakeholder events, roadshows, briefings, conference calls and timely release of annual reports. Aseana Properties also maintains an updated and informative website, www.aseanaproperties.com that is accessible to stakeholders and members of the public. Environmental Management Aseana Properties believes that any commitment to a more environmentally sustainable world has to start at home, and to this end, it challenges itself to work in an environmentally responsible manner and to find new ways to reduce its carbon footprint. It also works with consultants such as architects to look at how they can be more environmentally friendly by incorporating natural elements such as water, greenery, light and air into its projects. Maintaining and sustaining local Malaysian heritage is the essence of the RuMa Hotel so decorative elements like batik prints throughout are recycled from a local batik factory. The Kelelai, a type of bamboo, ornaments and ceiling panels at the pool area of Level 6 of the hotel are cultivated from a dying weaving art by Kelantanese women. The RuMa Hotel and Residences have both been separately awarded the Green Building Index Provisional Gold Rating having successfully met all the GBI Criteria under each category for Energy Efficiency, Indoor Environment Quality, Sustainable Site Planning and Management, Materials and Resources, Water Efficiency and Innovation."
"The GBI is Malaysia’s industry recognized green rating tool for buildings to promote sustainability in the building industry. The bathroom amenities at The RuMa Hotel were designed with sustainability in mind and incorporated biodegradable materials such as bamboo, corn starch, and recycled paper for dry amenities like toothbrushes, cotton swabs, soap dishes, and shower caps. Additionally, the wet amenities range was created exclusively for The RuMa Hotel and is both eco friendly and able to be disposed of in an environmentally responsible manner. By opting for biodegradable bathroom amenities, we can contribute to the protection of our planet and the promotion of a more sustainable future. The RuMa Hotel recognizes that promoting gender equality is crucial to our sustainability efforts, and we have incorporated the promotion of gender equality in the workplace as a key component of our sustainability initiatives. Our aim is to foster a more diverse, inclusive, and equitable work environment by implementing clear policies and guidelines that promote gender equality, such as equal pay for equal work, flexible work arrangements, and a workplace that is free from harassment and discrimination. We are committed to providing our employees with training and education on gender equality issues, including unconscious bias and gender sensitivity, to ensure that everyone in our organization understands the importance of this initiative. Community Aseana Properties understands the importance of community engagement both for the communities themselves but also for giving staff more meaningful experiences by tapping into their professional skills and capabilities. Nicholas John Paris Non Executive Independent Chairman Nicholas Nick John Paris was re appointed as a Non Executive Director of Aseana Properties Limited in September 2019 and became Chairman on 29 July 2020 following the retirement of Gerald Ong. He had previously been a Non Executive Director of Aseana from 22 June 2015 to 20 March 2019. Nick is a fellow of the Institute of Chartered Accountants England and Wales and a Chartered Alternative Investment Analyst. Nick is currently Managing Director of Myanmar Investments International Limited and a Managing Director of Dolphin Capital Investors Limited of which both are quoted on the AIM market of the London Stock Exchange and a Non Executive Director of Fondul Proprietatea, a fund listed on the Bucharest and London Stock Exchanges. Thomas Holland Non Executive Independent Director Thomas Tom Holland was appointed as a Non Executive Independent Director of Aseana Properties Limited on 23 November 2020. Tom has been based in Asia for 25 years with experience working in leadership positions in a number of financial firms. Tom has been active in Vietnam since 2006, having led the investments in large real estate developments as well as privatizing state owned enterprises. Prior to founding his current platform, Development Finance Asia, a boutique investment firm, Tom was head of Asia for Cube Capital and a senior investment manager for Income Partners Asset Management. Tom has a track record of successfully managing private investments in Vietnam, Malaysia, China, Indonesia, Myanmar, Mongolia and Cambodia. He holds a number of non executive director roles for financial services, logistics and consumer companies across Asia. Monica Lai Voon Huey Non Executive Non Independent Director Monica Lai was appointed as a Non Executive Non Independent Director of Aseana Properties Limited in September 2019. Monica is the Group Chief Executive Officer of Eccaz Sdn Bhd which is involved in property development and urban transportation solutions. Monica graduated from City University, London with a Bachelor of Science Hons Degree in Accountancy and Economics and worked for EY London and KPMG Hong Kong. Her professional qualifications include The Institute of Chartered Accountants England and Wales, The Malaysian Institute of Accountants and the Malaysian Institute of Taxation. Hock Chye Tan Non Executive Independent Director Hock Chye Tan was appointed as a Non Executive Independent Director of Aseana Properties in March 2023. Hock Chye is a Chartered Global Management Accountant CGMA of the Association of International Certified Professional Accountants, a Fellow Member FCMA of the Chartered Institute of Management Accountants and a Chartered Accountant CA M with the Malaysian Institute of Accountants. He obtained an MBA from Oklahoma City University and has attended a Harvard Premier Management Program. He also holds a Diploma in Commerce from the TAR University College. He has worked in Papua New Guinea, Singapore and Malaysia in both private and public companies and held senior management and Board positions. Currently, he is the CFO of SEATech Ventures Corp., a start up company listed on the US OTC Pink Market."
"He is also the National Assistant Treasurer of SME Association of Malaysia and Treasurer of the Malaysia Cross Border E Commerce Association. Helen Wong Siu Ming Non Executive Independent Director Helen Wong Siu Ming was appointed as a Non Executive Independent Director of Aseana Properties in June 2019. Helen has over 28 years of financial and operational experience in the United States and Asia. She is Chief Executive Officer and founder of LAPIS Global Limited, a Hong Kong based investment management and advisory firm. She was formerly the CEO of Cushman and Wakefield Capital Asia where she established the Asia Investment Management and Investment Banking platform. In addition, Helen has held numerous executive positions including Chief Operating Officer of Lazard Asia Investment Management HK Limited, Managing Director of IFIL Asia renamed EXOR S.p.A, where she was responsible for the Asian direct investment activities and Chief Financial Officer of the Singapore listed investment vehicle, Pacific Century Regional Developments Limited. Helen also has extensive experience in infrastructure and transport through her prior roles at the Provisional Airport Authority, Hong Kong and the Port Authority of New York and New Jersey. The Directors present their report together with the audited financial statements of Aseana Properties Limited and its subsidiary undertakings for the year ended 31 December 2022. The principal activities of the Group were the development of upscale residential and hospitality projects in Malaysia and Vietnam. The Group is now focused on carrying out its divestment program which consists of selling the Group’s remaining Malaysian assets, repaying its debts and distributing the remaining proceeds to its shareholders. The consolidated statement of comprehensive income for the year is set out on page 40. A review of the development and performance of the business has been set out in the Chairman’s Statement and the Financial Review reports. When the Company was launched in 2007, the Board considered it desirable that Shareholders should have an opportunity to review the future of the Company at appropriate intervals. The Company will hold another discontinuation vote at a general meeting in May 2023, meanwhile the Company continues to seek for disposal of its assets in a measured manner. To the extent that the Company has not disposed of all of its assets by May 2023, Shareholders will be provided with an opportunity to review the future of the Company, which would include the option for shareholders to vote for the continuation of the Company. The Group’s business was property development in Malaysia and Vietnam. Since divesting its assets in Vietnam in 2022, its principal risks are therefore related solely to the property market in Malaysia. More detailed explanations of these risks and the way they are managed are contained under the heading of Financial and Capital Risk Management Objectives and Policies in Note 4.1 to the financial statements. Other risks faced by the Group in Malaysia include the following: Economic inflation, economic recessions and movements in interest rates could affect property development activities. Strategic incorrect strategy, including timing, could lead to poor returns for shareholders. Regulatory breach of regulatory rules could lead to suspension of the Company’s Stock Exchange listing and financial penalties. Law and regulations changes in laws and regulations relating to planning, land use, development standards and ownership of land could have adverse effects on the business and returns for the shareholders. Tax regimes changes in the tax regimes could affect the tax treatment of the Company and or its subsidiaries in these jurisdictions. Management and control changes that cause the management and control of the Company to be exercised in the United Kingdom could lead to the Company becoming liable to United Kingdom taxation on income and capital gains. Operational the COVID 19 pandemic and many related movement control measurements in Malaysia lasted until 2022, which continued to affect our key properties as our hotel suffered closure and low occupancy rates and our retail mall was also forced to close; at times, only food operations were permissible at our shopping mall. The overall effect of low occupancy rates and reduced operating income had a negative impact on our revenues, costs and valuations. Failure of the Company’s accounting system and disruption to the business, or to that of third party service providers, could lead to an inability to provide accurate reporting and monitoring leading to a loss of shareholders’ confidence. Financial inadequate controls by the Company or third party service providers could lead to a misappropriation of assets."
"Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of regulations or a qualified audit report. Failure to sell the assets in a timely manner may result in inadequate financial resources to continue operational existence and to meet financial liabilities and commitments. The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual rights and obligations. It also regularly monitors the economic and investment environment in Malaysia, its only remaining market. Details of the Group’s internal controls are described on page 29. Claim Against Ireka Corporation Bhd ICB A civil suit was filed in the Malaysian Courts on 21 October 2022 by ASPL M9 Limited, a subsidiary of the Company, against ICB. The suit relates to the Joint Venture Agreement between ASPL M9 Limited, ICB and Urban DNA Sdn Bhd an indirect subsidiary of the Company for the development and construction of the RuMa Hotel and Residences. Claim Against Ireka Engineering and Construction Sdn Bhd IECSB A civil suit was filed in the Malaysian Courts on 2 August 2022 by Amatir Resources Sdn Bhd ARSB, an indirect wholly owned subsidiary of the Company against IECSB a wholly owned subsidiary of ICB. Since filing the claim, an interim liquidator has been appointed for IECSB according to the announcement at the Bursa Malaysia dated 27 March 2023 with reference to a creditor’s voluntary winding up. On 19 April 2023, ARSB obtained Judgment in Default against IECSB for the sum of RM 7,198,890 approximately US 1.6 million and interest thereon at the rate of 8% per annum calculated on a daily basis from 1st January 2020 to the date of full payment. The results for the year ended 31 December 2022 are set out in the attached financial statements. No dividends were declared nor paid during the financial year under review. No shares were issued in 2022. Further details on share capital are stated in Note 23 to the financial statements. The following were Directors of Aseana who held office throughout the financial year and up to the date of this report: Nicholas John Paris Chairman, Thomas Holland, Monica Lai Voon Huey, Hock Chye Tan appointed 3 March 2023, Helen Wong Siu Ming. The interests of the directors in the Company’s shares as at 31 December 2022 and as at the date of this report were as follows: DIRECTOR ORDINARY SHARES OF US$0.05 EACH As at 31 Dec 2021 As at 31 Dec 2022 Nicholas John Paris 26,644,192 - Christopher Henry Lovell 48,000 - Monica Lai Voon Huey 36,628,282 36,628,282 Notes: Nicholas John Paris is no longer associated with the holdings of clients of LIM Advisors Limited. Christopher Henry Lovell ceased to be a director during the year. Monica Lai Voon Huey is associated with the holdings of Legacy Essence Limited. None of the other directors in office at the end of the financial year had any interest in shares in the Company during the financial year. MANAGEMENT The routine operations of the Company are supervised by the Chairman and the Board with a small team of finance professionals directly engaged to run our finances and operations. Ms. Helen Wong was nominated as the Divestment Director with a specific focus to sell the Company’s remaining assets, in line with the Divestment Policy. EMPLOYEES The Company had no executive Directors during the year, and a team of four finance professionals were engaged to run our finances and operations. The subsidiaries of the Group had a total of 239 employees as at 31 December 2022, of which 22 and 213 were employed by (i) the Sandakan hotel asset and Harbour Mall Sandakan, and (ii) The RuMa Hotel and Residences in Kuala Lumpur respectively. GOING CONCERN The Company will continue until May 2023 at which time another continuation vote will be held by shareholders. In connection with, or at the same time as, the proposal that the Company be wound up voluntarily, the Board shall be entitled to make proposals for the reconstruction of the Company. Until then, the Company will continue to seek to dispose of its assets in a measured manner."
"As disclosed in Note 2.1 to the financial statements, it refers to the assumptions made by the Directors including the uncertainty regarding the divestment of certain assets will be completed as planned and the loans and borrowing can be discharged in a timely manner when concluding that it remains appropriate to prepare the financial statements on the going concern basis. CREDITORS PAYMENT POLICY The Group’s operating companies are responsible for agreeing on the terms and conditions under which business transactions with their suppliers are conducted. It is the Group’s policy that payments to suppliers are made in accordance with all relevant terms and conditions. Trade creditors at 31 December 2022 amounted to 349 days (2021: 591 days) of property development cost and interest expenses accrued by the Group. FINANCIAL INSTRUMENTS The Group’s principal financial instruments comprise cash balances, balances with related parties, other payables, receivables, and loans and borrowings that arise in the normal course of business. The Group’s Financial and Capital Risk Management Objectives and Policies are set out in Note 4.1 to the financial statements. DIRECTORS’ LIABILITIES Subject to the conditions set out in the Companies (Jersey) Law 1991 (as amended), the Company has arranged appropriate Directors’ and Officers’ liability insurance to indemnify the Directors against liability in respect of proceedings brought by third parties. Such provisions remain in force at the date of this report. STATEMENT OF DIRECTORS’ RESPONSIBILITIES The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Companies (Jersey) Law 1991 requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities, financial position, and of the profit or loss of the Group for that year. In preparing these financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable, relevant, and reliable; ensure that the financial statements comply with IFRSs; and prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group and the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. The Directors are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for the maintenance and integrity of the Company’s website on the internet. However, information is accessible in many different countries where legislation governing the preparation and dissemination of financial statements may differ from that applicable in the United Kingdom and Jersey. The Directors of the Company confirm that to the best of their knowledge that: the financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Group; and the sections of this Report, including the Chairman’s Statement, Director’s Review, Financial Review, and Principal Risks and Uncertainties, which constitute the management report include a fair review of all information required to be disclosed by the Disclosure and Transparency Rules issued by the Financial Services Authority of the United Kingdom. DISCLOSURE OF INFORMATION TO AUDITOR So far as each person who was a Director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries of fellow Directors, each Director has taken all the steps that he is obliged to take as a Director in order to have made himself aware of any relevant audit information and to establish that the auditor is aware of that information. RE-APPOINTMENT OF AUDITOR The auditor, PKF Littlejohn LLP, has expressed their willingness to continue in office. A resolution proposing their re-appointment will be tabled at the forthcoming Annual General Meeting."
"BOARD COMMITTEES Information on the Audit Committee is included in the Corporate Governance section of the Annual Report. ANNUAL GENERAL MEETING The tabling of the 2022 Annual Report and Financial Statements to shareholders will be at an Annual General Meeting that is currently expected to be held on 30 May 2023. During the AGM, investors will be given the opportunity to question the board and to meet with them thereafter. They will be encouraged to participate in the meeting. On behalf of the Board THOMAS HOLLAND Non-Executive Independent Director 28 April 2023 REPORT OF DIRECTORS’ REMUNERATION DIRECTORS’ EMOLUMENTS The Company has no executive Directors, solely a few employees who are mainly focused on the divestment process. The Independent Directors in the Board of Directors are responsible for setting the framework and reviewing compensation arrangements for all non-executive Directors before recommending the same to the Board for approval. The Independent Directors assess the appropriateness of the emoluments on an annual basis by reference to comparable market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high calibre Board. During the year, the Directors received the following emoluments in the form of fees from the Company: Directors Year ended 31 December 2022 (US$) Year ended 31 December 2021 (US$) Nicholas John Paris (Chairman of the Board) 70,000 70,000 Helen Wong Siu Ming (Chairman of the Audit Committee) 77,000 77,105 Thomas Holland 48,000 48,058 Monica Lai Voon Huey 48,000 48,000 Christopher Henry Lovell 22,286 48,082 Christopher Lovell was not re-elected at the Company’s 2022 Annual General Meeting on 17 June 2022. SHARE OPTIONS The Company did not operate any share option schemes during the years ended 31 December 2021 and 2022. SHARE PRICE INFORMATION High for the year - US$0.20 Low for the year - US$0.12 Close for the year - US$0.14 PENSION SCHEMES No pension schemes exist in the Company. SERVICE CONTRACTS In view of the non-executive nature of the directorships, there are no service contracts in existence between the Company and any of the Directors. Each Director was appointed by a letter of appointment that states his appointment subject to the Articles of Association of the Company which set out the main terms of his appointment. THOMAS HOLLAND Non-executive Independent Director 28 April 2023 CORPORATE GOVERNANCE STATEMENT The Financial Conduct Authority requires all companies with a Premium Listing to comply with The UK Corporate Governance Code. Aseana Properties is a Jersey incorporated company with a Standard Listing on the UK Listing Authority’s Official List and is therefore not subject to the Code. The following explains how the principles of governance are applied to the Company. THE BOARD The Company currently has a Board of five non-executive directors, including the non-executive Chairman. The brief biographies of the following Directors appear in this Annual Report: Nicholas John Paris (Non-Executive Chairman), Thomas Holland, Monica Lai Voon Huey, Hock Chye Tan (appointed 3 March 2023), Helen Wong Siu Ming. The routine operations of the Company are supervised by the Chairman and the Board and a team of finance professionals were directly engaged to run our finances and operations. Ms. Helen Wong was nominated as the Divestment Director with a specific focus to sell the Company’s remaining assets, in line with the Divestment Policy. ROLE OF THE BOARD OF DIRECTORS The Board’s role is to provide entrepreneurial leadership to the Company, within a framework of prudent and effective controls, enabling risks to be assessed and managed. The Board sets the Company’s strategic objectives, monitors and reviews the Company’s operational and financial performance, ensures the Company has sufficient funding, and examines and approves disposal of the Company’s assets in a controlled, orderly, and timely manner. The Board also sets the Company’s values and standards and ensures that its obligations to its shareholders and other stakeholders are met. The Board has adopted a divestment strategy since 2015. Appropriate level of directors’ and officers’ liability insurance is maintained by the Company. The Board currently has the power to make purchases on behalf of the Company of its own Ordinary Shares provided up to a maximum aggregate 29,783,780 Ordinary Shares representing approximately 14.99 percent of the Company’s issued ordinary share capital excluding ordinary shares held in treasury. MEETINGS OF THE BOARD OF DIRECTORS The Board meets at least four times a year and at such other times as the Chairman shall require."
"During the year ended 31 December 2022, the Board met ten times and their respective attendance are as follows: Name of Directors Attendance Nicholas John Paris 10/10 Thomas Holland 9/9 Monica Lai Voon Huey 9/9 Christopher Henry Lovell 5/5 Helen Wong Siu Ming 9/9 Each of Thomas Holland, Monica Lai Voon Huey, and Helen Wong Siu Ming were excused from one of the meetings during the year due to potential conflicts of interest. Hock Chye Tan was appointed to the Board in March 2023 and therefore does not appear in the above. To enable the Board to discharge its duties effectively, all Directors receive accurate, timely, and clear information, in an appropriate form and quality, including Board papers distributed in advance of Board meetings. The Board periodically will receive presentations at Board meetings relating to the Company’s business and operations, significant financial, accounting, and risk management issues. All Directors have access to the advice and services of the Company Secretary and advisers, who are responsible to the Board on matters of corporate governance, board procedures, and regulatory compliance. BOARD BALANCE AND INDEPENDENCE Following the resignation of our former Development Manager as of 30 June 2019, ASEANA has been a self-managed company. The Board consists solely of non-executive directors of which Nicholas Paris is the non-executive Chairman. Monica Lai Voon Huey is a representative of Legacy Essence Limited and she was a representative of Ireka Corporation Berhad until her resignation from the latter’s Board in November 2021; she is therefore classified as a Non-Independent Non-Executive Director of the Company. The Board considers the majority of Directors to be independent, being independent of management and also having no business relationships which could interfere materially with the exercise of their judgement. The Chairman is responsible for leadership of the Board, ensuring effectiveness in all aspects of its role and setting its agenda. Matters referred to the Board are considered by the Board as a whole and no individual has unrestricted powers of decision. Together, the Directors bring a wide range of experience and expertise in business, law, finance, and accountancy, which are required to successfully direct and supervise the business activities of the Company. PERFORMANCE APPRAISAL The Board undertakes an annual evaluation of its own performance and that of its Committees and individual Directors. During 2022, the evaluation concluded that the performance of the Board, its Committees, and each individual Director was and remains effective and that all Directors demonstrate full commitment in their respective roles. The Directors are encouraged to continually attend training courses at the Company’s expense to enhance their skills and knowledge in matters that are relevant to their role on the Board. The Directors also receive updates on developments of corporate governance, the state of the economy, management strategies and practices, laws, and regulations, to enable effective functioning of their roles as Directors. RE-ELECTION OF DIRECTORS The Company’s Articles of Association states that all Directors shall submit themselves for election at the first opportunity after their appointment, and shall not remain in office for longer than three years since their last election or re-election without submitting themselves for re-election. At the Annual General Meeting held on 17 June 2022, Christopher Lovell retired by rotation and offered himself for re-election by the shareholders. He was not re-elected at the AGM. At the forthcoming Annual General Meeting, Hock Chye Tan will be offering himself for re-election having recently been appointed, and Nicholas John Paris will be retiring by rotation and offering himself for re-election. BOARD COMMITTEES The Board has established Audit Committees which deal with the specific aspect of the Company’s affairs, under a written term of reference which is reviewed annually. Necessary recommendations are then made to the Board for its consideration and decision-making. No one, other than the committee chairman and members of the relevant committee, is entitled to be present at a meeting of board committees, but others may attend at the invitation of the board committees for presenting information concerning their areas of responsibility. Copies of the terms of reference are kept by the Company Secretary and are available on request at the Company’s registered office at Osprey House, Old Street, St. Helier, Jersey, JE2 3RG, Channel Islands. AUDIT COMMITTEE The Audit Committee consists of three members and is currently chaired by Helen Wong. The other members are Thomas Holland and Hock Chye Tan (appointed in March 2023)."
"The Committee members have no links with the Company’s external auditor and Helen Wong, Thomas Holland, and Hock Chye Tan are independent Directors. The Board considers that collectively the Audit Committee has sufficient recent and relevant financial experience with the ability to discharge its duties properly, through extensive service on the Boards and Audit Committees of other listed companies. MEETINGS OF THE AUDIT COMMITTEE The Committee meets at least twice a year and at such other times as the Chairman of the Audit Committee shall require. Any member of the Audit Committee or the auditor may request a meeting if they consider that one is necessary. The Committee met two times during the year and their respective attendance are as follows: Name Attendance Helen Wong Siu Ming 2/2 Christopher Henry Lovell 1/1 Thomas Holland 2/2 Hock Chye Tan was appointed to the Audit Committee in March 2023 and therefore does not appear in the above. Representatives of the auditor may attend by invitation. The Committee is responsible for monitoring, in discussion with the auditor, the integrity of the financial statements of the Company, any formal announcements relating to the Company’s financial performance and reviewing significant financial reporting judgements contained in them; reviewing the Company’s internal financial controls and risk management systems; making recommendations to the Board in relation to the appointment, re-appointment, and removal of the external auditor and approving the remuneration and terms of engagement of the external auditor to be put to the shareholders for their approval in general meetings; reviewing and monitoring the external auditor’s independence and objectivity and effectiveness of the audit process, the Audit Committee recognizes that the Code and AIC Code provisions for FTSE 350 companies to put the external audit contract out to tender at least every 10 years. Though the Company is not a member of the FTSE 350, the Audit Committee considers this to be best practice. The Audit Committee is needed and making recommendations as to the steps to be taken. Since the start of the financial year ending 31 December 2022, the Audit Committee performed its duties as set out in the terms of reference. The main activities carried out by the Audit Committee encompassed the following: reviewing the audit plan with the Group’s Auditor; reviewing and discussing the Audit Committee Report with the Group’s Auditor; reviewing the draft Audited Financial Statements as contained in the draft Annual Report together with the Group’s Auditor before tabling to the Board for consideration and approval; reviewing other published financial information including the half-year results and results announcements before tabling to the Board for consideration and approval; considering the independence of the auditor; and reviewing the auditor’s performance and making a recommendation for the reappointment of the Group’s auditor by shareholders. The Significant Issues The Audit Committee considered the following key issues in relation to the Group’s financial statements during the year: valuation of inventory assets - The Audit Committee considered and discussed the valuation of the Group’s inventory assets as at 31 December 2022 and to identify potential impairment. Impairment of receivables from a related party - The Audit Committee noted that a related party to the Group, which the Group maintained receivable balances with, had entered Judicial Management due to financial distress. Consequently, the recoverability of the balances was considered doubtful and full impairment has been made on the balances. Going concern - The Audit Committee considered the Company’s financial requirements for the next 12 months and concluded that it has sufficient resources to meet its commitments and any outstanding loan covenants. Consequently, the financial statements have been prepared on a going concern basis. NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee was chaired by Christopher Lovell. The other committee members were Monica Lai Voon Huey and Nicholas Paris. The responsibilities of the NRC are stated below and upon Christopher Lovell’s departure in June 2022 were integrated into the Board’s responsibilities. Given the Company is currently in its divestment phase, all Directors are non-executive on fixed fees. For the same reason, a specific diversity and inclusion policy has not been applied. However, it is considered that the Board has suitable gender balance and is suitably diverse."
"During the year ended 31 December 2022, the Nomination and Remuneration Committee carried out its functions as set out in its terms of reference which are summarized below: regularly reviewing the structure, size and composition (including diversity, skills, knowledge and experience) of the Board and making recommendations to the Board with regard to any change; considering succession plans for Directors and the re-appointment or re-election of any Directors at the conclusion of their specified term of office or retiring in accordance with the Company’s Articles of Association; identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and when they arise; considering any matter relating to the continuation in office of any Director at any time; determining and agreeing with the Board the framework for the remuneration of the Directors; and setting the remuneration for all Directors albeit since all Directors are non-executive, the principles of the Code in respect of executive directors’ remuneration are not applicable and as such there is no policy for executive compensation. FINANCIAL REPORTING The Board aims to present a fair, balanced and understandable assessment of the Company’s position and prospects in all reports to shareholders, investors and regulatory authorities. This assessment is primarily provided in the half-yearly report and the Annual Report through the Chairman’s Statement, Financial Review Statement and Directors’ Report. The Audit Committee has reviewed the significant reporting issues and judgments made in connection with the preparation of the Group’s financial statements including significant accounting policies, significant estimates and judgments. The Audit Committee has also reviewed the clarity, appropriateness and completeness of disclosures in the financial statements. INTERNAL AUDIT The Board has confirmed that the systems and procedures employed provide sufficient assurance that a sound system of risk management and internal control is maintained. An internal audit function specific to the Company is therefore considered not necessary given the Company is in the divestment phase of its life. However, the Directors will continue to monitor if such need is required. AUDITOR The Audit Committee’s responsibilities include monitoring and reviewing the performance and independence of the Company’s Auditor, PKF Littlejohn LLP who had been re-appointed on 8 December 2022. Pursuant to audit and ethical standards, the auditor is required to assess and confirm to the Board their independence, integrity and objectivity. The Auditor had carried out this assessment and considered themselves to be independent, objective and in compliance with the Ethical Standard for Auditors published by the UK Financial Reporting Council and the Code of Ethics issued by the Institute of Chartered Accountants in England and Wales. RISK MANAGEMENT AND INTERNAL CONTROL The Board is responsible for the effectiveness of the Company’s risk management and internal control systems and is supplied with information to enable it to discharge its duties. Such systems are designed to meet the particular needs of the Company and to manage rather than eliminate the risk of failure to meet business objectives and can only provide reasonable, and not absolute, assurance against material misstatement or loss. During the year, the Board discharged its responsibility for risk management and internal control through the following key procedures: clearly defined delegation of responsibilities to employees of the Company, including authorization levels for all aspects of the business; regular and comprehensive information provided to the Board covering financial performance and key business indicators; a detailed system of budgeting, planning and reporting which is approved by the Board and monitoring of results against budget with variances being followed up and action taken, where necessary; and regular visits to operating units and projects by the Board. The Board has established frameworks, policies and procedures to comply with the requirement of the Bribery Act 2010 and Market Abuse Regulation. In respect of the former, the Company has a legal and compliance function for the purposes of implementing the anti-corruption and anti-bribery policy. Training and briefing sessions were conducted for the senior management and employees. Compliance reviews are carried out as and when required to ensure the effectiveness of the policy. In respect of dealing by employees and Directors of the Company, the Company has a Dealing Code which imposes restrictions on dealings in its securities by Persons Discharging Managerial Responsibilities and certain employees who have been told the clearance procedures apply to them. The Company also has a Group-Wide Dealing Policy and a Dealing Procedures Manual."
"These policies have been designed to ensure that the PDMR and other employees of the Company and its subsidiaries do not misuse or place themselves under suspicion of misusing information about the Group which they have and which is not public. RELATIONSHIP WITH SHAREHOLDERS The Board is committed to maintaining good communications with shareholders and has designated the Chairman and certain members of its Board as the principal spokespersons with investors, analysts, fund managers, the press and other interested parties. The Board is informed of material information provided to shareholders and is advised on their feedback. The Board has also developed an understanding of the views of major shareholders about the Company through meetings and teleconferences conducted by the financial adviser. In addition, the Company seeks to regularly update shareholders through stock exchange announcements, press releases and participation in roadshows. To promote effective communication, the Company has a website, www.aseanaproperties.com through which shareholders and investors can access relevant information. SUBSTANTIAL SHAREHOLDERS The Board was aware of the following direct and indirect interests comprising a significant amount of more than 3% issued share capital of the Company as at 31 December 2022: NUMBER OF ORDINARY SHARES HELD PERCENTAGE OF ISSUED SHARE CAPITAL Ireka Corporation Berhad 45,837,504 23.07% Legacy Essence Limited and its related parties 36,628,282 18.43% LIM Advisors 26,644,192 13.41% SIX SIS 18,366,118 9.24% Progressive Capital Partners 14,393,372 7.24% Dr. Thong Kok Cheong 12,775,532 6.43% Credit Suisse 12,024,891 6.05% ANNUAL GENERAL MEETING The AGM is the principal forum for dialogue with shareholders. At and after the AGM, investors are given the opportunity to question the Board and seek clarification on the business and affairs of the Group. Mr. Nicholas John Paris, non-executive Chairman and Mr. Christopher Lovell, non-executive independent director, attended the 2022 AGM, either in person or by telephone, which was held on 17 June 2022 at the Company’s registered office. Notices of the AGM and related papers are sent out to shareholders in good time to allow for full consideration prior to the AGM. Each item of special business included is accompanied by an explanation of the purpose and effect of a proposed resolution. The Chairman declares the number of votes received for, against and withheld in respect of each resolution after the shareholders and proxies present have voted on each resolution. An announcement confirming whether all the resolutions have been passed at the AGM is made through the London Stock Exchange. On behalf of the Board NICHOLAS JOHN PARIS Chairman 28 April 2023 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ASEANA PROPERTIES LIMITED Opinion We have audited the financial statements of Aseana Properties Limited and its subsidiaries for the year ended 31 December 2022 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union. In our opinion, the financial statements: give a true and fair view of the state of the group’s affairs as at 31 December 2022 and of its loss for the year then ended; have been properly prepared in accordance with IFRSs as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991. Basis for opinion We conducted our audit in accordance with International Standards on Auditing and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to note 2.1 in the financial statements, which indicates that the success of the group relies on its ability to raise sufficient funds through project divestments in order to finance the operation of the group, as well as the result of the members’ discontinuation vote to be held at the end of May 2023."
"As at 31 December 2022, the group’s loans, borrowings and medium-term notes amounted to USD 32.9 million, of which the entirety is due for repayment by 8 December 2023. The economic consequences of the global pandemic have continued to adversely impact the interest of prospective buyers for the group’s remaining assets. Therefore, there is no certainty that the sale of the remaining assets will be completed as planned and the loans, borrowings including medium-term notes can be repaid in a timely manner. As stated in note 2.1, these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s ability to continue to adopt the going concern basis of accounting included a review of management’s assessment of the going concern status of the group, including a cash flow forecast for the twelve months from the anticipated approval of the group financial statements. Our audit procedures included challenging the integrity of the underlying formulas and calculations within the going concern model; and reviewing the reasonableness of the key assumptions used by the directors to prepare the cash flow forecast. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Our application of materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate, on the financial statements as a whole. Group financial statements 2022 Group financial statements 2021 Overall materiality USD 1,200,000 USD 1,400,000 Performance materiality USD 720,000 USD 840,000 Basis of materiality c. 0.7% of gross assets c. 0.7% of gross assets Rationale A key determinant of the group’s value is property assets held within inventory. Due to this, the key area of focus in the audit is the valuation of inventory. On this basis, we consider gross assets to be a critical financial performance measure for the group given that it is a key metric used by management, investors, analysts and lenders. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was between USD 5,000 and USD 630,000. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above USD 60,000 as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. Our approach to the audit As part of designing our audit, we determined materiality and assessed risk of material misstatement in the financial statements. In particular, we looked at areas involving significant accounting estimate and judgment by the directors and considered future events that are inherently uncertain such as the carrying value of inventory. We also addressed the risk of management override of controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. The group has nine trading companies consolidated within the group financial statements, all of which are based in Malaysia. We identified seven significant components, which were subject to a full scope of audit. Significant Malaysian components were audited by the PKF network firm in Malaysia. We reviewed component audit working papers electronically. In addition to this, significant components were subject to audits under our direction and supervision."
"Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the material uncertainty related to going concern section we have determined the matters described below to be the key audit matters to be communicated in our report. Key Audit Matter How our scope addressed this matter Carrying value of inventory Refer to note 20 Inventory. The group owns a portfolio of land held for property development and completed property units in Malaysia. The total carrying value of inventory for the group was USD 132.6 million. Inventory amounted to USD 126.2 million was valued by third party valuers who are engaged by the directors. The valuation report issued shows a write down of approximately USD 13.8 million in the carrying value of Sandakan Harbour Square located in Malaysia. March 2023 shows a write down of approximately USD. We performed testing of the inventory valuation and critically assessed the key assumptions and estimates made. The procedures performed are summarized below. We assessed the valuers qualifications and expertise and read their terms of engagement with the group to determine whether there are matters that might have affected their objectivity or may have imposed limitation of scope upon their work. We also considered fees and other contractual arrangements that might exist between the group and the valuers. We found no evidence to suggest that the objectivity of the valuers was compromised. We read all valuation reports including workings which support the net realizable value assessment of inventory. 1.8 million dollars in the carrying value of RuMa Hotel excluding Services Residences. The directors had been in discussions with a party leading up to the year end and on 17 January 2023 the directors of Aseana Properties Limited received a signed Letter of Intent to purchase Sandakan Harbour Square and RuMa Hotel and Services Residences, subject to normal due diligence. The Offer Price indicated an impairment of approximately 8.6 million dollars to the carrying value of the Sandakan Harbour Square and no impairment in respect of the RuMa Hotel and Services Residences. The directors are of the opinion that the Offer Price included in the Letter of Intent indicates a fair price and that both parties are actively seeking to agree contractual terms. The directors considered the Offer Price as an appropriate carrying value of the inventory at the year end. Directors do not plan to dispose of any of the inventory with a price lower than that indicated by the Letter of Intent. As a result, an impairment charge of approximately 8.6 million dollars is recognized against the carrying value of the Sandakan Harbour Square. At 31 December 2022, goodwill valued at 578,000 dollars arose from the acquisition of ICSD Ventures Sdn. Bhd, the owner of the Sandakan Harbour Square in 2009, and was not impaired. Directors are of the opinion that the value of goodwill can be recovered via the disposal of the Sandakan Harbour Square despite the impairment charge stated above. A parcel of land located in Kota Kinabalu, Sabah in Malaysia with a carrying value of 6.3 million dollars as at 31 December 2022 was not valued by any third party valuer. In addition to this, and consistent with the market conditions observed, we note there continued to be a higher level of judgment associated with certain asset valuations, notably those with a significant retail and hospitality element. The continuing economic consequences of COVID-19 further increased judgment in relation to assumptions around occupier demand and solvency, asset liquidity, and tested the underlying data used by the valuers in forming their valuation including benchmarking, validating key assumptions to supporting third party evidence or market activity and considering contrary evidence. Assessed and challenged the key estimates and assumptions used in the valuation methodology, noted and performed analysis on changes from prior year where relevant. Evaluated a range of key estimates and assumptions used in the valuations and profit and cash flow forecasts."
"In addition to the above work on the valuation reports, we reviewed the signed letter of intent stating the potential buyer's interest in purchasing Sandakan Harbour Square and RuMa Hotel and Services Residences. Further, we assessed the buyer's credentials using publicly available information. In respect of the land located in Kota Kinabalu, Sabah in Malaysia with a carrying value of 6.3 million dollars as at 31 December 2022 where no third party valuation has been carried out, our comparison to recent sales transactions of land assets of similar characteristics resulted in the conclusion that no indicator of impairment to the year-end carrying value existed. Except for the issues identified in relation to Sandakan Harbour Square, RuMa Hotel and Services Residences as well as the land located in Kota Kinabalu, Sabah, we concluded that the directors year end carrying value is supportable in light of the evidence. We note that the Letter of Intent is not a contractual document. Contractual terms may differ materially from the Offer Price. In determining the carrying value of inventory, the valuers take into account property specific information such as the current lease agreements and occupancy rates. They apply assumptions for yields and expected future income growth rates, which are influenced by prevailing market yields and comparable market transactions, to arrive at final valuation. The valuation of inventory requires significant judgment and estimation by management and their valuers. Inaccuracies in inputs or unreasonable bases used in these judgments could result in a material misstatement in the financial statements. There is also a risk that management may influence the significant judgments and estimates in respect of inventory valuations in order to meet market expectations. The significance of the estimates and judgments involved, coupled with the fact that only a small percentage difference in individual valuations, when aggregated, could result in a material misstatement, warranted specific audit focus in this area. Other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Matters on which we are required to report by exception. We have nothing to report in respect of the following matters in relation to which the Companies Jersey Law 1991 requires us to report to you if, in our opinion, adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us, or the financial statements and the part of the directors remuneration report to be audited are not in agreement with the accounting records and returns, or certain disclosures of directors remuneration specified by law are not made, or we have not received all the information and explanations we require for our audit. Responsibilities of directors. As explained more fully in the directors report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so. Auditor's responsibilities for the audit of the financial statements."
"Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs UK will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. We obtained an understanding of the group and the sector in which it operates to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management, industry research, application of cumulative audit knowledge and experience of the sector. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including the significant component audit team, and remained alert to any indicators of fraud or non-compliance with laws and regulations throughout the audit. We determined the principal laws and regulations relevant to the group in this regard to be those arising from the Companies Jersey Law 1991, Disclosure and Transparency Rules, the Bribery Act 2010, Market Abuse Regulations, Anti-Money Laundering Legislation, Local Tax and Employment Law, and International Financial Reporting Standards as adopted by European Union. We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group with those laws and regulations. These procedures included, but were not limited to, making inquiries of management, reviewing minutes of board meetings, reviewing accounting ledgers, and reviewing RNS announcements. We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that the carrying value of inventory could indicate potential management bias. The potential for management bias was identified in relation to the carrying value of the inventory and we addressed this by challenging the assumptions and judgments made by management when auditing that significant accounting estimate. As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to, the testing of journals, reviewing accounting estimates for evidence of bias, and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business, and reviewing transactions through bank statements to identify potentially large and unusual transactions that do not appear to be in line with our understanding of the business operations. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report. Use of our report. This report is made solely to the group's members, as a body, in accordance with our engagement letter dated 8 December 2022. Our audit work has been undertaken so that we might state to the group's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the group and the group's members as a body, for our audit work, for this report, or for the opinions we have formed."
"Mark Ling Engagement Partner 15 Westferry Circus For and on behalf of PKF Littlejohn LLP Canary Wharf Registered Auditor London E14 4HD 28 April 2023 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2022 2022 2021 Restated Notes US dollars Continuing operations Revenue 980 595 Cost of sales (640) (318) Gross profit 340 277 Other income 10,971 5,677 Administrative expenses (2,433) (1,408) Other operating expenses (26,085) (9,013) Gain on sale of discontinued operations 2,702 - Foreign exchange loss/gain (1,695) 345 Operating loss (16,200) (4,122) Finance income 1,970 1,969 Finance costs (3,344) (3,621) Net finance costs (1,374) (1,652) Net loss before taxation from continuing operations (17,574) (5,774) Taxation (302) (141) Loss for the year from continuing operations (17,876) (5,915) Discontinued operations Loss for the year from discontinued operations - (3,087) Loss for the year (17,876) (9,002) Other comprehensive income/loss, net of tax Items that are or may be reclassified subsequently to profit or loss Foreign currency translation differences for foreign operations (2,459) (3,584) Total other comprehensive income for the year (2,459) (3,584) Total comprehensive loss for the year (20,335) (12,586) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONTINUED FOR THE YEAR ENDED 31 DECEMBER 2022 2022 2021 Restated Notes US dollars Loss attributable to: Equity holders of the parent company Loss for the year from continuing operations (15,867) (4,122) Loss for the year from discontinued operations - (1,632) Loss for the year attributable to equity holders of the parent company (15,867) (5,754) Non-controlling interests Loss for the year from continuing operations (2,009) (1,793) Loss for the year from discontinued operations - (1,455) Loss for the year attributable to non-controlling interests (2,009) (3,248) Loss for the year (17,876) (9,002) Total comprehensive loss attributable to: Equity holders of the parent company Loss for the year from continuing operations (18,451) (6,232) Loss for the year from discontinued operations - (2,719) Total comprehensive loss attributable to equity holders of the parent company (18,451) (8,951) Loss for the year from continuing operations (1,884) (1,736) Loss for the year from discontinued operations - (1,899) Total comprehensive loss attributable to non-controlling interests (1,884) (3,635) Total comprehensive loss for the year (20,335) (12,586) Loss per share Basic and diluted (US cents) - from continuing operations (7.99) (2.08) - from discontinued operations - (0.82) (7.99) (2.90) See Note 2.3(f) for details regarding the restatement as a result of an error. The notes to the financial statements form an integral part of the financial statements. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022 2022 2021 Restated 1 Jan 2021 Restated Notes US dollars Non-current assets Property, plant and equipment 79 104 121 Intangible assets 578 578 578 Right of use - 1 160 Deferred tax assets 4,723 4,979 5,111 Total non-current assets 5,380 5,662 5,970 Current assets Inventories 132,573 147,048 157,133 Trade and other receivables 11,575 14,799 14,999 Prepayments 376 496 206 Current tax assets 10 781 956 Assets held for sale - 14,466 10,344 Cash and cash equivalents 7,259 7,114 5,388 Total current assets 151,793 184,704 189,026 TOTAL ASSETS 157,173 190,366 194,996 Equity Share capital 10,601 10,601 10,601 Share premium 208,925 208,925 208,925 Capital redemption reserve 1,899 1,899 1,899 Translation reserve (25,436) (22,852) (19,655) Accumulated losses (122,781) (106,904) (101,160) Shareholders equity 73,208 91,659 100,610 Non-controlling interests (5,404) (2,646) (7,189) Total equity 67,804 89,013 93,421 Non-current liabilities Trade and other payables 36,440 38,339 39,789 Loans and borrowings - - 1 Total non-current liabilities 36,440 38,339 39,790 Current liabilities Trade and other payables 18,089 17,050 17,757 Amount due to non-controlling interests 1,981 1,952 1,906 Loans and borrowings 1,595 1,695 1,922 Medium term notes 31,264 42,317 40,200 Total current liabilities 52,929 63,014 61,785 Total liabilities 89,369 101,353 101,575 Total equity and liabilities 157,173 190,366 194,996 The financial statements were approved on 28 April 2023 and authorized for issue by the Board and were signed on its behalf by Thomas Holland Helen Siu Ming Wong Director Director 28 April 2023 The notes to the financial statements form an integral part of the financial statements."
"Consolidated statement of changes in equity for the year ended 31 December 2022 Consolidated Redeemable Ordinary Shares US$ Management Shares US$ Share Premium US$ Capital Redemption Reserve US$ Translation Reserve US$ Accumulated Losses US$ Total Equity Attributable to Equity Holders of the Parent US$ Non-controlling Interests US$ Total Equity US$ Balance at 1 January 2021 10,601 208,925 1,899 (19,655) (100,433) 101,337 (6,877) 94,460 Correction or error net of tax As at the beginning of the financial year restated 10,601 208,925 1,899 (19,655) (101,160) 100,610 (7,189) 93,421 Changes in ownership interests in subsidiaries (341) (341) Non-controlling interests contribution 8,519 8,519 Loss for the year restated (5,754) (5,754) (3,248) (9,002) Total other comprehensive loss for the year (3,197) (3,197) (387) (3,584) Total comprehensive loss for the year restated (3,197) (5,754) (10,210) (3,635) (12,586) Disposal of subsidiaries As at 31 December 2021/1 January 2022 10,601 208,925 1,899 (22,852) (106,914) 91,659 (2,646) 89,013 As at 31 December 2021/1 January 2022 as originally presented 10,601 208,925 1,899 (22,852) (105,915) 92,658 (1,678) 90,980 Correction or error net of tax As at 31 December 2021/1 January 2022 restated 10,601 208,925 1,899 (22,852) (106,914) 91,659 (2,646) 89,013 Loss for the year (15,867) (15,867) (2,009) (17,876) Total other comprehensive loss for the year (2,584) (2,584) 125 (2,459) Total comprehensive loss for the year (2,584) (15,867) (18,451) (1,884) (20,335) Sale of discontinued operations Shareholders equity at 31 December 2022 10,601 208,925 1,899 (25,436) (122,781) 73,208 (5,404) 67,804 Represents 2 management shares at US$0.05 each The notes to the financial statements form an integral part of the financial statements. Consolidated statement of cash flows for the year ended 31 December 2022 2022 2021 Restated US$ Cash flows from operating activities Net loss before taxation Continuing operations (17,574) (5,774) Discontinued operation (3,087) Impairment of amount due from a related party 2,755 Impairment of inventory 8,620 Finance income (1,970) (1,969) Finance costs 3,344 3,621 Loss on disposal of subsidiaries (2,702) Unrealised foreign exchange loss/gain 1,688 (346) Depreciation of property, plant and equipment and right-of-use asset 60 207 Operating loss before changes in working capital (5,779) (7,348) Changes in working capital Increase/Decrease in inventories (1,671) 4,660 Decrease/Increase in trade and other receivables and prepayments 15,985 (3,341) Decrease in trade and other payables (7,448) (137) Cash used in/generated from operations 1,087 (6,166) Interest paid (6,034) (3,618) Tax refunded/paid 428 (46) Net cash used in operating activities (4,519) (9,830) Cash flows from investing activities Purchase of property, plant and equipment (39) (42) Proceeds from the sale of discontinued operations 10,045 Finance income received 508 710 Net cash from investing activities 10,514 668 Consolidated statement of cash flows continued for the year ended 31 December 2022 2022 2021 Restated US$ Cash flows from financing activities Advances from non-controlling interests 129 121 Issuance of ordinary share of subsidiaries to non-controlling interests 8,519 Repayment of finance lease liabilities (14) (163) Repayment of loans and borrowings (8,884) Drawdown of loans and borrowings and Medium Term Notes 3,559 Net cash generated from financing activities (8,769) 12,036 Net changes in cash and cash equivalents during the year (2,774) 2,874 Effect of changes in exchange rates 2,919 (1,148) Cash and cash equivalents at the beginning of the year 7,114 5,388 Cash and cash equivalents at the end of the year 7,259 7,114 Cash and cash equivalents Cash and cash equivalents included in the consolidated statement of cash flows comprise the following consolidated statement of financial position amounts: 2022 2021 Restated US$ Cash and bank balances 4,786 4,644 Short term bank deposits 2,473 2,470 7,259 7,114 Less: Deposits pledged Cash and cash equivalents 4,786 4,644 Included in short term bank deposits and cash and bank balance is US$2,473,000 pledged for loans and borrowings and Medium Term Notes of the Group. The notes to the financial statements form an integral part of the financial statements. Notes to the financial statements General information Aseana Properties Limited was incorporated in Jersey as a limited liability par value company. The Company’s registered office is Osprey House, Old Street, St Helier, Jersey JE2 3RG. The consolidated financial statements comprise the financial information of the Company and its subsidiary undertakings together the Group. Details of the entities of the Group are described in Note 32. The principal activities of the Group were the development of upscale residential and hospitality projects, sale of development land and operation and sale of hotel, mall and hospital assets in Malaysia and Vietnam."
"It is currently carrying out its divestment program which consists of selling the Group’s remaining Malaysian assets, repaying its debts and distributing the remaining proceeds to its shareholders. The financial statements are presented in US Dollar which is the Group’s presentation currency. All financial information is presented in US$ and has been rounded to the nearest thousand unless otherwise stated. Basis of preparation The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by European Union and IFRIC interpretations issued and effective or issued and early adopted at the date of these financial statements. As permitted by Companies Jersey Law 1991 only the consolidated financial statements are presented. The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The Board has reviewed the accounting policies set out below and considers them to be the most appropriate to the Group’s business activities. A disposal group qualifies as a discontinued operation if it is a component of an entity that either has been disposed of or is classified as held for sale and represents a separate major line of business or geographical area of operations or is part of a single coordinated plan to dispose of a separate major line of business or geographic area of operations or is a subsidiary acquired exclusively with a view to resale. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the income statement. Comparatives are also re-presented to reclassify disposed businesses or held for sale businesses which meet the criteria for discontinued operations. Going concern The financial statements have been prepared on the historical cost basis and on the assumption that the Group is a going concern. The Directors expect to raise sufficient funds to finance the operation of the Group’s existing projects via the disposal of its development assets in East Malaysia, its existing units of residential apartment inventories at The RuMa Residences in West Malaysia, and through the disposals of the Sandakan hotel asset, the Harbour Mall Sandakan and the RuMa Hotel. The slow economic recovery after the COVID-19 pandemic and reopening of society in Malaysia has had an ongoing impact affecting the interest of prospective buyers for our remaining assets. The slow recovery casts doubt on the outlook in tourism and hospitality related businesses such as our hotel in Kuala Lumpur and our retail mall in Sandakan which was negatively affected. Additionally, the Malaysian political landscape in 2022 was volatile until the general election in November 2022 when the Pakatan Harapan formed a coalition government with other political parties. Given the challenges in engaging with prospective buyers during a time of economic uncertainty, the Directors decided to roll over the medium term notes related to the Sandakan assets which were due to expire on 8 December 2022. The roll over of the medium term notes was completed prior to the expiry date and now has a maturity date of 8 December 2023. The notes are AAA rated and secured by two completed inventories of the Group with carrying amount of US$45.6 million as at 31 December 2022. The Group has prepared and considered prospective financial information based on assumptions and events that may occur for at least 12 months from the date of approval of the financial statements and the possible actions to be taken by the Group. Prospective financial information includes the Group’s profit and cash flow forecasts for the ongoing projects. In preparing the cash flow forecasts, the Directors have considered the availability of cash, adequacy of bank loans and medium term notes and also the refinancing of the medium term notes. The Directors believe that the business will be able to realize its assets and discharge its liabilities in the normal course of business for at least 12 months from the date of the approval of these financial statements."
"The Directors anticipate the sale of the Group’s remaining assets, comprising the hotel asset and shopping mall in Sandakan, a plot of development land in Kota Kinabalu and the hotel and the remaining unsold residential units in Kuala Lumpur, can be sold as the economy gradually recovers in Malaysia. These asset sales will collectively enable the repayment of the Group’s bank debts as or before they fall due. In addition, on 28 May 2021, shareholders voted to extend the life of the Company by a further two years to May 2023 and a further discontinuation vote will be put to shareholders by the end of May 2023. After considering the forecasts and the business risks, there is no certainty the divestment of certain assets will be completed as planned and the loans and borrowing can be discharged in a timely manner. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group and the Company’s ability to continue as a going concern. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. May 2021 resolution At a general meeting of the Company held on 28 May 2021, Shareholders voted in favour of the Board’s proposals to reject the 2021 Discontinuation Resolution and enabled the Company to continue to pursue the new divestment strategy rather than placing the Company into liquidation. This should enable the realization of the Company’s assets in a controlled, orderly and timely manner, with the objective of achieving a balance between periodically returning cash to Shareholders and maximizing the realization value of the Company’s investments. Statement of compliance A number of new standards and amendments to standards and interpretations have been issued by International Accounting Standards Board but are not yet effective and in some cases have not yet been adopted by the EU. The Directors do not expect that the adoption of these standards will have a material impact on the financial statements of the Group in future periods. Use of estimates and judgments and errors The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are discussed below: Going concern The Extraordinary General Meeting that was held on 28 May 2021 extended the Company’s life until May 2023 and the Directors anticipate holding a similar vote at that time. It is too early to be able to forecast how the Company’s shareholders will vote on a continuation resolution which would be a special resolution needing to be passed by two-thirds majority of those voting. The Company and the Group continue to adopt the going concern basis in preparing the financial statements. As described in Note 2.1 the Directors consider the Company to be a going concern while the Directors continue with the agreed divestment and realization process in an orderly manner under their control and they expect to be able to continue to meet all finance obligations as they fall due. Net realizable value of inventories The Group assesses the net realizable value of inventories under development, land held for development and completed properties held for sale according to their recoverable amounts with reference to the realizability of these properties, taking into account estimated net sales based on prevailing market conditions supported by external valuations, as well as indicative market transaction prices on an arm’s length basis. Provision is made when events or changes in circumstances indicate that the carrying amounts may exceed net realizable value. The assessment requires the use of judgment and estimates in relation to factors such as sales prices, comparable market transactions, occupancy levels, projected growth rates, and discount rates. The methods and key assumptions in relation to the calculation of the net realizable value of inventories are described in Note 20. At 31 December 2022, the carrying value of inventories were approximately US$133 million."
"Revenue sale and leaseback arrangements. The Group entered into agreements with the buyers of The RuMa Hotel Suites in a sale and leaseback arrangement. The sold hotel suites will be leased back to the Group for the hotel operation over the lease term period of 10 years. The Group considers that the control of the sold hotel suites, under the sale and leaseback arrangement, has yet to be transferred to the buyer and the transfer of the asset is therefore not a sale. No revenue is recognized in the financial statements. The nature of this leaseback transaction represents, in substance, a temporary financing arrangement. Any contractual payment made to the buyer was recognized as finance costs. The proceeds of the revenue received from these buyers were recognized as amounts owed to contract buyers, amounted to US$36.4 million and is disclosed in Note 27. Classification of assets as inventory. The Directors apply judgments in determining the classification of the properties held by the Group. As the Group’s principal activity was property development, the Group continues to classify its completed developments, namely the two hotels and mall as inventories, in line with the Group’s intention to dispose of these assets rather than hold them for rental or capital appreciation. The Group operates these inventories temporarily to stabilize its operation while seeking a potential buyer. As described in the Notes 3.3(c) and (d), as a result of this classification all income generated from the operations of these developments is recognized as other income in Note 6. Global economic uncertainty. Although many countries around the globe have eased their COVID-19 pandemic responses during 2022, including the easing of temporary movement controls, travel restrictions and quarantine measures, the economic recovery remained vulnerable. The slow economic recovery continued to affect supply chains and the production of goods and services and lower economic activity which is likely to result in reduced demand for the Group’s goods and services. Additionally, with the ongoing Ukraine situation, high inflation and continued disruption of supply chains there is concern on the pace of the economic recovery. The Group exercises judgment, in light of all facts and circumstances, to assess what event in this series of events provides additional evidence about the condition that existed at the reporting date and therefore affects the recognition and measurement of the Group’s assets and liabilities at 31 December 2022. Correction of material error in expense accrual. In the post-year end period, the management became aware of the following in relation to prior financial years: An understatement in accruing guaranteed rental return payable to the owners of certain sold and leased back hotel suites. The error resulted in a material understatement of accrued GRR expense recognized for the 2021 and prior financial years and a corresponding understatement of net loss. An understatement of accrued finance income from a related party in relation to the Group’s equity contribution to a non-wholly owned subsidiary and pursuant to the relevant Joint Venture Agreement. The error resulted in a material understatement of finance income recognized for the 2021 financial year and a corresponding overstatement of net loss."
"The errors have been corrected by restating each of the affected financial statement line items for the prior periods as follows: Consolidated Statement of Financial Position (Extract) 31 December 2021 Increase / Decrease 31 December 2021 (Restated) 31 December 2020 Increase / Decrease 1 January 2021 (Restated) US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Trade and other receivables 13,540 1,259 14,799 14,999 - 14,999 Total Assets 189,107 1,259 190,366 194,996 - 194,996 Accumulated losses (105,915) (999) (106,914) (100,433) (727) (101,160) Non-Controlling interests (1,678) (968) (2,646) (6,877) (312) (7,189) Total Equity 90,980 (1,967) 89,013 94,460 (1,039) 93,421 Trade and other payables 13,824 3,226 17,050 16,718 1,039 17,757 Total Equity and Liabilities 189,107 1,259 190,366 194,996 - 194,996 Consolidated Statement of Comprehensive Income (Extract) 2021 Increase / Decrease 2021 (Restated) US$’000 US$’000 US$’000 Other operating expenses (6,826) (2,187) (9,013) Operating loss (1,935) (2,187) (4,122) Finance income 710 1,259 1,969 Finance costs (3,621) - (3,621) Net finance costs (2,911) 1,259 (1,652) Net loss before taxation from continuing operations (4,846) (928) (5,774) Taxation (141) - (141) Loss for the year from continuing operations (4,987) (928) (5,915) Loss for the year from discontinued operations (3,087) - (3,087) Loss for the year (8,074) (928) (9,002) Total other comprehensive income for the year (3,584) - (3,584) Total comprehensive loss for the year (11,658) (928) (12,586) Loss attributable to: Equity holders of the parent company Loss for the year from continuing operations (3,850) (272) (4,122) Loss for the year from discontinued operations (1,632) - (1,632) Loss for the year attributable to equity holders of the parent company (5,482) (272) (5,754) Non-controlling interests Loss for the year from continuing operations (1,137) (656) (1,793) Loss for the year from discontinued operations (1,455) - (1,455) Loss for the year attributable to non-controlling interests (2,592) (656) (3,248) Loss for the year (8,074) (928) (9,002) Total comprehensive loss attributable to: Equity holders of the parent company Loss for the year from continuing operations (5,960) (272) (6,232) Loss for the year from discontinued operations (2,719) - (2,719) Total comprehensive loss attributable to equity holders of the parent company (8,679) (272) (8,951) Non-controlling interests Loss for the year from continuing operations (1,080) (656) (1,736) Loss for the year from discontinued operations (1,899) - (1,899) Total comprehensive loss attributable to non-controlling interests (2,979) (656) (3,635) Total comprehensive loss for the year (11,658) (928) (12,586) Loss per share Basic and diluted (US cents) from continuing operations (1.94) (0.14) (2.08) from discontinued operations (0.82) - (0.82) (2.76) (0.14) (2.90) SIGNIFICANT ACCOUNTING POLICIES Basis of Consolidation Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. For new acquisitions, the Group measures the cost of goodwill at the acquisition date as the fair value of the consideration transferred plus the recognized amount of any non-controlling interests in the acquiree plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree less the net recognized amount of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognized in profit or loss. Transaction costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in profit or loss. Subsidiaries are entities controlled by the Group. The financial information of subsidiaries is included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing control only when such rights are substantive."
"The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return. Transactions eliminated on consolidation. Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but to the extent that there is no evidence of impairment. Acquisition of non-controlling interests. Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognized as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary. Foreign Currencies Foreign currency transactions. The consolidated financial statements are presented in United States Dollar, which is the Group’s presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on the retranslation of available-for-sale equity investments, which are recognized in other comprehensive income. Foreign operations. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to US$ at exchange rates at the reporting date. The income and expenses of foreign operations are translated to US$ at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income and presented in the foreign currency translation reserve in equity. However, if the foreign operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interest. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Group disposes of only part of its investment in an associate that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity. Revenue Recognition and Other Income. Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: Sale of completed properties. Revenue from sale of completed properties is recognized when effective control of ownership of the properties is transferred to the purchasers which is when the completion certificate or occupancy permit has been issued. Sale of development properties."
"Revenue from sale of development properties is recognized as and when the control of the asset is transferred to the buyer and it is probable that the Group will collect the consideration to which it will be entitled in exchange for the asset that will be transferred to the buyer. In light of the terms of the contract and the laws that apply to the contract, control of the asset is transferred over time as the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. Revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. This is determined based on the actual cost incurred to date to estimated total cost for each contract. Where the outcome of a contract cannot be reliably estimated, revenue is recognized to the extent of contract costs incurred that are likely to be recoverable. Contract costs are recognized as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately. Rental income. Rental income is recognized in profit or loss on a straight-line basis over the lease term. Lease incentives granted are recognized as an integral part of the total rental income, over the term of the lease. Rental income is recognized as other income. Income from hotel and mall operations. Income from the hotel operations, which include provision of rooms, food and beverage, other departments sales and laundry service fees are recognized when services are rendered. Income from hotel operations is recognized as other income. Income from mall operations is recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental income, over the term of the lease. Where a rent-free period is included in a lease, the rental income foregone is allocated evenly over the period from the date the lease commencement to the earliest termination date. Income from mall operations is recognized as other income. Interest income. Interest income is recognized as it accrues using the effective interest method in profit or loss except for interest income arising from temporary investment of borrowings taken specifically for the purpose of obtaining a qualifying asset which is accounted for in accordance with the accounting policy on borrowing costs. Property, Plant and Equipment. All property, plant and equipment are stated at cost less depreciation unless otherwise stated. Cost includes all relevant external expenditure incurred in acquiring the asset. The estimates for the residual values, useful lives and related depreciation charges for the property and equipment are based on commercial factors which could change significantly as a result of technical innovations and competitors’ actions in response to the market conditions. The Group anticipates that the residual values of its property and equipment will be insignificant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The carrying amount of property and equipment as at the reporting date is disclosed in Note 16 to the financial statements. The cost of property, plant and equipment recognized as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged between knowledgeable willing parties in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar items when available and replacement cost when appropriate. Depreciation of property, plant and equipment is calculated using the straight-line method to allocate cost to their residual values over their estimated useful lives, as follows: Furniture, Fittings and Equipment 4 to 33.33 percent, Motor Vehicles 20 percent. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period."
"An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount as described in Note 3.10(b). The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment. Equipment is recognized net within other income and other operating expenses respectively in profit or loss. Income tax expense comprises current tax and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognized for the following temporary differences: the initial recognition of goodwill, and the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is Classification as held for sale and until disposal, the noncurrent assets, except for certain assets as explained below, or disposal groups, are recognized at the lower of their carrying amount and fair value less costs to sell. The principal exceptions to this measurement policy, so far as the financial statements of the Group and the Company are concerned, are deferred tax assets, assets arising from employee benefits, financial assets other than investments in subsidiaries, associates, and joint ventures, and investment properties. These assets, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in Note 3. Impairment losses on initial classification as held for sale, and on subsequent remeasurement while held for sale, are recognized in profit or loss. As long as a current asset is classified as held for sale, or is included in a disposal group that is classified as held for sale, the asset is not depreciated or amortized. An asset held for sale or disposal group is derecognized from the date that control ceases. A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographical area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. It also occurs if the operation is abandoned. Where an operation is classified as discontinued, a single amount is presented on the face of the statement of profit or loss, which comprises the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognized on the measurement to fair value less costs to sell, or on the disposal of the assets or disposal groups constituting the discontinued operation. The Group’s principal financial instruments comprise cash and cash equivalents, trade and other receivables, trade and other payables, amount due to non-controlling interest, medium term notes, loans, and borrowings. The Group’s accounting policies and methods adopted, including the criteria for recognition, the basis on which income and expenses are recognized in respect of each class of financial assets, financial liability, and equity instrument are set out in Note 3.6. The Group’s operations and debt financing arrangements expose it to a variety of financial risks: credit risk, liquidity risk, and price risk including foreign exchange risk and interest rate risk. The Group’s financial risk management policies and their implementation on a group-wide basis are under the direction of the Board of Aseana Properties Limited. The Group’s treasury policies are formulated to manage the financial impact of fluctuations in interest rates and foreign exchange rates to minimize the Group’s financial risks. The Group has not used derivative financial instruments, principally interest rate swaps and forward foreign exchange contracts for hedging transactions."
"The Group does not envisage using these derivative hedging instruments in the short term as it is the Group’s policy to borrow in the currency to match the revenue stream to give it a natural hedge against foreign currency fluctuation. The derivative financial instruments will only be used under the strict direction of the Board. It is also the Group’s policy not to enter into derivative transactions for speculative purposes. The Group’s credit risk is primarily attributable to deposits with banks and credit exposures to customers. The Group has credit policies in place and the exposures to these credit risks are monitored on an ongoing basis. The Group manages its deposits with banks and financial institutions by monitoring credit ratings and limiting the aggregate risk to any individual counterparty. At 31 December 2022, 100% of deposits and cash balances were placed at banks and financial institutions with credit ratings of no less than A. Management does not expect any counterparty to fail to meet its obligations. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets. In respect of credit exposures to customers, the Group receives progress payments from sales of commercial and residential properties to individual customers prior to the completion of transactions. In the event of default by customers, the Group companies undertake legal proceedings to recover the properties. The Group has limited its credit exposure to customers due to secured bank loans taken by the purchasers. At 31 December 2022, there was no significant concentration of credit risk within the Group. The Group’s exposure to credit risk arising from total debtors was set out in Note 21 and totals US$11.3 million. The Group’s exposure to credit risk arising from deposits and balances with banks is set out in Note 22 and totals US$7.3 million. The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. At the end of the reporting period, the maximum exposure to credit risk as represented by the outstanding banking and credit facilities of the subsidiaries is as follows: Financial institutions for bank facilities granted to its subsidiaries 32,859 at the end of the reporting period there was no indication that any subsidiary would default on repayment. The Group raises funds as required on the basis of budgeted expenditure and inflows for the next twelve months with the objective of ensuring adequate funds to meet commitments associated with its financial liabilities. When funds are sought, the Group balances the costs and benefits of equity and debt financing against the developments to be undertaken. At 31 December 2022, the Group’s borrowings to fund the developments had terms of less than ten years. Cash flows are monitored on an ongoing basis. The Group manages its liquidity needs by monitoring scheduled debt servicing payments for long-term and short-term financial liabilities as well as cash outflows due in its day-to-day operations while ensuring sufficient headroom on its undrawn committed borrowing facilities at all times so that borrowing limits and covenants are not breached. Capital investments are committed only after confirming the source of funds, such as securing financial liabilities. Management is of the opinion that most of the bank borrowings can be renewed or refinanced based on the strength of the Group’s earnings, cash flow, and asset base. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at a significantly different amount. The maturity profile of the Group’s financial liabilities at the statement of financial position date, based on the contracted undiscounted payments, were as follows: At 31 December 2022 Finance lease liabilities - Interest bearing loans and borrowings 32,859 Trade and other payables 18,089 Amount due to non-controlling interests 1,981. At 31 December 2021 Finance lease liabilities 14 Interest bearing loans and borrowings 43,998 Trade and other payables 17,050 Amount due to non-controlling interests 1,952."
"Entities within the Group are exposed to foreign exchange risk from future commercial transactions and net monetary assets and liabilities that are denominated in a currency that is not the entity’s functional currency. The foreign currency exposure is not hedged. The Group maintains a natural hedge, whenever possible, by borrowing in the currency of the country in which the property or investment is located or by borrowing in currencies that match the future revenue stream to be generated from its investments. Management monitors the foreign currency exposure closely and takes necessary actions in consultation with the bankers to avoid unfavorable exposure. The Group is exposed to foreign currency risk on cash and cash equivalents which are denominated in currencies other than the functional currencies of the relevant Group entities. The Group’s exposure to foreign currency risk on cash and cash equivalents in currencies other than the functional currencies of the relevant Group entities at year end are as follows: US Dollar 3,018 Ringgit Malaysia 4,241 Others 7,259. At 31 December 2022, if cash and cash equivalents denominated in a currency other than the functional currencies of the Group entities strengthened or weakened by 10% and all other variables were held constant, the effects on the Group’s profit or loss and equity expressed in US dollars would have been US$424,000 or negative US$424,000. The Group’s policy is to minimize interest rate risk on bank loans and borrowings using a mix of fixed and variable rate debts that represent market rates. The Group prefers to maintain flexibility on the desired mix of fixed and variable interest rates as this will depend on the economic environment, the type of borrowings available, and the funding requirements of the project when a decision is to be made. The interest rate profile of the Group’s significant interest-bearing financial instrument, based on carrying amounts at the end of the reporting period was: Fixed rate instruments: Financial assets 2,473 Financial liabilities 32,859. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s liabilities with a floating interest rate. The fixed and floating interest rates were not hedged and would therefore expose the Group to cash flow interest rate risk. Borrowings at fixed rate represent 100% of the Group’s total borrowings at 31 December 2022. Interest rate risk is reported internally to key management personnel via a sensitivity analysis, which is prepared based on the exposure to variable interest rates for non-derivative instruments at the statement of financial position date. For variable rate borrowings, the analysis is prepared assuming that the amount of liabilities outstanding at the statement of financial position date will be outstanding for the whole year. A 100 basis point increase or decrease is used and represents the management’s assessment of the reasonable possible change in interest rate. The carrying amount of trade and other receivables, deposits, cash and cash equivalents, trade and other payables, and accruals of the Group approximate their fair values in the current and prior years due to the relatively short-term nature of these financial instruments. The table below analyses financial instruments carried at fair value and those not carried at fair value, along with their carrying amounts shown in the statement of financial position. The fair value on an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer. Level 1 fair value is derived from quoted price in an active market for identical financial assets or liabilities that the entity can access at the measurement date. Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the financial assets or liabilities, either directly or indirectly. Level 3 fair value is estimated using unobservable inputs for the financial assets and liabilities. There has been no transfer between Level 1 and Level 2 fair values during the financial year. Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. At 31 December 2022, the interest rate used to discount estimated cash flows of the medium term notes is 7.48%."
"The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The capital structure of the Group consisted of cash and cash equivalents, loans and borrowings, medium term notes, and equity attributable to equity holders of the parent. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debts. Consistent with others in the industry, the Group monitors capital on the basis of net debt-to-equity ratio. Net debt-to-equity ratio is calculated as a total of interest-bearing borrowings less held-for-trading financial instruments and cash and cash equivalents to the total equity. The net debt-to-equity ratios at 31 December 2022 and 31 December 2021 were as follows: 2022 2021 US$000 US$000 Total borrowings and finance lease liabilities 32859 44012 Less: Cash and cash equivalents 7259 7114 Net debt 25600 36898 Total equity 67804 89013 Net debt-to-equity ratio 0.38 0.41 REVENUE AND SEGMENTAL INFORMATION The Group’s operating revenue for the year was mainly attributable to the sale of completed units in Malaysia. Income earned from hotel, mall and hospital operations are included in other income in line with management’s intention to dispose of the properties. Revenue recognised during the year as follows: 2022 2021 US$000 US$000 Sale of completed units 980 595 Segmental Information 2022 2021 Timing of revenue recognition US$000 US$000 Properties transferred at a point in time 980 595 Properties transferred over time 0 0 Segmental information represents the level at which financial information is reported to the Board of Directors, being the chief operating decision makers as defined in IFRS 8. The Directors determine the operating segments based on reports reviewed and used by their staff for strategic decision making and resource allocation. For management purposes, the Group is organised into project units. The Group’s reportable operating segments are as follows: (i) Investment Holding Companies – investing activities; (ii) Ireka Land Sdn. Bhd. – developed Tiffani by i-ZEN; (iii) ICSD Ventures Sdn. Bhd. – owns and operates Harbour Mall Sandakan and the Sandakan hotel asset; (iv) Amatir Resources Sdn. Bhd. – developed SENI Mont Kiara; and (v) Urban DNA Sdn. Bhd. – developed The RuMa Hotel and Residences. Other non-reportable segments comprise the Group’s development projects. None of these segments meets any of the quantitative thresholds for determining reportable segments in 2022 and 2021. Information regarding the operations of each reportable segment is in Note 5.3. The Directors monitor the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. Performance is based on segment gross profit or loss and profit or loss before taxation, which the Executive Management believes are the most relevant in evaluating the results relative to other entities in the industry. Segment assets and liabilities are presented inclusive of inter-segment balances and inter-segment pricing is determined on an arm’s length basis. The Group’s revenue generating development projects are in Malaysia. Analysis of the Group’s reportable operating segments is as follows: Operating Segments – year ended 31 December 2022 Continuing operations Investment Holding Companies Ireka Land Sdn. Bhd. ICSD Ventures Sdn. Bhd. Amatir Resources Sdn. Bhd. The RuMa Hotel KL Sdn. Bhd. Urban DNA Sdn. Bhd."
"Total continuing operations Discontinued Operations Total US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 Segment loss or profit before taxation 826 (5) (9061) (1789) (1792) (4898) (16719) 0 (16719) Included in the measure of segment loss or profit are: Revenue 0 0 0 0 0 980 980 0 980 Other income from hotel operations 0 0 0 0 8169 0 8169 0 8169 Other income from mall operations 0 0 2098 0 0 0 2098 0 2098 Other income from hospital operations 0 0 0 0 0 0 0 0 0 Expenses from hotel operations 0 0 (310) 0 (9859) 0 (10169) 0 (10169) Expenses from mall operations 0 0 (1251) 0 0 0 (1251) 0 (1251) Expenses from hospital operations 0 0 0 0 0 0 0 0 0 Depreciation of property, plant and equipment 0 0 (10) 0 (50) 0 (60) 0 (60) Finance costs 0 0 (1172) (192) 0 (1933) (3297) 0 (3297) Finance income 1462 0 47 413 0 1 1923 0 1923 Segment assets 9331 60 46882 704 965 89571 147513 0 147513 Segment liabilities 459 3 1294 2511 6758 45205 56230 0 56230 Reconciliation of reportable segment revenues, profit or loss, assets and liabilities and other material items Profit or loss US$000 Total loss for reportable segments (16719) Other non-reportable segments (856) Depreciation 1 Finance income (47) Finance costs 47 Consolidated loss before taxation (17574) US$000 Revenue Depreciation Finance costs Finance income Segment assets Segment liabilities Additions to non-current assets Total reportable segment 980 (60) (3297) 1923 147513 56230 39 Other non-reportable segments 0 1 (47) 47 9660 33139 0 Consolidated total 980 (59) (3344) 1970 157173 89369 39 Operating Segments – year ended 31 December 2021 Continuing operations Investment Holding Companies Ireka Land Sdn. Bhd. ICSD Ventures Sdn. Bhd. Amatir Resources Sdn. Bhd. The RuMa Hotel KL Sdn. Bhd. Urban DNA Sdn. Bhd. Total continuing operations Discontinued operations Total US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 Segment loss or profit before taxation (1854) (2) (580) 360 (3825) (2030) (7931) (3087) (11017) Included in the measure of segment loss or profit are: Revenue 0 0 0 0 0 595 595 0 595 Other income from hotel operations 0 0 0 0 2679 0 2679 0 2679 Other income from mall operations 0 0 2007 0 0 0 2007 0 2007 Other income from hospital operations 0 0 0 0 0 0 0 12768 12768 Expenses from hotel operations 0 0 (255) 0 (4042) 0 (4297) 0 (4297) Expenses from mall operations 0 0 (1072) 0 0 0 (1072) 0 (1072) Expenses from hospital operations 0 0 0 0 0 0 0 (11144) (11144) Depreciation of property, plant and equipment 0 0 (43) 0 (164) 0 (207) 0 (207) Finance costs (172) 0 (1290) (203) (2) (1909) (3576) (5358) (8934) Finance income 1259 0 45 600 0 20 1924 335 2259 Segment assets 8096 78 58322 3212 703 95243 165654 100812 266466 Segment liabilities 3659 3 1589 2785 5050 44246 57332 86347 143679 Reconciliation of reportable segment revenues, profit or loss, assets and liabilities and other material items Profit or loss US$000 Total loss for reportable segments (restated) (7931) Other non-reportable segments 2157 Depreciation 0 Finance income (45) Finance costs 45 Consolidated loss before taxation (restated) (5774) US$000 Revenue Depreciation Finance costs Finance income Segment assets Segment liabilities Additions to non-current assets Total reportable segment (restated) 595 (207) (3576) 1924 165654 57332 42 Other non-reportable segments 0 109 (45) 45 24712 44021 0 Consolidated total (restated) 595 (98) (3621) 1969 190366 101353 42 COST OF SALES 2022 2021 US$000 US$000 Direct costs attributable to: Completed units 640 318 OTHER INCOME 2022 2021 US$000 US$000 Rental income 121 78 Other income from hotel operations 8169 2679 Other income from mall operations 2098 2007 Sundry income 583 913 10971 5677 Other income from hotel operations The income relates to the hotel operations of the Sandakan Hotel Asset which is owned by a subsidiary of the Company, ICSD Ventures Sdn. Bhd. The income earned from hotel operations is included in other income in line with management’s intention to dispose of the hotel. Other income from mall operations The income relates to the operation of Harbour Mall Sandakan which is owned by a subsidiary of the Company, ICSD Ventures Sdn. Bhd. The income earned from mall operations is included in other income in line with management’s intention to dispose of the mall."
"FOREIGN EXCHANGE GAIN OR LOSS 2022 2021 US$000 US$000 Foreign exchange gain or loss comprises: Realised foreign exchange loss (6) (1) Unrealised foreign exchange gain or loss (1689) 346 (1695) 345 STAFF COSTS 2022 2021 US$000 US$000 Wages, salaries and others (including key management personnel) 5259 2817 Employees’ provident fund, social security and other pension costs 46 40 5305 2857 The Company has no executive Directors or employees under its employment. As of the year ended 31 December 2022, the subsidiaries of the Group have a total of 235 employees. FINANCE INCOME OR COSTS 2022 2021 (Restated) US$000 US$000 Interest income from banks 508 588 Accrued interest 1462 1381 Interest on bank loans (239) (841) Lease interest 0 (2) Interest on medium term notes (3105) (2778) (1374) (1652) NET LOSS BEFORE TAXATION Net loss before taxation is stated after charging or crediting: 2022 2021 US$000 US$000 Auditor’s remuneration 96 171 Directors’ fees or emoluments 265 291 Depreciation of property, plant and equipment 58 54 Expenses of hotel operations 10170 4298 Expenses of mall operations 1251 1405 Unrealised foreign exchange loss or gain 1689 (346) Realised foreign exchange loss 6 1 Impairment of amount due from a related party 4778 0 Impairment of inventory 8620 0 Gain on sale of discontinued operations (2702) 0 TAXATION 2022 2021 US$000 US$000 Current tax expense – Current year 85 70 – Prior year 217 119 Deferred tax charge – Current year 0 0 – Prior year 0 (48) Total tax expense or income for the year 302 141 The numerical reconciliation between the income tax income or expense and the product of accounting results multiplied by the applicable tax rate is computed as follows: 2022 2021 (Restated) US$000 US$000 Net loss before taxation (17574) (5774) Income tax at a rate of 24% (2021: 24%) (4218) (1386) Add: Tax effect of expenses not deductible in determining taxable profit 2379 1666 Current year losses and other tax benefits for which no deferred tax asset was recognised 3670 1312 Tax effect of different tax rates in subsidiaries 0 0 Less: Tax effect of income not taxable in determining taxable profit (1746) (1522) Under provision in respect of prior period or year 217 71 Total tax expense or income for the year 302 141 The applicable corporate tax rate in Malaysia is 24% (2021: 24%). The Company is treated as a tax resident of Jersey for the purpose of Jersey tax laws and is subject to a tax rate of 0% (2021: 0%). A Goods and Services Tax was introduced in Jersey in May 2008. The Company has been registered as an International Services Entity so it does not have to charge or pay local GST. The cost for this registration is £200 per annum. OTHER COMPREHENSIVE LOSS OR INCOME Items that are or may be reclassified subsequently to profit or loss, net of tax 2022 US$000 2021 US$000 Foreign currency translation differences for foreign operations Losses arising during the year (2440) (3584) (2440) (3584) LOSS PER SHARE Basic and diluted loss per ordinary share The calculation of basic and diluted loss per ordinary share for the year ended 31 December 2022 was based on the loss attributable to equity holders of the parent and ordinary shares outstanding and held by shareholders of the Company, calculated as below: 2022 2021 (Restated) US$000 US$000 Loss attributable to equity holders of the parent - continuing operations (15867) (4122) - discontinued operations 0 (1632) (15867) (5754) Number of shares (thousand shares) 198691 198691 Loss per share Basic and diluted (US cents) - continuing operations (7.99) (2.08) - discontinued operations 0 (0.82) (7.99) (2.90) The Company currently holds 13334000 Treasury Shares which are deducted from the total number of shares for the purpose of calculating loss per share. For details of the Treasury Shares, please refer to the description at Note 24. The diluted loss per share was not applicable as there were no dilutive potential ordinary shares outstanding at the end of the reporting period. NON-CONTROLLING INTERESTS Non-controlling interests in subsidiaries The Group’s subsidiaries that have material non-controlling interests are as follows: Urban DNA Sdn. Bhd. The RuMa Hotel KL Sdn. Bhd. Other individually immaterial subsidiaries Total 2022 US$000 US$000 US$000 US$000 NCI percentage of ownership interest and voting interest 30% 30% Carrying amount of NCI (259) (5180) 35 (5404) Loss allocated to NCI (1536) (342) (6) (1884) Summarised financial information before intra-group elimination Urban DNA Sdn. Bhd. The RuMa Hotel KL Sdn. Bhd."
"US$000 US$000 As at 31 December 2022 Non-current assets 827 24 Current assets 84,833 941 Non-current liabilities (84,590) (11,518) Current liabilities (3,957) (6,657) Net assets (2,887) (17,210) Year ended 31 December 2022 Revenue 980 - Loss for the year (4,898) (1,792) Total comprehensive loss (5,121) (1,142) Cash flows used in operating activities (1,203) (63) Cash flows from/(used in) investing activities - (9) Cash flows (used in)/from financing activities 991 299 Net increase in cash and cash equivalents (212) 227 Urban DNA Sdn. Bhd. The RuMa Hotel KL Sdn. Bhd. Other individually immaterial subsidiaries Total 2021 (Restated) US$ 000 US$ 000 US$ 000 US$ 000 NCI percentage of ownership interest and voting interest 30% 30% Carrying amount of NCI 1,277 (4,838) 915 (2,646) Loss allocated to NCI (711) (1,020) (1,456) (3,248) Summarised financial information before intra-group elimination Urban DNA Sdn. Bhd. The RuMa Hotel KL Sdn. Bhd. US$ 000 US$ 000 As at 31 December 2021 (restated) Non-current assets 522 68 Current assets 94,212 635 Non-current liabilities (84,570) (11,779) Current liabilities (5,907) (5,049) Net assets 4,257 (16,125) Year ended 31 December 2021 (restated) Revenue 595 - Loss for the year (2,149) (3,824) Total comprehensive loss (2,371) (3,401) Cash flows used in operating activities (532) (1,780) Cash flows from/(used in) investing activities 1,702 (37) Cash flows (used in)/from financing activities (1,107) 1,828 Net increase in cash and cash equivalents 63 11 Property, Plant and Equipment Furniture, Fittings & Equipment Motor Vehicles Total US$ 000 US$ 000 US$ 000 Cost At 1 January 2022 272 29 301 Exchange adjustments (13) (1) (14) Addition 39 - 39 At 31 December 2022 298 28 326 Accumulated Depreciation At 1 January 2022 170 27 197 Exchange adjustments (8) (1) (9) Charge for the year 59 - 59 At 31 December 2022 221 26 247 Net carrying amount at 31 December 2022 77 2 79 Cost At 1 January 2021 239 30 269 Exchange adjustments (9) (1) (10) Addition 42 - 42 At 31 December 2021 272 29 301 Accumulated Depreciation At 1 January 2021 120 28 148 Exchange adjustments (4) (1) (5) Charge for the year 54 - 54 At 31 December 2021 170 27 197 Net carrying amount at 31 December 2021 102 2 104 Intangible Assets Goodwill US$ 000 Cost At 1 January 2021 (re-presented)/31 December 2021/31 December 2022 6,479 Accumulated impairment At 1 January 2021 (re-presented) 5,901 Disposals - At 31 December 2021/1 January 2022 5,901 Disposals - At 31 December 2022 5,901 Carrying amount At 31 December 2021 578 At 31 December 2022 578 For the purpose of impairment testing, goodwill is allocated to the Group’s operating divisions which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes. The aggregate carrying amounts of intangible assets allocated to each unit are as follows: 2022 2021 US$ 000 US$ 000 Goodwill SENI Mont Kiara 28 28 Sandakan Harbour Square 550 550 578 578 The recoverable amount of goodwill has been tested by reference to underlying profitability of the ongoing operations of the developments using discounted cash flow projections. Right of Use Cost US$ 000 At 1 January 2021 4,436 Exchange adjustments - Disposal (12) At 31 December 2021/1 January 2022 4,424 Exchange adjustments - Disposal (3) At 31 December 2022 4,421 Depreciation charges At 1 January 2021 4,276 Charge for the year 157 Disposal (10) At 31 December 2021/1 January 2022 4,423 Charge for the year 1 Disposal (3) At 31 December 2022 4,421 Net Book Value At 31 December 2021 1 At 31 December 2022 - Lease liabilities included in the consolidated statement of financial position 2022 2021 US$ 000 US$ 000 Current - 14 Non-Current - - Total - 14 Amount recognized in the consolidated income statement 2022 2021 US$ 000 US$ 000 Depreciation charges on right-of-use 1 157 Interest on lease liabilities - 2 Total 1 159 A decrease in depreciation charges of right-of-use assets and interest charges of lease liabilities by US$156,000 and US$2,000 respectively, for the financial year ended 31 December 2022."
"Deferred Tax Assets 2022 2021 US$ 000 US$ 000 At 1 January 4,979 5,111 Exchange adjustments (256) (180) Deferred tax credit relating to origination of temporary differences during the year - 48 At 31 December 4,723 4,979 The deferred tax assets comprise: 2022 2021 US$ 000 US$ 000 Taxable temporary differences between accounting profit and taxable profit of property development units sold 4,723 4,979 At 31 December 4,723 4,979 Deferred tax assets have not been recognized in respect of unused tax losses of US$48 million which are available for offset against future taxable profits. The unrecognized deferred tax asset at effective tax rates of the Group would be approximately US$11.6 million. Inventories 2022 2021 Notes US$ 000 US$ 000 Land held for property development 6,288 6,628 Stock of completed units, at cost 126,181 140,300 Consumables 104 120 At 31 December 132,573 147,048 2022 2021 Notes US$ 000 US$ 000 Carrying amount of inventories pledged as security for loans and borrowings and Medium Term Notes 119,956 124,660 Land held for property development 2022 2021 US$ 000 US$ 000 At 1 January 6,628 6,871 Add: Exchange adjustments (340) (243) Additions - - Disposals - - At 31 December 6,288 6,628 Less: Costs recognized as expenses in the consolidated statement of comprehensive income during the year - - At 31 December 6,288 6,628 Stock of completed units, at cost 2022 2021 US$ 000 US$ 000 At 1 January 140,300 150,120 Transfer (to)/from work in progress 2,321 - Less: Exchange adjustments (7,180) (5,292) Disposals - - Impairment (8,620) - Costs recognized as expenses in the consolidated statement of comprehensive income during the year (640) (4,528) At 31 December 126,181 140,300 The net realizable value of completed units has been tested by reference to underlying profitability of the ongoing operations of the developments using discounted cash flow projections and/or comparison method with similar properties within the local market which provides an approximation of the estimated selling price that is expected to be achieved in the ordinary course of business. Included in the stock of completed units are SENI units as well as the following completed units: Sandakan hotel asset and Harbour Mall Sandakan. The aggregate recoverable amount of both assets was determined based on indicative market transaction prices on an arm’s length basis. The aggregate recoverable amount of US$45,558,000 for both assets was determined to approximate with their carrying amount. The RuMa Hotel and Residences The recoverable amount of The RuMa was determined based on a valuation by an external, independent valuer with appropriate recognized professional qualification. The recoverable amount US$83,599,000 of The RuMa was determined to be higher than its carrying amount. The valuation of The RuMa Hotel was determined by discounting the future cash flows expected to be generated from the continuing operations of The RuMa and was based on the following key assumptions: Cash flows were projected based on the 10 years projection of The RuMa Hotel; The occupancy rate of The RuMa Hotel will improve to 78% in year 10 which is when the hotel’s operations are expected to stabilize; Average daily rates of the hotel will improve to US$221.87 in year 10 which is when the hotel’s operations are expected to stabilize; Projected gross margin reflects the industry average historical gross margin, adjusted for projected market and economic conditions and internal resources efficiency; and Pre-tax discount rate of 9% was applied in discounting the cash flows. The discount rate takes into account the prevailing trend of the hotel industry in Malaysia. The valuation of The RuMa Residences was determined based on the Comparison Approach as the sole method of valuation. Trade and Other Receivables 2022 2021 (Restated) US$ 000 US$ 000 Trade receivables 4,401 2,343 Other receivables 6,842 12,224 Sundry deposits 332 232 11,575 14,799 Trade receivables represent progress billings receivable from the sale of completed units and land held for property development. Progress billings receivable from the sale of completed units are generally due for settlement within 30 days from the date of invoice and are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. They are recognized at their original invoice amounts on initial recognition less provision for impairment where it is required."
"The loss allowance as at 31 December 2022 and 31 December 2021 was determined as follows for both trade receivables and contract assets: Trade receivable Contract asset Loss allowance Total 31 December 2022 US$ 000 US$ 000 US$ 000 US$ 000 Current 4,399 - - 4,399 Past due 0 – 60 days - - - - 61 – 120 days - - - - More than 120 days (2,035) - (2,033) 2 6,434 - (2,033) 4,401 Trade receivable Contract asset Loss allowance Total 31 December 2021 US$ 000 US$ 000 US$ 000 US$ 000 Current 248 - - 248 Past due 0 – 60 days - - - - 61 – 120 days - - - - More than 120 days 2,095 - - 2,095 2,343 - - 2,343 The Group uses the simplified approach to estimate credit loss allowance for all trade receivables and contract assets, which will be based on the past payment trends, existing market conditions and adjusts for qualitative and quantitative reasonable and supportable forward-looking information. The loss allowances are also based on assumptions about risk of default. The quantum of any probability of an expected credit loss will occur to be low or not material. No provision is recognized in these financial statements. Included in trade receivables is US$ Nil representing 0% of the Group’s trade receivables which are due from a subsidiary of Ireka Corporation Berhad for the acquisition of SENI units. Included in other receivables was an amount due from Ireka Corporation Berhad in relation to the interest owed on the unpaid shareholder advances to the construction of The RuMa Hotel and Residences, as described in Note 31. The maximum exposure to credit risk is represented by the carrying amount in the statement of financial position. The Group monitors the repayment of the customers regularly and is confident of the ability of the customers to repay the balance outstanding. Cash and Cash Equivalents 2022 2021 US$ 000 US$ 000 Cash and bank balances 4,786 4,644 Short term bank deposits 2,473 2,470 7,259 7,114 Less: Deposits pledged (2,473) (2,470) Cash and cash equivalents 4,786 4,644 Included in short term bank deposits and cash and bank balance is US$2,473,000 pledged for loans and borrowings and Medium Term Notes of the Group. The interest rate on cash and cash equivalents, excluding deposit pledged with licensed bank of US$2,473,000, ranges from 1.05% to 2.85% per annum. The interest rate on short term bank deposits and cash and bank balance pledged for loans and borrowings and Medium Term Notes of the Group, ranges from 1.05% to 2.85% per annum. Share Capital Number of shares 2022 Amount 2022 Number of shares 2021 Amount 2021 ’000 US$ 000 ’000 US$ 000 Authorised Share Capital Ordinary shares of US$0.05 each 2,000,000 100,000 2,000,000 100,000 Management shares of US$0.05 each - * - * - * - * 2,000,000 100,000 2,000,000 100,000 Issued Share Capital Ordinary shares of US$0.05 each 212,025 10,601 212,025 10,601 Management shares of US$0.05 each - # - # - # - # 212,025 10,601 212,025 10,601 represents 10 management shares at US$0.05 each represents 2 management shares at US$0.05 each In 2015, the shareholders of the Company approved the creation and issuance of management shares by the Company as well as a compulsory redemption mechanism that was proposed by the Board. The Company increased its authorised share capital from US$100,000,000 to US$100,000,000.50 by the creation of 10 management shares of US$0.05 each for cash. The Company also increased its issued and paid-up share capital from US$10,601,250 to US$10,601,250.10 by way of an allotment of 2 new management shares of US$0.05 each at par via cash consideration. In accordance with the compulsory redemption scheme, the Company's ordinary shares were converted into redeemable ordinary shares. The ordinary shares and the management shares shall have attached thereto the rights and privileges, and shall be subject to the limitations and restrictions, as are set out below: Distribution of dividend: The ordinary shares carry the right to receive all the profits of the Company available for distribution by way of interim or final dividend at such times as the Directors may determine from time to time; and The management shares carry no right to receive dividends out of any profits of the Company. Winding-up or return of capital: The holders of the management shares shall be paid an amount equal to the paid-up capital on such management shares."
"The ordinary shares shall be repaid from the surplus assets of the Company available for distribution. Voting rights: The holders of the ordinary shares and management shares shall have the right to receive notice of and to attend and vote at general meetings of the Company. Each holder of ordinary shares and management shares being present in person or by a duly authorized representative (if a corporation) at a meeting shall, upon a show of hands, have one vote, and upon a poll, each such holder present in person or by proxy or by a duly authorized representative (if a corporation) shall have one vote in respect of every fully paid share held by them. Share premium represents the excess of proceeds raised on the issuance of shares over the nominal value of those shares. The costs incurred in issuing shares were deducted from the share premium. In 2017, the Shareholders of the Company at an Extraordinary General Meeting approved a proposal to return US$10,000,500 or US$0.75 per share for 13,334,000 shares representing 6.29 percent of the Company’s share capital to Shareholders. The capital distribution was completed on 10 January 2017, and the repurchased shares of 13,334,000 are currently held as Treasury Shares. The issued and paid-up share capital of the Company remains unchanged at 212,025,002. The capital redemption reserve was incurred after the Company cancelled its 37,475,000 and 500,000 ordinary shares of US$0.05 per share in 2009 and 2013 respectively. The translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign operations. Trade and other payables: 2022 2021 (Restated) US$’000 US$’000 Non-current Amount owed to contract buyers 36,440 38,339 Current Trade payables 5,609 3,219 Other payables 3,944 10,763 Deposits refundable 778 705 Accruals 7,758 2,363 Total 18,089 17,050 Total liabilities 54,529 55,389 Trade payables represent trade purchases and services rendered by suppliers as part of the normal business transactions of the Group. The credit terms granted by trade suppliers range from 30 to 90 days. Included in the other payables are the accrued costs for the development of the RuMa project amounting to US$0.7 million (31 December 2021: US$1.0 million). Contract liabilities represent proceeds received from purchasers of development properties, i.e., SENI and The RuMa Residences, which are pending transfer of vacant possession. Revenue recognized in the period from amounts included in contract liability at the beginning of the period was US$980,000 in 2022 and US$596,000 in 2021. Performance obligations satisfied in the previous period were not applicable. Amount owed to contract buyers is funding received by way of non-refundable deposits in advance of completion of the hotel suites, which are, as of 31 December 2022, still controlled by the Group. Deposits and accruals are from normal business transactions of the Group. Amount due to non-controlling interests: 2022 2021 US$’000 US$’000 Minority Shareholder of Bumiraya Impian Sdn. Bhd.: Global Ever Group Sdn. Bhd. 1,129 1,190 Minority Shareholder of Urban DNA Sdn. Bhd. and The RuMa Hotel KL Sdn. Bhd.: Ireka Corporation Berhad 852 762 Total 1,981 1,952 The current amount due to non-controlling interests amounting to US$1,981,000 (31 December 2021: US$1,952,000) is unsecured, interest-free, and repayable on demand. Loans and borrowings: 2022 2021 US$’000 US$’000 Current Bank loans 1,595 1,681 Lease liabilities - 14 Total 1,595 1,695 Future minimum lease payment: 2022 2021 US$’000 US$’000 Within one year - 14 Between one and five years - - Over five years - - Total - 14 The effective interest rates on the bank loans for the year is 12 percent (31 December 2021: 12 percent) per annum. Borrowings are denominated in Ringgit Malaysia. Bank loans are repayable annually and are secured by land held for property development, work-in-progress, operating assets of the Group, pledged deposits, and some are secured by the corporate guarantee of the Company."
"Reconciliation of movement of loans and borrowings to cash flows arising from financing activities: As at 1 January 2022 Drawdown of loan Repayment of loan Foreign exchange movements As at 31 December 2022 US$’000 US$’000 US$’000 US$’000 US$’000 Bank loans 1,681 - - (86) 1,595 Total 1,681 - - (86) 1,595 As at 1 January 2021 Drawdown of loan Repayment of loan Foreign exchange movements As at 31 December 2021 US$’000 US$’000 US$’000 US$’000 US$’000 Bank loans 1,742 - - (61) 1,681 Total 1,742 - - (61) 1,681 As at 1 January 2022 Repayment of lease payment Interest expense Foreign exchange movements As at 31 December 2022 US$’000 US$’000 US$’000 US$’000 US$’000 Lease liabilities 14 (13) - (1) - Total 14 (13) - (1) - As at 1 January 2021 Repayment of lease payment Interest expense Foreign exchange movements As at 31 December 2021 US$’000 US$’000 US$’000 US$’000 US$’000 Lease liabilities 181 (163) 3 (7) 14 Total 181 (163) 3 (7) 14 Medium term notes: 2022 US$’000 2021 US$’000 Outstanding medium term notes 31,264 42,317 Less: Repayment due within twelve months (31,264) (42,317) Repayment due after twelve months - - Reconciliation of movement of medium term notes to cash flows arising from financing activities: As at 1 January 2022 Drawdown of loan Repayment of loan Foreign exchange movements As at 31 December 2022 US$’000 US$’000 US$’000 US$’000 US$’000 Medium Term Notes 42,316 - (8,884) (2,168) 31,264 As at 1 January 2021 Drawdown of loan Repayment of loan Foreign exchange movements As at 31 December 2021 US$’000 US$’000 US$’000 US$’000 US$’000 Medium Term Notes 40,200 3,559 - (1,443) 42,316 The medium term notes were issued pursuant to a program with a tenor of ten years from the first issue date of the notes. The MTNs were issued by a subsidiary to fund two development projects known as Sandakan Harbour Square and Aloft Kuala Lumpur Sentral in Malaysia. Following the completion of the sale of the AKLS by the Group in 2016, the net adjusted price value for the sale of AKLS, which included the sale of the entire issued share capital of ASPL M3B Limited and Iringan Flora Sdn. Bhd., were used to redeem the MTN Series 2 and Series 3. Following the completion of the disposal of AKLS, US$96.25 million (RM394.0 million) of MTN associated with the AKLS (Series 3) and the Four Points Sheraton Sandakan (Series 2) were repaid on 19 August 2016. The charges in relation to AKLS were also discharged following the completion of the disposal. The Group completed a roll-over for the remaining MTNs of US$24.43 million on their maturity dates on 10 December 2020 and 2021. Repayment of US$8.89 million (RM39.0 million) was made on 7 April 2022. Subsequently, they were further rolled over and are now repayable on 8 December 2023. The MTNs are rated AAA. The weighted average interest rate of the MTN was 5.50 percent per annum at the statement of financial position date. The effective interest rates of the MTN and their outstanding amounts are as follows: Maturity Dates Interest rate percent per annum As at 31 December 2022 US$’000 Series 1 Tranche FG 8 December 2023 5.50 7,973 Series 1 Tranche BG 8 December 2023 5.50 5,922 Total 13,895 The medium term notes are secured by way of: (i) bank guarantee from two financial institutions in respect of the BG Tranches; (ii) financial guarantee insurance policy from Danajamin Nasional Berhad in respect to the FG Tranches; (iii) a first fixed and floating charge over the present and future assets and properties of Silver Sparrow Berhad and ICSD Ventures Sdn. Bhd. by way of a debenture; (iv) a third party first legal fixed charge over ICSD Ventures Sdn. Bhd.’s assets and land; (v) a corporate guarantee by the Company; (vi) letter of undertaking from the Company to provide financial and other forms of support to ICSD Ventures Sdn. Bhd. to finance any cost overruns associated with the development of the Sandakan Harbour Square; (vii) assignment of all its present and future rights, interest, and benefits under the ICSD Ventures Sdn. Bhd.’s Put Option Agreements in favor of Danajamin, Malayan Banking Berhad, and OCBC Bank (Malaysia) Berhad; (viii) assignment over the disbursement account, revenue account, operating account, sale proceed account, debt service reserve account, and sinking fund account of Silver Sparrow Berhad, revenue account of ICSD Ventures Sdn. Bhd., and escrow account of Ireka Land Sdn. Bhd.; (ix) assignment of all ICSD Ventures Sdn."
"Bhd.’s present and future rights, title, interest, and benefits in and under the insurance policies; and (x) a first legal charge over all the shares of Silver Sparrow Berhad, ICSD Ventures Sdn. Bhd., and any dividends, distributions, and entitlements. Potensi Angkasa Sdn. Bhd., a subsidiary incorporated on 25 February 2019, has secured a commercial paper and/or medium term notes program of not exceeding US$21.99 million (RM90.0 million) to fund a project known as The RuMa Hotel and Residences. PASB may, from time to time, issue commercial paper and/or medium term notes whereby the nominal value of outstanding notes shall not exceed US$21.99 million (RM90.0 million) at any one time. The details of the drawdown schedule were as follows: Initial Issue First Roll-over Second Roll-over Third Roll-over Tranche Number Date RM (’000) Tranche Number Date RM (’000) Tranche Number Date RM (’000) Tranche Number Date RM (’000) Tranche 1-23 10 Jun 2019 22,850 Tranche 63-83 10 Jun 2020 20,950 Tranche 124-142 10 Jun 2021 19,050 Tranche 24-31 30 Sep 2019 9,600 Tranche 84-91 30 Sep 2020 9,600 Tranche 143-147 1 Oct 2021 4,750 Tranche 180-184 3 Oct 2022 4,750 Tranche 32-49 7 Oct 2019 17,100 Tranche 92-109 7 Oct 2020 17,100 Tranche 148-165 8 Oct 2021 17,100 Tranche 185-202 10 Oct 2022 17,100 Tranche 50-62 25 Feb 2020 15,350 Tranche 110-122 25 Feb 2021 15,350 Tranche 166-178 28 Feb 2022 15,350 Tranche 123 9 Jun 2021 18,100 Tranche 179 10 Jun 2022 20,000 The weighted average interest rate of the loan was 9.07 percent per annum at the statement of financial position date. The effective interest rates of the medium term notes and their outstanding amounts were as follows: Maturity Dates Interest rate percent per annum As at 31 December 2022 US$’000 Tranches 124-142 13 February 2023 7.00 4,339 Tranches 166-178 1 March 2023 8.50 3,497 Tranche 179 12 June 2023 11.00 4,556 Tranches 180-184 3 April 2023 9.50 1,082 Tranches 185-202 11 April 2023 9.50 3,895 Total 17,369 Security for CP/MTN Programme: (a) A legal charge over the Designated Accounts by the PASB and/or the Security Party and assignment of the rights, titles, benefits, and interests of the PASB and/or the Security Party thereto and the credit balances therein on a pari passu basis among all Notes, subject to the following: (b) In respect of the 75 percent of the sale proceeds of a Secured Asset arising from the disposal of a Secured Asset, the Noteholders of the relevant Tranche secured by such Secured Asset shall have the first ranking security over such Net Sale Proceeds; (c) In respect of the insurance proceeds from the Secured Assets, the Noteholders of the relevant Tranche secured by such Secured Asset shall have the first ranking security over such Insurance Proceeds; (d) In respect of the sale deposits from the Secured Assets, the Noteholders of the relevant Tranche secured by such Secured Asset shall have the first ranking security over such Sale Deposits; (e) In respect of the amount at least equivalent to an amount payable in respect of any coupon payment of that particular Tranche for the next six months to be maintained by the Issuer, the Noteholders of the relevant Tranche shall have the first ranking security over such Issuer’s DSRA Minimum Required Balance; (f) In respect of the proceeds from the Collection Account, the Noteholders of the relevant Tranche shall have the first ranking security over such CA Proceeds; (g) In respect of any amount deposited by the Guarantor which are earmarked for the purposes of an early redemption of a particular Tranche of the Notes and/or principal payment of a particular Tranche of the Notes, the Noteholders of the relevant Tranche shall have the first ranking security over such Deposited Amount; (h) An irrevocable and unconditional guarantee provided by Urban DNA Sdn. Bhd. for all payments due and payable under the CP/MTN Programme; (i) Any other security deemed appropriate and mutually agreed between the PASB and the Principal Adviser/Lead Arranger. Security for each medium term note: Each Tranche shall be secured by assets to be identified prior to the issue date of the respective Tranche. Such Secured Assets may be provided by third parties, which, together with the Guarantor, shall collectively be referred to as Security Parties and each a Security Party."
"Subject always to final identification of the Secured Asset prior to the issue date of the respective Tranche, the security for any particular Tranche may include but not be limited to the following: (a) Legal assignment and/or charge by the PASB and/or the Security Party of the Secured Assets; (b) An assignment over all the rights, titles, benefits, and interests of the PASB and/or the Security Party under all the sale and purchase agreements executed by end-purchasers and any subsequent sale and purchase agreement to be executed in the future by end-purchasers, in relation to the Secured Assets; (c) A letter of undertaking from Aseana Properties Limited to, amongst others, purchase the Secured Assets; (d) Any other security deemed appropriate and mutually agreed between the Issuer and the Security Party. We are here live in Omaha, Nebraska. Good morning, everybody! I'm Becky Quick, along with Mike Santoli. In just 30 minutes, Berkshire Hathaway Chairman and CEO Warren Buffett is going to be taking the stage with his Vice Chair Charlie Munger. PA/LA and/or Lead Manager prior to the issuance of the relevant tranche. The security for each tranche is referred to as tranche security. Related party transactions involve transactions between the Group and Ireka Corporation Berhad (ICB) and its group of companies, classified as related party transactions based on ICB’s 23.07% shareholding in the Company. In 2009, the Group entered into a Joint Venture Agreement (JVA) with Ireka Corporation Berhad for the construction of The RuMa Hotel and Residences. Under the terms of that JVA, the joint venture partners are required to make equity contributions in proportion to their participating interest for the purpose of the development and construction of the RuMa. In the opinion of the directors, they have considered that the JVA allows for the equity contribution to be deferred and paid upon the conclusion of construction. At 31 December 2022, the total amount of equity contribution owed by ICB was US$11.7 million (at 31 December 2021: US$12.2 million). The recognition of these amounts owed by ICB would be offset by the corresponding entry of the amount owed to ICB, which therefore has no net impact on the consolidated financial statements. The equity contributions are non-trade in nature and are unsecured and interest-bearing. Furthermore, the Group was entitled to interest receivable from ICB. The interest receivable was calculated based on an annual interest rate of 2% above the Malaysia lending rate and applied to the deferred equity contributions. Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing, and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group and certain members of senior management of the Group. 2022 US$’000 2021 (Restated) US$’000 ICB Group of Companies Accrued interest on shareholders advance payable by ICB 1,462 1,259 Accrued interest on a contract payment by an ICB subsidiary 131 122 Key management personnel Remuneration of key management personnel - Directors’ fees 265 291 Remuneration of key management personnel - Consulting fees 300 287 Transactions between the Group and other significant related parties are as follows: 2022 2021 US$’000 US$’000 Non-controlling interests Advances – non-interest bearing 129 121 Other related parties Disposal of subsidiaries - - The above transactions have been entered into in the normal course of business and have been established under negotiated terms. The outstanding amounts due from/to ICB and its group of companies as at 31 December 2022 and 31 December 2021 are as follows: 2022 US$’000 2021 (Restated) US$’000 Net amount due from an ICB subsidiary - 2,005 Net amount due from ICB 5,461 4,416 The outstanding amounts due to the other significant related parties as at 31 December 2022 and 31 December 2021 are as follows: 2022 2021 US$’000 US$’000 Non-controlling interests Advances – non-interest bearing (1,981) (1,952) Transactions between the parent company and its subsidiaries are eliminated in these consolidated financial statements. A list of subsidiaries is provided in Note 32. Investment in subsidiaries Name Country of incorporation Principal activities Effective ownership interest 2022 2021 Subsidiaries Ireka Land Sdn. Bhd. Malaysia Property development 100% 100% Amatir Resources Sdn. Bhd. Malaysia Property development 100% 100% ICSD Ventures Sdn. Bhd. Malaysia Hotel and mall ownership and operation 100% 100% Potensi Angkasa Sdn. Bhd Malaysia Participating in the transactions contemplated under the Guaranteed MTNs Programme 100% 100% Silver Sparrow Berhad Malaysia Participating in the transactions contemplated under the Guaranteed MTNs Programme 100% 100% Bumiraya Impian Sdn. Bhd."
"Malaysia Property development 80% 80% The RuMa Hotel KL Sdn. Bhd. Malaysia Investment holding 70% 70% Urban DNA Sdn. Bhd. Malaysia Property development 70% 70% Aseana-BDC Co Ltd Vietnam Investment holding 65% 65% Debt service reserve account In 2017, Silver Sparrow Berhad obtained consent from the lenders to utilize proceeds of US$4.89 million in the Sales Proceeds Account and Debt Service Reserve Account to partially redeem the MTNs. Thereafter, an amount equivalent to RM10.0 million (US$2.40 million) is maintained in the DSRA at all times and the amount is disclosed as deposit pledged. In the event the funds in the DSRA fall below the Minimum Deposit, SSB shall within five Business Days from the date of receipt of written notice from the facility agent or upon SSB becoming aware of the shortfall, whichever is earlier, deposit such sums of money into the DSRA to ensure the Minimum Deposit is maintained. Sale of discontinued operations On 23 August 2021, the Group entered into the sale agreement to divest its operations and assets of the International Healthcare Park and the City International Hospital, held under Hoa Lam Services Company Limited and Shangri-La Healthcare Investment Pte. Ltd., and the indirectly held subsidiaries under both companies for a gross consideration of approximately US$18.3 million. The gross consideration comprised the repayment of current account to the Group for approximately US$8.3 million and a net consideration for transfer of equity interest for US$10.0 million. The conditions precedent for the divestment were met and the transaction was completed on 28 February 2022 when the shares were transferred to the purchaser. The subsidiaries were reported in 2021 as discontinued operations until the Disposal Date. Details of financial position of the Disposal Group were as follows: 2022 2021 US$’000 US$’000 Property, plant and equipment 400 400 Intangible Assets 3,519 3,519 Inventories 80,315 80,315 Trade and other receivables 1,250 1,250 Cash and cash equivalents 8,561 15,329 Trade and other payables (54,314) (54,314) Loans and borrowings (32,016) (32,016) Current tax liabilities (17) (17) Net assets classified as Asset held for Sale 7,698 14,466 There was no reported profit or loss from the discontinued operations during the year up to the Disposal Date. Analysis of the cash flows of discontinued operations are as follows: 2022 US$’000 2021 US$’000 Net cash generated from operating activities - 32,537 Net cash used in investing activities - - Net cash used in financing activities (6,768) (17,768) Net cash (used in)/generated from discontinued operations (6,768) 14,769 Details of the sale of the discontinued operations are as follows: 2022 US$’000 2021 US$’000 Consideration received or receivable Cash 10,045 - Total disposal consideration 10,045 - Carrying amount of net asset sold (7,698) - Non-controlling interests derecognized 874 - Receivables derecognized (279) - Gain on sale before income tax and reclassification of foreign currency translation reserve 2,943 - Reclassification of foreign currency translation reserve (241) - Income tax expense on gain - - Gain on sale after income tax (2,702) - Copies of the annual report will be available on the Company's website and from the Company's registered office, Osprey House, Old Street, St. Helier, Jersey, JE2 3RG, Channel Islands. Annual Report 2022 Annual Report for the year ended 31 December 2022 Investing for generations Investment objective The Company’s objective is to be a core investment for investors that delivers a real return over the long term through a combination of capital growth and a rising dividend. The Company invests primarily in global equities across a wide range of different sectors and industries to achieve its objective. Catering for every generation, Alliance Trust aims to grow your capital over time and provide rising income by investing in global equities. Contents Strategic Report Introduction Our Performance Chairman’s Statement Investment Manager’s Report Our Stock Pickers Investment Portfolio Dividend Ongoing Charges and Discount How We Manage Our Risks Directors’ Report Board of Directors Corporate Governance Viability and Going Concern Statements Audit and Risk Committee Directors’ Responsibilities Remuneration Report Independent Auditor’s Report Financial Statements Other Information Connecting with Shareholders Alternative Performance Measures Glossary of Terms Information for Shareholders Ten Year Record Annual Report and Financial Accounts 2022 As rated by Willis Towers Watson. MSCI All Country World Index. Apart from GQG Partners, which also manages a dedicated emerging markets mandate with up to 60 stocks. A core holding for all generations Our portfolio’s unique blend of Stock Pickers and their customized stock selections make Alliance Trust a strong, core holding for long-term investors seeking capital growth and rising income."
"Whatever your financial goal, be it saving for university or a first home, building a pension or leaving a legacy, we’re built to help you achieve this. Proven resilience Established in 1888, we’ve successfully navigated two world wars, multiple economic crises, the Covid-19 pandemic, and numerous political upheavals. Low maintenance Our ready-made portfolio does all the hard work for you. With thousands of funds to choose from, it can be daunting finding the time and having the confidence to be your own wealth manager. By using experts to select and monitor a team of top-rated Stock Pickers, who in turn choose their most attractive stocks, we provide a simple, high-quality way to invest in global equities at a competitive cost. Diversified by country, industry, and style Our approach doesn’t depend on the skill of a single high-profile individual. It’s a team effort which means the portfolio can add value through varying stock market cycles and deliver more consistent returns. All of our Stock Pickers have different but complementary approaches to investing. This means our holdings are well diversified across countries, industries, and investment styles to seek a wide range of opportunities while minimizing risk. Focused stock picking Although well diversified, we avoid hugging the Company’s benchmark index by asking the Stock Pickers to choose no more than 20 stocks in which they have the highest level of conviction. When combined, our portfolio’s country and sector exposures resemble the index but its individual holdings are very different. This high level of divergence is designed to maximize potential for outperformance. Expert manager selection All the Stock Pickers are chosen by our investment manager, Willis Towers Watson, a leading global investment business. WTW researches thousands of managers globally before selecting a diverse team of best-in-class Stock Pickers for Alliance Trust. To control risk, WTW then balances the amount of capital allocated to each of them. Due to the modular construction of the portfolio, if a Stock Picker needs to be replaced, this can be done smoothly. Responsible ownership Our approach to investment is forward-thinking. To help protect the returns of the next generations, we include consideration of environmental, social, and governance factors in the selection of our Stock Pickers who in turn include these factors in their investment processes. We place particular emphasis on engaging with companies to drive change in harmful business practices that may threaten long-term corporate profitability. Rising dividend We’re proud of our 56-year track record of dividend growth, which is one of the longest in the investment trust industry. Our unique approach brings together the best ideas from world-class Stock Pickers. Each is responsible for investing in a selection of high conviction equities. Gregor Stewart Chairman Introduction Key performance indicators On these two pages we set out the Key Performance Indicators the Board uses to measure performance. The benchmark we use is the MSCI All Country World Index in sterling with net dividends reinvested. Share Price Total Dividend NAV Total Return Key performance indicators As at 31 December 2022 840.0p 13.96p 23.1% 901.0p 14.38p 8.5% This measures the performance of our assets. It combines any change in the NAV with dividends paid by the Company. Source: Morningstar and MSCI Inc. NAV Total Return based on NAV including income with debt at fair value and after Stock Picker and WTW investment fees. Alliance Trust MSCI ACWI Peer Group Median AIC Global Sector Average NAV Total Return (unweighted) This demonstrates the return our shareholders receive through dividends and capital growth of the Company. Comparison against peers This shows our NAV Total Return against the Total Return of the Morningstar universe of UK retail global equity funds and the AIC Global Sector. Net asset value (pence) This shows the value per share of the investments held by the Company less its liabilities. Our performance Chairman’s statement Volatile market backdrop There were few places for investors to hide in 2022. The return of high inflation after a 40-year absence, the war in Ukraine, higher interest rates, and fears of recession sent most asset prices tumbling. Equities suffered less than bonds but still ended the year down on the previous year. Against this challenging backdrop, the Company delivered an encouraging performance against its benchmark index, the MSCI All Country World Index, and outperformed most of its competitors in the Association of Investment Companies Global Sector. In its report, our Investment Manager, Willis Towers Watson, analyzes this performance."
"While any negative annual return is frustrating, we remain focused on long-term performance and are encouraged by last year’s progress relative to competitors and the index. Resilient performance In the year to 31 December 2022, the Company’s Net Asset Value Total Return was -7.1% (2021: 18.6%), outperforming our benchmark index, the MSCI ACWI, which returned -8.1% (2021: 19.6%). The Company’s Total Shareholder Return was -5.8% (2021: 16.5%), as the discount to NAV at which the shares traded narrowed. The average TSR of the AIC Global Sector peer group was -23.2%. Our portfolio’s longer-term returns also compare well with our peers. Between 1 April 2017, when we adopted our multi-manager strategy, and 31 December 2022, the Company’s TSR was 54.7% against the average share price return of the AIC Global Sector peer group of 41.2%. We estimate that anyone investing £100 in April 2017 will have seen the value of their investment grow to £155 if they had reinvested their dividends. The Board is satisfied that the Company’s long-term. Performance has been consistent with its objective of delivering real returns and a rising dividend. It is also pleased with the performance versus peers. The only disappointment is that the company has not yet outperformed its benchmark index by the target set when the investment strategy was adopted on 1 April 2017. As part of its annual review of the performance of the investment manager, the board also considered WTW’s performance over the first five-year period since its appointment. Further details on the nature and outcome of the review can be found on page 49. The main findings of the review reinforced the board’s judgment that the investment strategy is sound, and the board continues to endorse WTW’s investment approach. Increased Dividend The board has declared a fourth interim dividend of 6.0p per share which brings the full year dividend to 24.0p. Following the step up in dividend levels from the second half of 2021, this is a 26% increase on the prior year and the 56th consecutive annual increase in the ordinary dividend. With a share price of 948.0p at year end, the full year dividend represents a yield of 2.5%. Following a year of particularly high income from certain stocks in the portfolio, I am pleased to report that earnings per share for the year ended 31 December is 26.14p per share (2021: 15.48p). Given this high level of earnings in 2022, the board has taken the opportunity to take advantage of the company’s structure as an investment trust and add to the company’s already significant distributable reserves. Borrowing and Gearing There were no major changes to the company’s long-term borrowing arrangements during 2022. As market interest rates rose, the value of the fixed rate loans on the company’s balance sheet declined resulting in a higher NAV, thus enhancing overall performance for the year. Further details on the revaluation of debt and its contribution to shareholder returns can be found on page 9. Chairman's Statement We are pleased that our performance was more resilient than the market and ahead of most of our peers in the AIC Global Sector. Gregor Stewart, Chairman. Stable Discount As shareholders are aware, one of the board’s strategic objectives is the maintenance of a stable discount. The company’s average discount over the year was 5.9%, equal to that of the prior year. As at 31 December 2022, the company’s discount was 4.2% (2021: 5.3%). This compared favorably with the average discount for the AIC Global Sector of 7.4% as at the year end. During the year under review, the company bought back 15.5 million shares. These share buybacks helped to support the stability of the discount and enhanced the NAV total return by 0.3%. The board will continue to use share buybacks as appropriate, and invest in promotional activity, such as investor events, designed to raise the company’s profile, to support the management of the discount. We hope, in time, to convert our discount into a premium as the benefits of our long-term strategy gain wider recognition. Further details on the company’s discount can be found on page 34. Strengthened Operating Model As previously announced, we made some operational changes at the end of 2022 which were the outcome of the work undertaken by the board to strengthen the company’s operating model. Juniper Partners Limited has been appointed as company secretary and will also provide finance, fund administration and accounting services to the company from 1 April 2023."
"WTW was also appointed to provide further marketing, public relations, and investor relations services. The changes will benefit shareholders by reducing risk in the company’s operating model and should also enhance the company’s communications. The board is pleased that despite the changes, it has been able to continue to work with members of the company’s executive team in their new roles with either Juniper or WTW. You can read more about the changes including details of the revised fee payable to WTW on page 55. Board Succession As part of our succession planning, we have made a number of changes to the board over the past three years. The most recent of these being the appointment of Vicky Hastings and Milyae Park to the board in September 2022. Vicky has extensive experience in fund management, both as a fund manager and business leader, while Milyae’s diverse career spans financial services, retail, and technology. They have brought further diversity of skills and fresh perspectives to the board. I would like to express my thanks to Anthony Brooke for his significant contribution to the board over the past seven and a half years. Anthony joined the board in 2015 and will complete his tenure at the Annual General Meeting on 27 April 2023. Portfolio Well Positioned for Uncertain Economic Outlook The outlook for the global economy remains highly uncertain and equity markets remain volatile. If inflation and interest rates have peaked in the US and the UK, as some analysts believe, and the war in Ukraine comes to an end, equity markets may rally. On the other hand, they may fall further if we descend into a deep recession. Coherent arguments can be made for both a bull and a bear case. The good news is that the success of our investment strategy does not hinge on macroeconomic outcomes. Regardless of the immediate outlook, our stock pickers remain resolutely focused on finding excellent businesses with exciting prospects. The speculative froth topping the valuations of many growth stocks has been blown away by higher interest rates and harsher economic conditions. We now look forward to the possibility of company fundamentals, not sentiment, driving share prices, if not for the short term, certainly in the long run. Gregor Stewart, Chairman, 8 March 2023. Investment Manager’s Report The Collins Dictionary’s word for the year is permacrisis, a portmanteau of permanent and crisis. It seems appropriate, as the world has lurched from one unprecedented event to another in the past few years. First Brexit, then the Covid pandemic, quickly followed in February last year by Russia’s invasion of Ukraine. The return of a land war to Europe began to reshape geopolitics and triggered sharp rises in food and energy prices, adding to inflationary pressures already building due to supply chain disruption and ultra-loose monetary policy linked to Covid. Interest rates decisively reversed direction, finally ending the cycle of rate reductions that began in the Great Financial Crisis. It hardly needs to be said that 2022 was one of the toughest environments on record for investors. It was also a year in which it was difficult for investment managers focusing on bottom-up stock picking to add value. Not surprisingly, most asset classes delivered negative returns. With the war driving up energy and raw materials prices, only commodities bucked the downward trend. The company’s benchmark, the MSCI ACWI, which includes developed and developing markets, returned -8.1% during the year. The company’s NAV total return also fell but was more resilient than the benchmark returning -7.1%, while a narrowing of the discount meant that TSR declined by 5.8%. The portfolio therefore outperformed the index in a challenging market environment. It also declined in value by a lot less than those investment trusts with a growth-style bias which have led the way in recent years. In the words of one analyst, Alliance Trust was an island of stability. Growth Stocks Led Market Decline Within the equity market, previously high-flying growth stocks in the US suffered some of the sharpest declines. Having contributed the most to performance in prior years, stocks such as Meta, Tesla, Alphabet, Microsoft, Amazon and Apple accounted for approximately half of the decline in the MSCI ACWI in 2022. Lesser-known growth stocks, such as Shopify, Snap, and DocuSign also suffered steep declines in value."
"Meanwhile, defensive and less glamorous value stocks generally did well, though measuring returns in aggregate by investment style masked what was largely a switch in fortune between the technology and energy sectors, with the latter soaring in value. The about-turn in sector performance is easily explained by the abrupt reversal in the interest rate cycle since late 2021 and early 2022. Higher borrowing costs dented optimism about the future earnings potential for many tech companies, while soaring prices for commodities boosted near-term cash flows and profits for energy and raw materials companies. On a country basis, the UK stock market did relatively well last year, with the FTSE 100 managing a modest gain of 0.9%, due to its concentration of energy and raw materials companies. Chinese equities fell significantly, as its economy remained semi-closed through much of the year due to persistent Covid lockdowns, though these had begun to ease by the end of 2022 because of public pressure. Balanced Stock Exposure Helped Performance The portfolio’s outperformance versus the market and most peers in 2022 stemmed from maintaining a balanced exposure to countries, sectors, and styles, and focusing on stock picking as the primary source of returns, although having slightly more money in aggregate invested in the UK than the index added value. In addition, the company’s NAV total return benefitted over the period from the decline in the fair value of the company’s fixed rate debt with rising bond yields. Offsetting some of this benefit was the impact of the portfolio being geared in a falling market. Whereas in previous years, our diversified stance had held back performance versus the market and many growth-style peers, due to the concentration of returns in a handful of expensive US growth stocks, in 2022 it enabled us to avoid the worst of the tech rout and, at the same time, benefit from the recovery in energy stocks. Not owning Tesla and Apple boosted relative returns versus the index, and although we continue to own some other fallen growth stars such as Amazon, Salesforce.com and Alphabet, the relative modesty of our exposures helped to contain the damage. The oil companies ExxonMobil in the US, BP in the UK and Petrobras in Brazil were among the biggest contributors to relative returns. Our stock pickers also found winners in defense, where BAE Systems and Booz Allen Hamilton benefitted from rising demand due to increased government spending. Our positions in healthcare and financials, with US-based UnitedHealth Group and Indian bank HDFC also boosted returns. In terms of the stock pickers, GQG contributed most to the portfolio’s outperformance, having correctly timed its exit from many overpriced tech stocks in 2021 and increased its exposure to cheaper energy companies. Jupiter and Black Creek, which both have a bias towards value stocks, also did well, while the stock pickers with a growth-style bias, such as Sands Capital and Sustainable Growth Advisors, which had performed well in prior years during the growth boom, were hit by the deratings of many of the stocks that they owned. We retain high conviction in the skill of both Sands and SGA to add value to the portfolio in the longer term, even though many of the stocks that they own may have been out of favor during 2022. Portfolio Turnover Reflected New Opportunities Our role as investment manager is to select the best stock pickers available globally and blend them together into a balanced portfolio, reallocating capital between them where necessary to control risk. We consciously did not change the strategic stance of the portfolio during the year, although we terminated River and Mercantile Asset Management’s mandate in March due to a change in corporate ownership which we thought could undermine the firm’s investment culture. At the time, R&M’s relatively small allocation accounted for approximately 6% of the portfolio. This capital was redistributed to existing stock pickers with similar investment approaches, principally Jupiter and Black Creek, to retain the portfolio’s overall style balance, although some of the capital also went to GQG. Stock picker weights evolved naturally during the year due to share price fluctuations and there was some turnover in positions by the stock pickers, most notably GQG’s shift between sectors. Total stock turnover was 56.7%, partly due to the reallocation of R&M’s capital, without which it would have been below 50%. At that level, stock turnover equates to an average two-year holding period. This may seem short for an investment approach focused on investing for generations."
"However, last year was anything but normal. The volatility of share prices created many new opportunities and our stock pickers actively exploited them. Examples of outright sales in 2022 included Novo Nordisk, which was disposed of by SGA and replaced with ICON. ICON is a leading contract research organization specializing in the strategic development, management, and analysis of programs that support clinical development. ICON’s scale enables it to expedite the clinical trial process and provide more comprehensive offerings, allowing it to charge premium prices. Sands purchased Keyence and sold Twilio. Twilio, a California-based business selling communication tools, was sold due to weakening fundamentals, indications of a deteriorating competitive position, and waning confidence in management’s execution. Keyence is a leading designer of high-end factory automation sensors and sensor systems. Despite the tech sell-off, Sands expects the company to maintain its leadership position as it expands into new industries, solutions, and applications over the next decade, that should hopefully result in sustained above-average earnings growth. Vulcan Value Partners added CBRE Group and General Electric to the portfolio. CBRE is the largest commercial real estate services provider in the world, with over 100,000 employees generating $17 billion of net revenue. CBRE serves both corporate occupiers of real estate and real estate investors. GE is an industrial company that operates in aviation, healthcare, renewable energy, and power. Vulcan believes that GE’s management has made considerable progress in simplifying the company’s structure and de-risking the balance sheet. Black Creek sold Nutrien, the world’s largest crop nutrient company, whose share price increased sharply as fertilizer prices rose to all-time highs, and purchased Stericycle, a leading global provider of regulated waste disposal services to businesses. Black Creek was attracted by Stericycle’s valuation, which is temporarily depressed as it goes through a multi-year restructuring program which will leave it stronger in the long run. The portfolio’s positioning at the end of the year remained broadly neutral versus the benchmark across countries, sectors, and styles. Even so, the portfolio was marginally overweight in the UK and in industrials where some of our stock pickers see opportunities from investment in new capacity. The portfolio was also underweight in the US. These overweight and underweight sector and country positions were the byproducts of bottom-up stock selection versus top-down allocations and were well within our risk tolerance. Despite top-down similarities, the portfolio was vastly different to the index in terms of stocks, with an active share of 79%, ensuring stock selection drives relative returns. Number of companies as at 31 December 2022: Portfolio 186, MSCI ACWI (benchmark index) 2,885. Asia and Emerging Markets 17.1% Europe 15.7% UK 11.2% Stock Picker Cash 2.9% All figures may be subject to rounding differences. Source: WTW, Bank of New York Mellon. Data as at 31 December 2022. All figures may be subject to rounding differences. Source: WTW, Bank of New York Mellon. Data as at 31 December 2022. Sector Information Technology 23.6% Utilities 1.3% Real Estate 0.9% Stock Picker Cash 2.9% Industrials 13.9% Financials 12.6% Health Care 11.0% Communication Services 9.4% Consumer Discretionary 8.4% Energy 6.2% Consumer Staples 5.3% Materials 4.5% Portfolio Weight Portfolio Weight 13 Investment Manager’s Report Uncertain Market Outlook After a tough year for investors, it may be tempting to think that the worst of the bear market is over. However, we expect continued economic uncertainty to produce more market volatility. On the positive side, there are some encouraging signs that inflation pressures may have peaked in the US and UK. This means we may be approaching the end of the cycle of rising interest rates. If that is the case, it is plausible that the global economy could achieve a soft landing, in other words a cyclical slowdown that avoids a deep and widespread recession. But a hard landing seems just as likely if interest rates remain at current levels and corporate earnings fail to meet optimistic expectations. Hence gross gearing at year end was 7.8%, at the lower end of our typical 7.5 to 12.5% range, reflecting our caution about the market outlook. We believe the Company’s portfolio is well positioned, with balanced exposure to stocks that can survive, and even thrive, in the current high inflation environment, as well as many companies who are financially strong enough to weather a recession. We also have exposure to many high-quality cyclical stocks with temporarily depressed valuations that could benefit disproportionately from an economic rebound."
"This reflects the fact that our approach does not attempt any big calls on the future direction of the market. We believe there are potential mispricing opportunities across the market, whether it is among growth stocks that have been oversold or value stocks whose earnings prospects are underappreciated. Our goal is simply for our Stock Pickers to pick the right companies with the best long-term opportunities for superior returns. Fundamentals Drive Returns in the Long Term We are reassured that, altogether, the portfolio has more attractive characteristics than our benchmark, namely a lower valuation, a higher dividend yield and more stable projected earnings growth. We also take comfort from empirical evidence that, notwithstanding short-term fluctuations due to changes in market sentiment, share prices follow company fundamentals in the long run. All figures may be subject to rounding differences. Notes: The Price to Earnings ratio, also called the P/E ratio, is an indication of the worth of a company. It is the amount per share that an investor will pay for each £1 of that company’s earnings. One way to calculate the P/E ratio is to use actual reported earnings over the past 12 months. This is referred to as the trailing P/E ratio. The P/E ratio can also be calculated using an estimate of future earnings (the forward P/E). The lower the P/E ratio the better value that company should be. Earnings per Share is an indicator of how much money a company makes for each share of its stock, it is a measure of a company’s profitability. Earnings per Share Growth gives a good picture of the rate at which a company has grown its profitability over a given period, with higher levels suggesting a company has products or services in strong demand and is able to grow its earnings faster. Earnings per Share Stability is a measure of the level of fluctuation in a company’s Earnings per Share over a given time period, the higher the value the more predictable future earnings should be. Source: BNY Mellon Performance and Risk Analytics Europe Limited. Data as of 31 December 2022. Portfolio Fundamentals are Strong Portfolio Fundamentals at 31 December 2022 Price to Earnings (Trailing) Price to Earnings (Forward 1 Year) Price to Book Value Dividend Yield Debt to Equity Earnings per Share Growth (Forecast 1 Year) Earnings per Share Stability (5 Year) 18.5x 17.5x 13.8x 14.7x 2.5x 2.4% 2.3x 2.9% 1.1x 1.0x 7.9% 26.1% 12.6% 27.5% MSCI ACWI Index Alliance Trust Portfolio Portfolio has more attractive valuation than the benchmark with higher dividend yield and higher and more stable earnings growth. Strategic Report Investment Manager’s Report It is notable that since our appointment on 1 April 2017, the price appreciation achieved through improvements in the underlying businesses of portfolio companies, as opposed to changes in market sentiment, is much greater than that of the benchmark. The charts opposite detail the components of returns for the Company’s portfolio, the MSCI ACWI and S&P 500. By contrast, the benchmark has benefitted disproportionally in recent years from over-excitement about the earnings potential of fashionable high tech growth stocks. As the more challenging economic environment forces investors to become increasingly hard-headed in their assessment of corporate prospects, we believe that the fundamentally strong companies in the Company’s portfolio, whether they are classified as growth or value or something in between, will gain greater recognition. Since the adoption of the multi-manager approach on 1 April 2017, after all costs, the NAV Total Return has performed in line with low-cost passive products and has outperformed the AIC Global Sector. Given that market returns are no longer as concentrated as they have been in recent years we are growing more confident that we will outperform the benchmark from here. It is a trite analogy, but we believe that a slow and steady pace wins the investment race, even if it lacks the excitement and bursts of speed associated with more adventurous strategies. We aim to offer investors a smooth path to the finishing line. Source: WTW, MSCI Inc. Data from 30 April 2017 to 31 December 2022 based on Price to Book. Equity portfolio log return gross of fees, which excludes the impact of gearing on returns and cost of gearing. The Ongoing Charges Ratio for 2022 was 0.61%. Source: WTW, Robert Shiller. Data as at 31 December 2021 based on Price to Earnings (Trailing)."
"Company Fundamentals Drive Share Prices in the Long Term Components of Gross Equity Portfolio Return for the Alliance Trust portfolio, 2017 to 2022 S&P 500 Components of Stock Returns over 150 years, 1871 to 2021 Alliance Trust MSCI ACWI Fundamental Growth Investor Sentiment Chairman's Statement Investment Manager’s Report Responsible Investment: The Alliance Trust Approach As stewards of approximately £3 billion of assets, we apply high standards of Responsible Investment to managing the investment portfolio on behalf of shareholders. Environmental, Social and Governance factors can all have a significant impact on the Company’s ability to deliver growth in capital and rising dividends. ESG risk factors are therefore integrated into the investment processes by the Company’s Investment Manager, Willis Towers Watson, to protect financial returns. WTW has a rigorous approach to Responsible Investing. WTW conducts due diligence on the Company’s Stock Pickers to ensure they have a long-term mindset, exercise voting rights and engage with companies on ESG considerations. WTW has appointed EOS at Federated Hermes, a renowned stewardship specialist, to provide an additional layer of engagement with companies, policy makers and regulators. With over $1.6 trillion under advice, this gives EOS more weight when lobbying for profitable change than one Stock Picker would have as a standalone investor. WTW monitors the portfolio and challenges the Stock Pickers when it feels their analysis could be improved, particularly in relation to climate change. WTW has extensive resources in this area, comprising 90 specialists analysing company-by-company the financial implications of climate change. Targeting Net Zero Greenhouse Gas Emissions Climate change poses significant risks to investment returns from many companies, which is why the Company has pledged to have its assets managed to achieve Net Zero by 2050 at the latest, with an interim target of reducing portfolio emissions by 50% by 2030, relative to 2019. However, the transition to Net Zero by 2050 will not be linear. There will be times when it will be attractive to invest in innovative companies developing solutions to climate change. But there will also be times when it will make financial sense to buy mispriced shares in traditional energy companies. We benefitted last year from GQG correctly seeing in 2021 that the shares of many traditional energy companies were trading well below levels that were justified by their future profitability. Increased allocations to high-emitting stocks such as Heidelberg Materials, ExxonMobil and Petrobras, among others, meant that overall portfolio emissions rose year-on-year. However, the weighted average carbon intensity ended the year lower than the index. Although there was a handful of stocks driving up portfolio emissions last year, two-thirds of the portfolio holdings by weight were either on or transitioning towards a clear path to Net Zero. The key to tackling the laggards is to engage and keep encouraging them in the right direction. GQG, as a responsible owner of ExxonMobil, for example, made two specific engagements in the past 18 months. During these discussions, GQG urged ExxonMobil to improve its climate disclosures, as it believes that ExxonMobil is investing in de-carbonisation more widely than is appreciated. GQG is encouraged that three new directors with sustainability expertise have been appointed to the ExxonMobil board of directors and that ExxonMobil announced its ambition for Net Zero greenhouse gas emissions by 2050. GQG has also recently engaged with Petrobras on our behalf. In addition to GQG’s efforts with these companies, EOS has an ongoing programme of engagement with them and some of the world’s largest emitters of greenhouse gases, arguing for more sustainable long-term business models, reductions in greenhouse gases and improved governance and disclosure. EOS plays a key role in support of Climate Action 100, an investor led initiative with the support of over 700 investors, representing more than $68 trillion of assets under management that aims to ensure the world’s largest corporate greenhouse emitters take the necessary action on climate change. Climate Action 100 is engaging with 166 companies, accounting for over 80 percent of global corporate industrial greenhouse gas emissions. While many of these companies are improving their disclosures, and embracing Net Zero commitments, their real-world activities are not yet sufficient to shift their business models to align with Net Zero goals. This demonstrates the need to continue to escalate engagement activity with the highest emitters to ensure Net Zero goals are met."
"As the transition gains momentum, EOS will continue to engage with such companies to ensure that they recognise the reality of a Net Zero economy, that they factor this into their financial and strategic planning, and that they deploy capital to address the risks and capture the opportunities presented by the transition. Source: WTW, MSCI ESG Research LLC, data as at 31 December 2021 and 31 December 2022. Based on Portfolio and Benchmark investment of $1 billion. Carbon Emissions for Alliance Trust Portfolio Compared to MSCI ACWI 2021 2022 MSCI ACWI Alliance Trust Source: WTW, MSCI ESG Research LLC, data as at 31 December 2021 and 31 December 2022. Based on Portfolio and Benchmark investment of $1 billion. Weighted Average Carbon Intensity for Alliance Trust Portfolio Compared to MSCI ACWI 2021 2022 MSCI ACWI Alliance Trust Reasons for Voting Against Management Engagement to Drive Positive Change As well as engaging on climate change, we, together with EOS and our Stock Pickers are also focused on a wide range of governance and social issues. These issues get less scrutiny by regulators concerned about greenwashing and are not always as easy to assess with data. It is, however, possible to address them through engagement. For example, Jupiter successfully engaged with Bayer, the German listed pharmaceutical, consumer health and agricultural sciences company, to help persuade the CEO to step down after a series of missteps by voting against management, supervisory boards and the remuneration report. Metropolis Capital engaged with News Corp over the company’s use of a poison pill provision to prevent activist investors, competitors or other potential acquirers from taking control of the company. The provision had never been voted upon by shareholders. Following feedback from investors, including Metropolis, News Corp terminated the provision. Sands challenged Entegris on how it sources materials and tools for semiconductor manufacturing. Semiconductor companies have exposure to conflict minerals such as tantalum, tin, tungsten, and gold, given that many of these are integral components of manufacturing electronic circuits. Sands is encouraged that Entegris has hired a senior employee to enhance its public disclosures and responsible mineral sourcing and is transitioning away from materials sourced from Russia. In addition to engagements by the Stock Pickers, EOS engaged with 103 companies within the Alliance Trust portfolio on 493 issues and objectives throughout the year. Of these engagements, the environmental category accounted for 27% of total engagement, with 75% of environmental engagements relating to climate change. Meanwhile, our Stock Pickers voted on all voteable proposals, casting votes on 3,444 resolutions at investee company meetings. Of these resolutions, they voted against company management on 323 and abstained from voting on 109 occasions. Of the key votes against management, the issues voted on were governance-related issues such as remuneration and director election. The topics and breakdown of the ways in which our Stock Pickers voted are detailed opposite. Source: WTW, EOS at Federated Hermes data as at 31 December 2022. Note: Total percentages may not add up to 100 due to rounding differences. How We Voted Investment Manager’s Report Our Stock Pickers How We Manage the Company’s Portfolio We have overall responsibility for the management of the Company’s portfolio. We have built and manage a team of diverse, best-in-class Stock Pickers, each of whom invest in a bespoke selection of typically 10 to 20 of their best ideas. Investing for Generations is the backbone of the philosophy of the Company. It brings long-term principles into how we invest your money, including ESG considerations. This helps us define our investment approach, ensuring that the Stock Pickers’ thinking and practices are aligned with the core beliefs of the Company and that they invest responsibly. We consider this a key factor for long-term success. How We Choose Our Stock Pickers We aim to forge abiding partnerships with our Stock Pickers, enabling them to focus on what they do best. Our Stock Pickers are focused on the long term and do not necessarily look at volatility as a risk, but more as an opportunity: risk is more associated with the permanent loss of capital. There was one change to the Stock Picker line up in 2022. R&M’s mandate was terminated after a change in ownership. We were concerned that this could prove a distraction for the investment team. The capital allocated to R&M was redistributed among the remaining Stock Pickers with similar characteristics to retain balanced exposure to different styles of investment, sectors and regions."
"We are, however, always on the lookout for new Stock Pickers and the advantage of the multi-manager structure is that we can easily change the line-up without disrupting the whole portfolio. We invest significant time, research and effort in identifying Stock Pickers for the Company’s portfolio, leveraging our extensive research network, robust process and expertise. Our approach involves identifying the skills and characteristics we believe are essential in good Stock Pickers. We believe the key to identifying tomorrow’s high-performing Stock Pickers lies in extensive due diligence combined with qualitative and quantitative analysis. This due diligence focuses on the investment processes, resources and decision-making that make up the Stock Picker’s competitive advantage, the culture and alignment of the organisation that leads to sustainability of that competitive advantage, their approach to responsible investment. We aim to appoint Stock Pickers who actively engage with the companies in which they invest and have an effective voting policy. When necessary, we challenge the Stock Pickers and guide them towards better practices, and the operational infrastructure that minimises risk from a compliance, regulatory and operational perspective. We do not believe that quantitative assessments on their own provide enough information to give us an advantage in assessing the potential of a stock picker to outperform. Our manager research team formulates a view on each stock picker we seek to rate over a series of meetings. We look beyond past performance numbers to try to understand what competitive edge each stock picker has and whether that edge is likely to be sustainable in the future. We dig deeper into the investments made by each stock picker using a case study methodology to understand the depth of fundamental analysis involved in investment decisions. We look at matters such as the team’s process for selecting stocks, adherence to this process through different market conditions, relevant team dynamics, training and experience, as well as performance track record. We see the track record as just a single data point and, without the context of the additional data we assess, it is unlikely to persuade us that a stock picker is skilled. Our expectation of success further rises where we engage with stock pickers to structure bespoke high conviction, concentrated strategies usually of 10 to 20 stocks, at an attractive cost, and we believe portfolios are more robust when we diversify across stock pickers with differing approaches. High active share and concentrated portfolios are advantageous. Academic research supports this. The broadest opportunity set is provided by unrestricted global mandates, to allow skilled stock pickers the widest scope. As rated by WTW. Sebastian and Attaluri, Conviction in Equity Investing, The Journal of Portfolio Management, Summer 2014. Investment Manager’s Report Our Stock Pickers as at 31 December 2022 Stock Picker Background Investment Style Percentage of Portfolio by Value at 31 December 2022 Black Creek Investment Management: Black Creek is based in Toronto and was founded in 2004. Assets under management as at 31 December 2022 were 8.7 billion dollars. Long-term contrarian value-orientated buyers of leading businesses across the market cap spectrum. 14 percent (11 percent at 31 December 2021) GQG Partners: GQG is a boutique investment management firm focused on global and emerging markets equities. Headquartered in Fort Lauderdale, Florida, USA, it managed assets of 88 billion dollars as at 31 December 2022. Seeks large capitalisation, high-quality companies, with durable earnings growth over the long term; quality at a reasonable price. 20 percent (19 percent at 31 December 2021) (Includes both global and emerging markets mandates) Jupiter Asset Management: Jupiter was established in London in 1985 as a specialist investment boutique. Since then it has expanded beyond the UK and managed 50.2 billion pounds as at 31 December 2022. Looks for out-of-favour and undervalued businesses with prominent franchises and sound balance sheets. 11 percent (7 percent at 31 December 2021) Lyrical Asset Management: Lyrical Asset Management is a boutique advisory firm based in New York, with 250 clients and discretionary assets under management of over 6.4 billion dollars as at 31 December 2022. Looks for quality US companies with simpler business models and attractive growth amid the cheapest 20 percent of their universe. 7 percent (7 percent at 31 December 2021) Metropolis Capital: Metropolis is a UK-based firm with a value-based investment style. It had 2.6 billion pounds assets under management at 31 December 2022. Focuses on long-term market recognition of the fundamental value of their investments and income generated from those investments."
"10 percent (10 percent at 31 December 2021) Sands Capital: Sands is an independent, employee-owned firm based in Greater Washington DC, USA. As at 31 December 2022, it had assets under management of 38.9 billion dollars. Focuses on finding high-quality, wealth-creating growth businesses that can sustain above-average earnings growth over the long term. 5 percent (8 percent at 31 December 2021) Sustainable Growth Advisers: SGA is based in Stamford, Connecticut, USA, and manages US, global, emerging markets, and international large-cap growth portfolios. It had assets of 20.7 billion dollars as at 31 December 2022. Seeks differentiated companies that have strong pricing power with recurring revenue, strong cash flow generation, and long runways of growth. 11 percent (11 percent at 31 December 2021) Veritas Asset Management: Veritas was established in 2003 and is run with a partnership structure and culture. It has offices in London and Hong Kong. As at 31 December 2022, it managed 19.5 billion pounds. Aims to grow real wealth over five-year periods by looking for highly cash generative protected businesses benefitting from enduring growth trends. 15 percent (13 percent at 31 December 2021) Vulcan Value Partners: Vulcan is based in Birmingham, Alabama, USA, and was founded in 2007. As at 31 December 2022, it managed 8.1 billion dollars for a range of clients including endowments, foundations, pension plans, and family offices. Focuses on protecting capital and generating returns by investing in companies with high-quality business franchises trading at attractive prices. 7 percent (8 percent at 31 December 2021) Jupiter and are the trademarks of Jupiter Investment Management Group Ltd. River and Mercantile Asset Management’s mandate was terminated in March 2022. As at 31 December 2021, it managed 6 percent of the company’s portfolio. Strategic Report Country of Listing: United States Sector: Communication Services Value of Holding: 103.3 million pounds Net Purchases in 2022: 40.4 million pounds Percentage of Total Assets: 3.3 percent Percentage of MSCI ACWI: 1.8 percent Average Portfolio Weight: 3.8 percent Total Return: -32.1 Country of Listing: United States Sector: Information Technology Value of Holding: 95.4 million pounds Net Sales in 2022: 33.9 million pounds Percentage of Total Assets: 3.1 percent Percentage of MSCI ACWI: 0.6 percent Average Portfolio Weight: 3.0 percent Total Return: 7.3 Our Largest 30 Investments at 31 December 2022 Investment Portfolio Alphabet: Alphabet is a holding company that engages in the acquisition and operations of different firms. It is best known as a parent company for Google but holds other subsidiaries as well. The company, through its subsidiaries, provides web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions, commerce, and hardware products. Alphabet dominates the online search market with Google’s global share above 80 percent, via which it generates strong revenue growth and cash flow. Visa: Visa is an American multinational financial services corporation. It describes itself as a global payments technology company that works to enable consumers, businesses, banks, and governments to use digital currency. It facilitates electronic funds transfers throughout the world, most commonly through Visa branded credit cards, debit cards, and prepaid cards across a broad clientele from retail to corporate use. The company is a dominant player within payment solutions and with cross-border travel volumes increasing, this could help sustain double-digit revenue growth for years to come. Investment Portfolio Country of Listing: United States Sector: Information Technology Value of Holding: 93.7 million pounds Net Purchases in 2022: 2.2 million pounds Percentage of Total Assets: 3.0 percent Percentage of MSCI ACWI: 3.0 percent Average Portfolio Weight: 2.8 percent Total Return: -20.9 Microsoft: Microsoft develops, manufactures, licenses, sells, and supports software products including operating systems, server applications, business and consumer applications, and software development tools for the Internet and intranets. In addition, it develops video game consoles and digital music entertainment devices. Microsoft is an established player in the tech sector and continues to evolve and innovate to maintain this position. We see the potential for solid growth driven by a still significant opportunity for its Azure cloud-computing business and within its suite of office and productivity solutions. Mastercard: Mastercard is an American technology company in the global payments business. It works with a wide range of consumers across individuals to corporations to governments to enable and facilitate electronic forms of payment. It provides technological solutions and enablement of electronic payment solutions. Mastercard is a firm that has shown good stability and quality with its earnings, holding one of the dominant positions amongst payment solutions."
"Country of Listing: United States Sector: Information Technology Value of Holding: 66.0 million pounds Net Purchases in 2022: 0.9 million pounds Percentage of Total Assets: 2.1 percent Percentage of MSCI ACWI: 0.5 percent Average Portfolio Weight: 1.8 percent Total Return: 9.3 Our Largest 30 Investments at 31 December 2022 Investment Portfolio Country of Listing: United States Sector: Consumer Discretionary Value of Holding: 61.9 million pounds Net Purchases in 2022: 26.8 million pounds Percentage of Total Assets: 2.0 percent Percentage of MSCI ACWI: 1.4 percent Average Portfolio Weight: 1.9 percent Total Return: -44.3 Amazon.com: Amazon.com is an American multinational technology company that focuses on e-commerce, online advertising, cloud computing, digital streaming, and artificial intelligence. Amazon offers personalised shopping services, web-based credit card payment, direct shipping to customers, as well as operating a cloud platform offering services globally. Amazon’s revenue growth does not only benefit from increases in online shopping. The opportunity for growth is also driven by the strength and execution in AWS, its cloud computing business. UnitedHealth Group: UnitedHealth Group describes itself as a health and well-being company, offering health care coverage and benefits through UnitedHealthcare, and technology and data-enabled care delivery through Optum. It also manages organised health systems across the United States and provides employers products and resources to plan and administer employee benefit programs. UnitedHealth Group is the largest health insurer in the world. Due to its size, stability, dividends, and positioning, it holds a dominant position in the largest healthcare industry in the world. Country of Listing: United States Sector: Health Care Value of Holding: 53.8 million pounds Net Purchases in 2022: 11.9 million pounds Percentage of Total Assets: 1.7 percent Percentage of MSCI ACWI: 0.9 percent Average Portfolio Weight: 1.6 percent Total Return: 19.6 HDFC Bank: HDFC Bank is India’s largest private sector bank and one of the largest banks in the world by market cap. It offers a wide range of services to the global corporate sector. It also provides corporate banking and custodial services and is active in the treasury and capital markets. HDFC markets project advisory services and capital market products such as Global Deposit Receipts, Euro currency loans, and Euro currency bonds. The firm is one of the largest on the Indian stock exchange and also one of the major employers in the country. Country of Listing: India Sector: Financials Value of Holding: 47.4 million pounds Net Purchases in 2022: 14.2 million pounds Percentage of Total Assets: 1.5 percent Percentage of MSCI ACWI: 0.0 percent Average Portfolio Weight: 1.1 percent Total Return: 18.77 ExxonMobil: ExxonMobil is a global oil and gas company that explores for, produces, and sells crude oil, natural gas, and petroleum products. It holds an industry-leading inventory of global oil and gas resources and is a world-leading refiner and marketer of petroleum products. It has been in existence for over a century and is known for innovation and being a leader in the energy and chemical manufacturing business. ExxonMobil markets fuels, lubricants, and chemicals under four brands: Esso, Exxon, Mobil, and ExxonMobil. Country of Listing: United States Sector: Energy Value of Holding: 49.0 million pounds Net Sales in 2022: 7.8 million pounds Percentage of Total Assets: 1.6 percent Percentage of MSCI ACWI: 0.8 percent Average Portfolio Weight: 1.5 percent Total Return: 107.9 Our Largest 30 Investments at 31 December 2022 Investment Portfolio Vale: Vale is a metal and mining company in Brazil. It produces and sells iron ore, pellets, manganese, alloys, gold, nickel, copper, kaolin, bauxite, alumina, aluminium, potash, and more. Amongst these, the firm is the largest producer of iron ore and nickel in the world and runs the Carajas mine, the largest iron mine in the world. Iron ore exports in Brazil account for about one third of the world’s supply. The company is Brazil’s largest public company, and locally it owns and operates railroads and maritime terminals. Country of Listing: Brazil Sector: Materials Value of Holding: 36.6 million pounds Net Sales in 2022: 28.6 million pounds Percentage of Total Assets: 1.2 percent Percentage of MSCI ACWI: 0.1 percent Average Portfolio Weight: 0.8 percent Total Return: 44.1 Petrobras: Petroleo Brasileiro S.A. (Petrobras) explores for and produces oil and natural gas. The company refines, markets, trades, transports, and supplies oil products. Petrobras operates oil tankers, distribution pipelines, marine, river, and lake terminals, thermal power plants, fertiliser plants, and petrochemical units. Brazil houses the second largest oil reserves in South America, this is where Petrobras operates and produces the majority of its oil and gas."
"Though majority owned by the Brazilian government, the firm competes on the world stage as one of the largest producers. Country of Listing: Brazil Sector: Energy Value of Holding: 43.7 million pounds Net Purchases in 2022: 0.9 million pounds Percentage of Total Assets: 1.4 percent Percentage of MSCI ACWI: 0.1 percent Average Portfolio Weight: 1.8 percent Total Return: 71.9 Name Country of Listing Value of Holding million pounds Percentage of Total Assets Percentage Average Portfolio Weight Interpublic Group: United States 36.3 1.2 1.0 Interpublic Group is an organisation of advertising agencies and marketing service companies. The company operates globally in various sectors. TotalEnergies: France 34.1 1.1 0.7 TotalEnergies, established in 1924, is a France-based oil and gas company. The company explores for, produces, transports, and supplies crude oil and natural gas. They also produce low carbon electricity, for example, solar energy. AstraZeneca: United Kingdom 34.1 1.1 0.9 AstraZeneca operates as a holding company. The company, through its subsidiaries, researches, manufactures, and sells both pharmaceutical and medical products. British American Tobacco: United Kingdom 33.2 1.1 0.7 British American Tobacco has been in existence for over a century and operates as a holding company for a group of companies that manufactures, markets, and sells cigarettes and other tobacco products including cigars and roll-your-own tobacco. Safran: France 32.6 1.0 0.9 Safran supplies aerospace and defence systems and equipment. The company sells engines for aeroplanes and helicopters, launch vehicles, etc. Safran serves aviation and defence industries worldwide. Bureau Veritas: France 31.2 1.0 0.9 Bureau Veritas is a world-leading company that provides a range of consulting services, including global inspection and audit, tests and certification applied to quality, hygiene, safety, and health. The firm was founded in 1827. DBS Bank: Singapore 29.8 1.0 1.0 DBS Bank and its subsidiaries provide a variety of financial services. The company offers services including mortgage financing, lease and hire purchase financing, nominee and trustee, funds management, corporate advisory, and brokerage. Our Largest 30 Investments at 31 December 2022 Investment Portfolio Name Country of Listing Value of Holding million pounds Percentage of Total Assets Percentage Average Portfolio Weight Berkshire Hathaway: United States 29.5 1.0 0.5 Berkshire Hathaway is a holding company owning subsidiaries in a variety of business sectors. The company’s principal operations are insurance businesses, conducted nationwide on a primary basis, and worldwide on a reinsurance basis. Heidelberg Materials: Germany 29.2 0.9 0.8 Heidelberg Materials produces and markets cement and aggregates, two essential raw materials for concrete, as one of the world’s largest building materials companies. Downstream activities include mainly the production of ready-mixed concrete as well as asphalt and other building products. Canadian Pacific: Canada 29.1 0.9 1.0 Canadian Pacific is a Class 1 transcontinental railway, providing freight and intermodal services over a network in Canada and the United States, hauling goods such as grain, energy products, coal, fertiliser, automotive products, sulphur, food products, and more. MercadoLibre: Uruguay 28.9 0.9 0.8 MercadoLibre operates an online trading site for the Latin American markets and is noted as the largest online commerce and payments ecosystem in Latin America. The company’s website allows businesses and individuals to list items, conduct sales, and purchases online in either a fixed-price and auction format. Makita: Japan 27.8 0.9 0.8 Makita, founded in 1915, manufactures electric power tools, including battery-operated power tools, stationary woodworking machines, pneumatic devices, and gardening tools for global distribution. The company also produces power tool attachments and accessories and provides parts replacement and repair services. VINCI: France 27.4 0.9 0.8 VINCI, founded in 1899, is a global player in concessions, energy, and construction with expertise in building, civil, hydraulic, and electrical engineering. It offers construction-related specialties and road materials production, as well as finance, management, operations, and maintenance of public infrastructures. AIA: Hong Kong 27.3 0.9 0.7 AIA competes to be the largest life insurance group in Asia, offering life insurance, medical insurance, accident protection insurance, critical illness insurance, disability protection insurance, and savings and investment plans to individuals. The firm was founded in 1919 and is currently headquartered in Hong Kong. Investment Portfolio Name Country of Listing Value of Holding million pounds Percentage of Total Assets Percentage Average Portfolio Weight Glencore: Switzerland 26.9 0.9 0.7 Glencore is one of the world’s largest diversified natural resources companies. The company operates in metals and minerals, energy products, and agricultural products. It is also a market leader in recycling copper and precious metals."
"It offers products and services to a global network of clients in automotive, power generation, steel production, food processing, and more. Murata Manufacturing Japan manufactures and sells electronic modules and components. The company produces communication modules, power supply modules, multilayer ceramic capacitors, noise countermeasure components, timing devices, sensor devices, high frequency components, batteries, and other products. Convatec United Kingdom manufactures medical and surgical equipment, marketing its products worldwide. The company offers urine meters, dressings, negative pressure wound systems, adhesive removers, and infusion devices. Unilever United Kingdom manufactures personal care products. The company offers consumer goods, food, detergents, fragrances, beauty, home, and personal care products. It serves customers worldwide. Adidas Germany manufactures sports shoes and sports equipment. The company produces products that include footwear, sports apparel, and golf clubs and balls. Adidas sells its products worldwide. Airbus France is a global firm in the aerospace industry, operating in the commercial aircraft, helicopters, defense, and space sectors. The company produces military fighter aircraft, missiles, satellites, and telecommunications and defense systems, as well as offering military and commercial aircraft conversion and maintenance services. Airbus is the largest aerospace firm in Europe and serves customers worldwide. Source: WTW, The Bank of New York Mellon, MSCI Inc. Note: All figures are subject to rounding differences."
Strategic Report OUR OTHER INVESTMENTS AT 31 DECEMBER 2022 INVESTMENT PORTFOLIO Name Country of Listing % of Total Assets Value of Holding £m Baidu China 0.8 25.0 ASML Netherlands 0.8 24.9 General Electric United States 0.8 24.7 Charter Communications United States 0.8 24.7 Yum United States 0.8 24.4 Danaher United States 0.8 24.4 The Cooper Companies United States 0.8 24.4 State Street United States 0.8 24.2 Kyndryl United States 0.8 24.0 Exelon United States 0.8 23.6 Enbridge Canada 0.8 23.4 Intuit United States 0.7 23.3 News Corp United States 0.7 23.2 Imperial Brands United Kingdom 0.7 23.2 Stericycle United States 0.7 23.0 Fleetcor Technology United States 0.7 22.8 Standard Chartered United Kingdom 0.7 22.5 BP United Kingdom 0.7 22.3 Kuehne & Nagel Switzerland 0.7 22.2 ICON Ireland 0.7 22.2 Humana United States 0.7 21.2 Autodesk United States 0.7 21.1 S&P Global United States 0.7 21.0 Booking Holdings United States 0.7 20.9 KKR United States 0.7 20.8 Workday United States 0.7 20.5 Schwab Charles United States 0.7 20.3 salesforce.com United States 0.6 20.1 Fiserv United States 0.6 20.0 Continental Germany 0.6 19.9 Covestro Germany 0.6 19.5 Smiths Group United Kingdom 0.6 19.3 Molson Coors United States 0.6 19.3 Paypal United States 0.6 19.2 Weir Group United Kingdom 0.6 19.1 Aena Spain 0.6 19.0 Ashtead United Kingdom 0.6 18.8 Comcast United States 0.6 18.7 GSK United Kingdom 0.6 18.7 Ebara Japan 0.6 18.3 Name Country of Listing % of Total Assets Value of Holding £m Bayer Germany 0.6 18.1 Schneider Electric France 0.6 17.8 Texas Instruments United States 0.6 17.8 Harley Davidson United States 0.6 17.7 Intel United States 0.6 17.6 Amadeus IT Spain 0.6 17.6 Skyworks Solution United States 0.5 17.0 CVS Health United States 0.5 16.8 Walmart United States 0.5 16.8 Broadcom United States 0.5 16.2 United Rentals United States 0.5 16.2 Santen Pharmaceutical Japan 0.5 16.1 Transdigm United States 0.5 16.0 DKSH Holding Switzerland 0.5 16.0 Admiral United Kingdom 0.5 15.7 Flex United States 0.5 15.3 Cigna United States 0.5 15.2 WPP United Kingdom 0.5 14.8 Cisco Systems United States 0.5 14.7 Hargreaves Lansdown United Kingdom 0.5 14.7 Swire Pacific Hong Kong 0.5 14.6 Ameriprise Financial United States 0.5 14.4 CBRE Group United States 0.5 14.3 TP ICAP United Kingdom 0.4 14.0 Signify Netherlands 0.4 13.9 Aercap Ireland 0.4 13.7 Carlyle Group United States 0.4 13.7 Dexcom United States 0.4 13.4 HCA Healthcare United States 0.4 12.9 ITC India 0.4 12.8 Housing Development Finance India 0.4 12.8 Zebra Technologies United States 0.4 12.7 Kingfisher United Kingdom 0.4 12.3 TS Tech Japan 0.4 11.8 Western Union United States 0.4 11.5 Kubota Japan 0.4 11.4 ServiceNow United States 0.4 11.3 Keyence Japan 0.4 11.0 Oracle United States 0.3 10.6 Sonic Healthcare Australia 0.3 10.4 INVESTMENT PORTFOLIO Strategic Report OUR OTHER INVESTMENTS AT 31 DECEMBER 2022 INVESTMENT PORTFOLIO Name Country of Listing % of Total Assets Value of Holding £m Synnex United States 0.3 10.1 NRG Energy United States 0.3 9.9 Intercontinental Exchange United States 0.3 9.5 Liberty Global United Kingdom 0.3 9.3 Whirlpool United States 0.3 9.2 Kato Sangyo Japan 0.3 9.0 Global Payments United States 0.3 8.9 Adient Ireland 0.3 8.6 Lithia Motors United States 0.3 8.3 Ebay United States 0.3 8.0 META United States 0.3 7.9 Reliance Industries India 0.2 7.5 Entegris United States 0.2 7.3 Edwards Lifesciences United States 0.2 7.1 Block United States 0.2 7.1 Andritz Austria 0.2 7.1 Snowflake United States 0.2 7.1 Netflix United States 0.2 6.6 Taiwan Semiconductor Manufacturing Taiwan 0.2 6.4 Liberty Media United States 0.2 6.4 Atlassian United States 0.2 6.3 Gruma Mexico 0.2 6.3 Adyen Netherlands 0.2 6.1 Shopify Canada 0.2 5.9 Itau Unibanco Brazil 0.2 5.8 ICICI Bank India 0.2 5.7 Sea Singapore 0.2 5.7 Lincoln National United States 0.2 5.3 Western Digital United States 0.2 5.2 Eletrobras Brazil 0.2 5.2 State Bank of India India 0.2 4.9 Philip Morris International United States 0.2 4.9 Bank Central Asia Indonesia 0.2 4.8 Wal-Mart de Mexico Mexico 0.1 4.6 Bharti Airtel India 0.1 4.4 Heineken Netherlands 0.1 4.4 Shell United Kingdom 0.1 4.2 Sun Pharmaceutical Industries India 0.1 4.0 America Movil Mexico 0.1 3.9 Hanesbrands United States 0.1 3.9 Name Country of Listing % of Total Assets Value of Holding £m Bank Mandiri Indonesia 0.1 3.9 Bread Financial United States 0.1 3.8 Cloudflare United States 0.1 3.7 Commscope Holdings United States 0.1 3.6 Coca-Cola United States 0.1 3.6 Cipla India 0.1 3.5 Petrochina Co Ltd China 0.1 3.5 Eni Italy 0.1 2.9 Banorte Mexico 0.1 2.6 Kasikornbank Thailand 0.1 2.5 POSCO South Korea
"0.1 2.4 Tata Steel India 0.1 2.4 Power Grid India 0.1 2.3 BTG Pactual Brazil 0.1 2.3 Ping An Insurance China 0.1 2.2 Moody's United States 0.1 2.1 JSW Steel India 0.1 2.0 B3 Brazil 0.1 1.9 SK Telecom South Korea 0.1 1.8 Banco Bradesco Brazil 0.1 1.6 Zijin Mining Group China 0.1 1.6 PICC Property and Casualty China 0.0 1.3 Turkish Airlines Turkey 0.0 1.3 Paramount Global United States 0.0 0.9 Bajaj Finserv India 0.0 0.9 Tüpraş Turkey 0.0 0.5 Standard Bank South Africa 0.0 0.4 Akbank Turkey 0.0 0.3 China Resources Land Hong Kong 0.0 0.2 Koc Holding Turkey 0.0 0.2 Garanti BBVA Turkey 0.0 0.2 China Overseas Land Hong Kong 0.0 0.2 Bank Negara Indonesia Indonesia 0.0 0.1 Sitios Latinoamérica Mexico 0.0 0.1 China Hongqiao China 0.0 0.0 BIM Turkey 0.0 0.0 Source: The Bank of New York Mellon. Note: All figures are subject to rounding differences. INVESTMENT PORTFOLIO Strategic Report DIVIDEND DIVIDEND POLICY Subject to market conditions and the Company’s performance, financial position, and outlook, the Board will seek to pay a dividend that increases year on year. The Company expects to pay four interim dividends per year, on or around the last day of June, September, December, and March, and will not, generally, pay a final dividend for a particular financial year. DIVIDEND As previously noted in the Chairman’s Statement, the Company has increased its total dividend for the year ended 31 December 2022 to 24.00p per ordinary share, a 26% increase on the previous year. During the year under review, the Board was pleased to be able to pay shareholders a consistent quarterly dividend of 6.0p per ordinary share, being an increase on the corresponding quarterly dividend payments in the previous financial year. The total of the first and second interim dividends represented an increase of 62.1% on the same payments for 2021. Details of the payments can be found below. Dividend 2022 (p) 2021 (p) % increase 1st Interim 6.0 3.702 62.1 2nd Interim 6.0 3.702 62.1 3rd Interim 6.0 5.825 3.0 4th Interim 6.0 5.825 3.0 The Board is of the opinion that the increased level of total dividend is both sustainable and affordable and it expects to extend the Company’s 56-year track record of annual dividend increases for many years. The Company’s Dividend Policy, Investment Objective, and Investment Strategy all remain unchanged. The following chart shows the growth in the Company’s dividend over the last 56 years. Dividend per Share (p) The Board aims to continue delivering a rising dividend year after year as well as capital growth. The chart also shows what has been achieved for investors to date. If you had invested £100 in the Company at the start of 1968 and you had reinvested your dividends in additional shares, you would have shares worth £23,926 at the end of 2022, and £5,643 if you did not. In determining the level of future dividends, the Board will take into account factors such as any anticipated increase or decrease in dividend cover, projected income, inflation, and the yield on similar investment trusts. The Board will continue to take advantage of the Company’s structure as an investment trust and will use both its investment income and its significant accumulated distributable reserves to fund dividend payments. The Company policy of paying quarterly interim dividends means that shareholders have certainty of the date on which they will receive their income but means they are not asked to approve the final dividend. However, each year shareholders are given the opportunity to share their views on the Company’s dividend by being asked to approve the Company’s Dividend Policy. 2022 2013 2018 2008 2003 1998 1993 1988 1983 1978 1973 1968 Dividend per Share (p) Return rebased to 100 at 31 January 1968 Source: WTW and Alliance Trust. Past performance is not a reliable indicator of future returns. Total Return is the sum of the change in the share price plus dividend income reinvested whereas Capital Return excludes the impact of dividends reinvested. DIVIDEND INCOME AND DISTRIBUTABLE RESERVES The Company’s income receipts from dividends in 2022 saw a significant increase to £94.9m. The same level of dividend income may not continue in 2023. The Company’s distributable reserves at 31 December 2022 were £2.9bn. Of these, the Company’s revenue reserve was £102.3m, realized capital reserves were £2.7bn, and unrealized capital reserves were £0.1bn. Both elements of the capital reserves are readily convertible to cash."
"FOURTH INTERIM DIVIDEND DECLARATION A fourth interim dividend of 6.0p per ordinary share will be paid on 31 March 2023 to shareholders who are on the register at close of business on 10 March 2023. The fourth interim dividend will be fully paid from income, with no requirement to utilize revenue reserves. The payment dates for the 2023 financial year can be found on page 115. If you had invested £100 in the Company at the start of 1968 and you had reinvested your dividends in additional shares, you would have shares worth £23,926 at the end of 2022. ONGOING CHARGES The Company’s Ongoing Charges Ratio marginally increased to 0.61%. Total administrative expenses were £6.5m and investment management expenses were £12.8m. The Board has a policy of adopting a one-quarter revenue and three-quarters capital allocation for management fees, financing costs, and other indirect expenses which is consistent with the Association of Investment Companies Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts. The Company’s costs remain competitive for an actively managed multi-manager global equity investment company. SHARE BUYBACKS The Company bought back 5.0% of its issued share capital during the year, purchasing 15,537,581 shares for cancellation. The total cost of the share buybacks was £149.6m. The weighted average discount of shares bought back in the year was 6.3%. All the shares bought back were cancelled. Share buybacks contributed a total of 0.3% to the Company’s NAV performance in the year. DISCOUNT One of the Company’s strategic objectives is the maintenance of a stable share price discount to Net Asset Value. During the year under review, the Company’s share price traded at an average discount of 5.9%. As at 31 December 2022, the Company’s share price discount was 4.2%. The average discount for the AIC Global Sector was 7.4%. ONGOING CHARGES AND DISCOUNT Source: WTW, Bank of New York Mellon. Alternative Performance Measure. Constituents of the AIC Global Sector Alliance Trust Notes: The charges are shown for the investment companies in the AIC global equity sector and include ongoing costs, portfolio transaction costs, and performance fees. Data sourced on 29 December 2022 by WTW from each investment company’s Key Information Documents available on their website. As such, cost data may be as at different dates. Strategic Objectives The strategic objectives of the Company are to: consistently meet the investment performance targets set by the Board; continue its policy of paying a progressive dividend; maintain a stable discount; and provide good value to its shareholders. The Board determines the levels of risk that it is prepared to accept to achieve the Company’s strategic objectives. It then monitors whether there is a possibility of any of these risk levels being breached through Early Warning Indicators, or EWIs, and if there is, it will take action to bring the level of risk back within the EWI it has set. During the year, the EWIs were reviewed to ensure they remained appropriate. No changes were made to the list of EWIs. At the year end, there were three measures which triggered their EWIs. Details of which are as follows: Portfolio Performance: The EWI was triggered due to the underperformance of the portfolio against the MSCI ACWI over a rolling three-year period. Portfolio Turnover: The EWI was triggered as a result of increased turnover due to Stock Picker changes and trading in the portfolio when Stock Pickers took advantage of opportunities in the market. Operational Risk: The EWI was triggered as a result of factsheet errors. Additional controls have subsequently been put in place to mitigate the risk of future errors being made. Principal and Emerging Risks In common with other financial services organizations, the Company’s business model results in inherent risks. The Directors have carried out a robust assessment of the principal and emerging risks facing the Company and how these are continuously monitored and managed. As an investment company, investment risk has the potential to impact the Company significantly. We explain on the next page how we mitigate against the potential impact of this risk. 2022 was a challenging year as a result of geopolitical tension, inflation, and the risk of many economies entering into recession, all of which adversely impacted the global economy. The market outlook for 2023 remains highly uncertain as policymakers continue to battle inflation without triggering a deep recession. The backdrop of the war in Ukraine also continues to impact market and investor confidence."
"The other area where we see risk evolving relates to ESG matters and we cover the actions being taken on this within the portfolio on pages 15 to 17 and operationally on page 39. In addition to considering the potential adverse impact of ESG factors on the Company’s reputation and financial performance, a specific climate change risk, along with mitigating activities at Company and portfolio level, is being monitored. Set out on the next five pages are the Company’s principal and emerging risks that could impact on the achievement of the strategic objectives and the Board’s view of each risk. How We Manage Our Risks Investment, Counterparty and Financial Risks Risk Risk Trend during 2022 Mitigating Activities Market Risk Risk of a general fall in equity markets that would lead to a lower valuation of the Company’s investments. Increased After a strong 2021, 2022 was challenging for global equity markets with concerns over the economic implications of the Russia-Ukraine conflict, the potential need for a faster pace of interest rate hikes to combat higher inflation, and renewed Covid-19 outbreaks in China led to increased volatility in equities. Active management of the concentrated high conviction approach employed by the Company means that it should be able to take advantage of any volatility caused by external factors as it creates opportunities. The investment approach focuses on company fundamentals with stock selection being the main driver of investment performance rather than sentiment-driven market movements. The portfolio is managed to be broadly balanced in terms of style, sector, and geographical exposures relative to the benchmark, avoiding being held hostage to any one particular risk factor that might fall out of favor at any point in time which is near impossible to predict. The Company can use derivative instruments to hedge, enhance, and protect positions including currency exposures. Investment Performance Risk Investment performance fails to deliver long-term capital growth and rising income that meet the targets set by the Board. Decreased Whilst the Company’s portfolio returned negatively in 2022, it outperformed its benchmark over the period. The Company is closed-ended and, unlike open-ended funds, does not have to sell investments at low valuations in volatile markets. This allows Stock Pickers to remain invested for the long term and adhere to their disciplined investment process. The Company’s multi-manager approach benefits from a rich mix of investment styles which reduces the risk of isolated losses normally associated with a single Stock Picker. The portfolio is designed to outperform the market over the long term, regardless of the market conditions, by blending the stocks invested in by Stock Pickers with different complementary styles into a diversified, high conviction global equity portfolio expected to deliver consistent outperformance with lower volatility. The investment strategy and the performance of the Stock Pickers as well as the composition, allocation, rebalancing, and diversification of the portfolio are regularly reviewed. The Board actively considers the prevailing external environment and outlook in its decision-making process. The global market appears to be less skewed towards large US technology stocks. This offers more opportunity for active Stock Pickers to add value through high conviction stock selection and for the portfolio to outperform its index. Credit and Counterparty Risk Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. Counterparty risk is the risk that a counterparty to an agreement will fail to discharge an obligation or commitment that it has entered into with the Company. Unchanged The credit and service quality of the third parties that the Company dealt with in 2022 remained at appropriate levels. The Company contracts only with creditworthy counterparties. Its main transactions relating to investments are carried out with well-established brokers on a cash against receipt, or cash against delivery, basis. A due diligence process is followed when selecting third-party service providers. Outsourced providers are subject to regular oversight by the Board, the Company Secretary, and the Depositary. The Company’s Depositary is responsible for the safekeeping of the Company’s assets and liable to the Company for any loss of assets. Reports from the Depositary and Custodian are reviewed regularly by the Board, the Company Secretary, and WTW. Daily reconciliation of the Company’s assets is undertaken. Capital Structure and Financial Risk The capital structure is not appropriate to support the Company’s strategic objectives, risk appetite, and overall operations."
"The Company does not have sufficient liquid resources to ensure it can meet its liabilities as they fall due and the fair value of the assets of the Company is amplified by any gearing that the Company may have. Unchanged The Board used the tools at its disposal to manage the share capital, reserves, discount, and gearing at stable levels. The Board regularly reviews the capital structure of the Company including, but not limited to, issued share capital, discount and share buybacks, capital and other reserves, and gearing. The Board and the Company’s Broker monitor the discount level closely and has taken the powers, which it seeks to renew each year, for share issuance, buybacks, and cancellation to support the management of the discount. In 2021, the Company was granted Court approval for the conversion of the Company’s merger reserve into a distributable reserve. This has provided the Company with increased flexibility in the way it can fund dividend payments. Stress and scenario testing is carried out on the portfolio and reported to the Committee by WTW. Liquidity analysis, including liquidity stress testing, is carried out on the portfolio and reported to the Committee by WTW. The Company’s portfolio comprises quoted equities which are readily realizable. Operational Risks Risk Risk Trend during 2022 Mitigating Activities Cyber attack Failure to ensure that the business is adequately protected against the threat of cyber attack, which may lead to significant business disruption or external fraud. Increasing The Russia-Ukraine conflict increased the risk of global cyberattacks on critical systems and business applications with the risk of spillover cyberattacks against non-primary targets becoming more widespread. The Company benefits from the level of IT security put in place by its third-party IT service provider. This includes having in place security designed to protect systems from cyber attack. Business continuity plans are in place should a cyber attack occur. Outsourcing Loss arising from inadequate or failed processes, people, and/or systems of outsourced functions. Unchanged The outsourced providers and Executive team continued to provide services under a hybrid working model during 2022 with no adverse impact on the standard of service received. WTW monitors and reports on the performance of outsourced providers to the Board which also receives control reports from certain service providers. WTW itself is monitored by the Board and the Company Secretary, and the Depositary which also monitors the Custodian. The Board also monitors the performance of Juniper Partners Limited following its appointment as Company Secretary on 31 December 2022. Environmental, Social and Governance (ESG) factors Risk Risk Trend during 2022 Mitigating Activities Environmental, Social and Governance (ESG) factors Failure to consider the impact of ESG factors adversely affecting the Company’s reputation and financial performance. The adverse impact of climate-related risks on the Company’s business strategy, operating model, investment strategy, and financial planning. Increased Increasing volume, short implementation deadlines, and lack of commonality of new ESG regulations issued by multiple regulators, accompanied by increased regulatory focus and labeling and marketing of investment products as having ESG characteristics increase the perceived risk of greenwashing. In 2022, some of the Stock Pickers found attractive opportunities in the Energy sector, leading to an increase in the portfolio’s carbon footprint. WTW’s approach to ESG is embedded within its overall assessment of the Company’s Stock Pickers. The appointment of the EOS team at Federated Hermes has strengthened the Company’s commitment to responsible investment. The Board will continue to consider developments in this area such as the recommendations from the Task Force on Climate-related Financial Disclosures, and the FCA’s Sustainability Disclosure Regulation currently under consultation. The Company committed to transitioning its portfolio to Net Zero greenhouse gas emissions by 2050. Stocks with significant exposure to thermal coal and tar sands are excluded from the portfolio. WTW is a signatory to the Net Zero Asset Managers Initiative, the Principles for Responsible Investment, and the UK Stewardship Code. EOS and a number of our Stock Pickers are signatories to the Climate Action 100+ initiative. The Company calculates its carbon footprint based on the GHG Protocol Corporate Accounting and Reporting Standard and verified by Carbon Footprint Limited. WTW monitors the carbon intensity of the Company’s portfolio against recognized benchmarks. The Company has a small physical presence with a limited impact on the environment. Legal and Regulatory Non-Compliance Risk Risk Trend during 2022 Mitigating Activities Legal and Regulatory non-compliance Failure of not meeting and complying with all relevant legal and regulatory requirements and responsibilities."
"Unchanged There were no material legal or regulatory issues for the Company that arose during 2022. The Board receives updates from WTW, the Company Secretary, and the Company’s legal advisers on legal and regulatory developments and changes. WTW reviews and monitors the Company’s Investment Trust status and reports on this regularly to the Board. On at least an annual basis, the Board receives updates from the Company’s third-party service providers in respect of their compliance with legal and regulatory obligations. The Board conducts an annual internal review on its and its Committees’ effectiveness. An external review is carried out at least every three years and the last such review was in 2021. Members of the Board and representatives from WTW and Company Secretary periodically attend relevant industry training events. Shareholder documentation including the Company’s Interim and Annual Reports are subject to stringent review. Processes and procedures are in place to ensure compliance with applicable requirements such as the Market Abuse Directive. The Strategic Report has been approved by the Board and signed on its behalf by: Gregor Stewart Chairman Directors’ Report Sarah Bates Senior Independent Director Member of Audit and Risk Committee. Member of the Nomination Committee. Sarah joined the Board in 2021. Sarah is a Fellow of CFA UK and was previously Chair of the Association of Investment Companies. Sarah was also previously Chair of Polar Capital Technology Trust plc, Merian Global Investors Limited, St James’ Place plc, JPMorgan American Investment Trust plc, Witan Pacific Investment Trust plc and chair of the audit committees of New India Investment Trust plc and of U and I Group plc. Sarah was a founder of the Diversity Project and an Ambassador for Chapter Zero. Current Appointments Worldwide Healthcare Trust plc Chair of the Nomination Committee and Senior Independent Director John Lewis Partnership Trust for Pensions Chair BBC Pension Scheme Independent Member of the Investment Committee and Chair of BBC Pension Investment Limited USS Investment Management Limited Chair Board of Directors Gregor Stewart Chairman (Independent) Chair of the Nomination Committee. Gregor joined the Board in 2014 and chaired the Audit and Risk Committee until his appointment as Chairman in September 2019. Gregor is a Chartered Accountant and was Finance Director for the insurance division of Lloyds Banking Group, including Scottish Widows, and a member of the Group’s Finance Board. He worked for more than 20 years at Ernst & Young, with 10 years as a Partner in the firm’s Financial Services practice. Current Appointments Direct Line Insurance Group plc Non-Executive Director FNZ (UK) Limited and its holding company Chair of FNZ (UK) Limited and Non-Executive Director of its holding company Anthony Brooke Independent Non-Executive Director Member of Audit and Risk Committee. Member of the Nomination Committee. Anthony joined the Board in 2015. Anthony was a Vice Chairman of S.G. Warburg & Co. Ltd. and from 1999 to 2008 a partner in Fauchier Partners, a manager of alternative investments. Until 2010, Anthony was a Non-Executive Director of the PR consultancy, Huntsworth PLC. Anthony will retire as a Non-Executive Director of the Company with effect from the conclusion of the Annual General Meeting on 27 April 2023. Current Appointments Investment Committee of the National Portrait Gallery Member Investments Committee of Christ’s College, Cambridge Member Various Endowments Adviser Dean Buckley Independent Non-Executive Director Member of Audit and Risk Committee. Member of the Nomination Committee. Dean joined the Board in 2021. Dean is a qualified actuary and has enjoyed a career in fund management. Dean was previously Chief Executive Officer of Scottish Widows Investment Partnership. Prior to that, Dean held several positions at HSBC Bank plc, most recently as Chief Executive Officer of HSBC Asset Management UK and Middle East. Dean held senior fund management positions at Prudential Portfolio Managers and was also previously a Non-Executive Director of Saunderson House Limited. Current Appointments Fidelity Special Values PLC Chair JPMorgan Asia Growth and Income plc Chair of the Audit Committee, Remuneration Committee and Senior Independent Director Baillie Gifford & Co Limited Non-Executive Director Evelyn Partners Fund Solutions Limited Chair Clare Dobie Independent Non-Executive Director Member of Audit and Risk Committee. Member of the Nomination Committee. Clare joined the Board in 2016. Clare started as a journalist working at the BBC, Times and Independent, where she was City Editor. From there she joined Barclays Global Investors, where she was Head of Marketing, and later she moved to GAM as Group Head of Marketing. She then ran a marketing consultancy serving financial services firms."
"She is a former Non-Executive Director of Aberdeen New Thai Investment Trust, CT Capital and Income IT, Schroders UK Mid Cap Fund and Southend Hospital. Current Appointments Roman River Music charity Trustee Jo Dixon Independent Non-Executive Director Chair of Audit and Risk Committee. Member of the Nomination Committee. Jo joined the Board in 2020 and was appointed Chair of the Audit and Risk Committee in March 2020. Jo is a chartered accountant and has previously held senior positions within the NatWest Group and was Finance Director of Newcastle United plc. She was Commercial Director, UK, Europe and the Middle East at Serco Group and sat on various advisory boards in the education and charity sector. Jo was also previously Chair of JPMorgan European Growth and Income PLC. Current Appointments Bellevue Healthcare Trust PLC Non-Executive Director and Chair of Audit Committee Strategic Equity Capital PLC Non-Executive Director and Chair of Audit Committee The Global Smaller Companies Trust PLC Non-Executive Director and Chair of Audit Committee Ventus VCT PLC Non-Executive Director Milyae Park Independent Non-Executive Director Member of Audit and Risk Committee. Member of the Nomination Committee. Milyae joined the Board in 2022. Milyae began her career as a Chartered Accountant in the US and holds an MBA from The Wharton School. She has held senior global executive positions spanning investment banking and other financial services, retail, consumer, and technology. Milyae has experience running and advising companies from FTSE 100 to start-up in scale in over 40 countries. In addition, her recent advisory experience has focused on digital transformation and growth, as well as ESG. Vicky Hastings Independent Non-Executive Director Member of Audit and Risk Committee. Member of the Nomination Committee. Vicky joined the Board in 2022. Vicky has over 30 years of experience in the investment management industry. She was a European Equity fund manager before holding senior leadership roles at Merrill Lynch Investment Managers and JO Hambro Capital Management. Vicky was previously an Independent Non-Executive Director of JPMorgan Asset Management UK Ltd and JP Morgan Asset Management International Ltd and a Non-Executive Director of Henderson Global Trust Plc and Charter European Trust Plc. Current appointments include Non-Executive Director of Fidelity European Trust PLC and Governor of the Museum of London, Chair of the subsidiary Museum of London (Trading) Ltd, and Non-Executive Director of Faber and Faber Limited. Current appointments also include Non-Executive Director of Henderson European Focus Trust Plc, Non-Executive Director and Senior Independent Director of Edinburgh Investment Trust Plc, Non-Executive Director of Impax Environmental Markets Plc, and Trustee of Moorfields Eye Charity. In 2022, in addition to the Board’s regular quarterly meetings, several ad hoc Board meetings were held. There were four scheduled Audit and Risk Committee meetings and no ad hoc Audit and Risk Committee meetings were held, although there was a decision between meetings circulated by email. The Nomination Committee was established on 1 November 2022. There were no matters that required consideration by the committee between its establishment and prior to the financial year end. The committee will meet for the first time in 2023. Scheduled meeting attendances were as follows: - Gregor Stewart: Board 14 Actual 4 Possible, Audit and Risk 2 Actual 2 Possible, Nomination - Actual - Possible - Sarah Bates: Board 4 Actual 4 Possible, Audit and Risk 4 Actual 4 Possible, Nomination - Actual - Possible - Anthony Brooke: Board 4 Actual 4 Possible, Audit and Risk 4 Actual 4 Possible, Nomination - Actual - Possible - Dean Buckley: Board 4 Actual 4 Possible, Audit and Risk 4 Actual 4 Possible, Nomination - Actual - Possible - Jo Dixon: Board 4 Actual 4 Possible, Audit and Risk 4 Actual 4 Possible, Nomination - Actual - Possible - Clare Dobie: Board 4 Actual 4 Possible, Audit and Risk 4 Actual 4 Possible, Nomination - Actual - Possible - Vicky Hastings: Board 21 Actual 1 Possible, Audit and Risk 1 Actual 1 Possible, Nomination - Actual - Possible - Milyae Park: Board 21 Actual 1 Possible, Audit and Risk 1 Actual 1 Possible, Nomination - Actual - Possible - Chris Samuel: Board 32 Actual 2 Possible, Audit and Risk 2 Actual 2 Possible, Nomination - Actual - Possible Gregor Stewart stepped down as a Member of the Audit and Risk Committee on 1 July 2022. Vicky Hastings and Milyae Park joined the Board on 29 September 2022. Chris Samuel left the Board on 21 April 2022."
"Several ad hoc working group meetings also took place to deal with specific activities during the year which involved some or all of the Directors. This included the Marketing Oversight Group. Details of its activities can be found on page 51. The Board’s Policy on Board Diversity is as follows: The Company recognizes the benefits of having a diverse Board and sees diversity at Board level as important in maintaining good corporate governance and Board effectiveness. The Board members should have different skills, geographical and industry experience, backgrounds, ethnicity, race, and gender. These differences will be considered in determining the composition of the Board and when possible should be balanced appropriately. All Board appointments must be made on merit, in the context of the skills, experience, independence, and knowledge which the Board as a whole requires to be effective. In reviewing Board composition, the benefits of all aspects of diversity will be considered, including, but not limited to, those described above, in order to enable it to discharge its duties and responsibilities. In identifying the best candidates for appointment to the Board, the Board will consider candidates from a range of differing perspectives and backgrounds against objective criteria with due regard to the benefits of diversity on the Board. As part of the selection process, where search agents are used, they are currently required in preparing their long list to include candidates that will improve the ethnic diversity of the Board given the Board’s alignment with the Parker Review target for ethnic diversity by 2024. The Board reports on its succession plans on page 53. When making appointments, the Board will ensure that the positive steps taken to increase the Board’s gender diversity over the last two years will be applied to other areas of diversity in which the Board could improve. The Board at the year end comprised three males and five females. One of the Directors is of a minority ethnic origin and of the two senior Board positions, one is male and the other female. While the Board has met its targets for gender and ethnic diversity, it will continue to seek to consider all aspects of diversity for future appointments. A table showing the gender and ethnicity of the Directors and workforce can be found on page 60. In accordance with the AIC Code, as part of its succession planning program, the Board appointed Cornforth Consulting, an independent external search consultant to undertake a search for at least one Non-Executive Director. As a result of this search, Vicky Hastings and Milyae Park were appointed as Directors of the Company on 29 September 2022. The annual review of individual Directors’ performance is usually supported by an independent external facilitator and undertaken by way of questionnaire and discussions between the Chairman and each of the Directors. A review of the performance of the Chairman is undertaken by the other Directors, led by the Senior Independent Director. A more extensive review is undertaken every third year, with the last review having been undertaken for 2021. During the year under review, the Board appointed Lintstock Limited to support its annual appraisal of the effectiveness of the Board, its Committees, and the individual Directors. Lintstock has no other connections with the Company or individual Directors and was therefore deemed independent. The findings of the external evaluation were discussed with the Chairman, and with the Senior Independent Director in respect of the Chairman’s evaluation, and all findings were considered by the Board after the year-end. The results of the evaluation confirmed that the Chairman continues to lead the Board in an effective manner. It also confirmed that all Directors continue to demonstrate commitment to their roles, provide constructive challenge to the Investment Manager, and provide valuable contributions to the deliberations of the Board. No material weaknesses or concerns were highlighted by Lintstock. Some focal points were highlighted to the Board for 2023. These included ensuring the new operating model is effective and continuing to develop the Company’s partnership with WTW, with a particular focus on the Company’s marketing and distribution activities. Set out in the table below are the key skills and experience that the Board recognizes it must possess to manage and govern effectively. In addition to these key skills, the Board also has experience in Investment, Financial Oversight, Risk, Strategy and Change, and Corporate Finance. In addition to its ongoing monitoring of the Investment Manager, the Board undertakes a robust annual evaluation of its performance."
"This monitoring process and review is important as investment performance and responsible ownership are critical to delivering sustainable long-term growth and income for shareholders. The Board’s annual evaluation of the Investment Manager was also supported by Lintstock. Several areas were evaluated, these included the overall success of the Company’s investment policy, the provision of information to both the Board and shareholders, regulatory compliance, sales and marketing, and fees. The Board agreed that, taking the factors that had impacted performance into consideration, the overall performance of the Investment Manager was in line with expectations. Some minor recommendations were made in respect of enhancements that could be made by the Investment Manager, all of which are being considered. As previously noted in the Chairman’s Statement, the Board also considered WTW’s performance over the first five-year period since its appointment and commissioned a review by an external expert. The review included both quantitative analysis and interviews with the Investment Manager. The Board was encouraged with the findings of the review which reinforced its own judgment that the Investment Manager’s investment approach remained consistent with the investment objective of the Company, to produce a real return over the long term through a combination of capital growth and a rising dividend. It is encouraging that, after facing a strong headwind for most of the period since WTW’s appointment in April 2017, market conditions have now turned in the Company’s favor. The index is no longer dominated by a handful of US growth stocks and there are more opportunities for skilled stock picking across countries and sectors. The Board will continue to closely monitor the performance of the Investment Manager to ensure that its continuing appointment is in the best interest of shareholders. The Board is committed to achieving and demonstrating high standards of corporate governance. The AIC Code of Corporate Governance issued in February 2019 provides a framework of best practice for investment companies. The Financial Reporting Council has confirmed that AIC member companies who report against the AIC Code will be meeting their obligations in relation to the 2018 UK Corporate Governance Code. The Company has complied with the Principles and recommended Provisions of the AIC Code during the year ended 31 December 2022 and up to the date of this report, except as set out below: Internal audit function. The Company does not have a separate internal audit function. The Board is of the view that, as most of the Company’s day-to-day operations are outsourced to third parties with established internal control frameworks, there is no need for such a function. The Board also gains assurance on the effectiveness of the internal controls operated by third parties on its behalf from the reports that it receives from the Investment Manager and, up until the end of December 2022, the Company’s Executive team. As a result of the changes made to the Company’s operating model at the end of 2022, this assurance will, in future, come from the Investment Manager, Administrator, and Company Secretary. As a purely Non-Executive Board with no Executive Directors, the Board does not consider it necessary to establish a Remuneration Committee. During the year under review, the only remuneration questions to be determined were in relation to the remuneration of the five members of the Executive team and the Directors’ own remuneration. As a result of the changes made to the Company’s operating model, the only remuneration to be considered going forward will be the Directors’ own remuneration. The Company does not have a Management Engagement Committee. The Board, as a whole, performs this function. The Directors, all of whom are independent, monitor WTW’s performance throughout the year and undertake a formal annual evaluation. The Audit and Risk Committee separately reviews the internal controls and compliance arrangements of the Company’s key service providers and reports to the Board on its findings. The Board has established the following committees: Audit and Risk Committee. The Audit and Risk Committee comprises all the Non-Executive Directors, with the exception of Gregor Stewart, and is chaired by Jo Dixon. The Report of the Audit and Risk Committee which details the role of the committee and the work it has undertaken during the year under review can be found in this report. On 1 November 2022, the Board established a Nomination Committee which comprises all the Non-Executive Directors and is chaired by Gregor Stewart."
"The primary responsibilities of the committee are to regularly review the structure, size, and composition of the Board and make recommendations to the Board; to ensure plans are in place for orderly succession to Board positions, taking into account the challenges and opportunities facing the Company, and the skills and expertise needed on the Board in the future; to identify and nominate, for the approval of the Board, candidates to fill Board vacancies as and when they arise. In addition, the committee is responsible for the annual performance evaluation of the Board and its committees. Vicky Hastings and Milyae Park were appointed to the Board on 29 September 2022 in advance of the establishment of the Nomination Committee. There were no other matters that required to be considered by the committee between its establishment and the financial year end, accordingly, the committee will meet for the first time in 2023. A report on the work of the committee will be included in future annual reports. The Board’s Policy on diversity and what it has achieved can be found in this report. The terms of reference of the Audit and Risk Committee and the Nomination Committee can be found on the Company’s website. Details of the Company’s internal controls and risk management processes in relation to its financial reporting can be found in this report. The Company continues to invest in improving communications. The Board’s oversight of the Company’s marketing activities is supported by the work of the Marketing Oversight Group chaired by Clare Dobie. The Group works closely with the Company’s Investment Manager, WTW, and met four times during the year. Matters considered included how the Company can better engage with shareholders who invest via a platform, wealth manager, or other third parties. We have invited shareholders and others to sign up to receive fact sheets, our quarterly newsletters, and notifications of events including investor forums. They can also access videos of Stock Pickers and other information on our website. Through the appointment of two new directors, we have brought further diversity of skills and fresh perspectives to the Board. Name Designation Appointed Expected minimum duration of appointment Gregor Stewart Chairman 1 December 2014; took on role of Chairman on 5 September 2019 April 2026 Sarah Bates Senior Independent Director 4 March 2021 April 2027 Anthony Brooke Non-Executive Director 24 June 2015 April 2023 Dean Buckley Non-Executive Director 4 March 2021 April 2027 Jo Dixon Non-Executive Director 29 January 2020 April 2026 Clare Dobie Non-Executive Director 26 May 2016 April 2023 Vicky Hastings Non-Executive Director 29 September 2022 April 2029 Milyae Park Non-Executive Director 29 September 2022 April 2029 This date is based on Gregor Stewart’s date of appointment as Chairman rather than as a Director and reflects the potential length of term he may serve on the Board. Mr. Brooke has confirmed that he will not stand for re-election in 2023 and will complete his tenure at the Company’s Annual General Meeting on 27 April 2023. The Board is responsible to shareholders for the effective stewardship of the Company. Investment policy and strategy are determined by the Board. It is also responsible for the gearing, dividend, and share buyback policies; public documents, such as the Annual Report and Financial Statements; and corporate governance matters. The Board currently meets at least four times a year to review investment performance and associated matters such as gearing, asset allocation, marketing/investor relations, discount, costs, risk, compliance, share buybacks, and the performance of peer investment trusts. Representatives of the Investment Manager and one or more of the Stock Pickers attend each meeting. The Board arranges to meet with each of the Stock Pickers at least once a year. A separate strategy session is held annually. Board or Board Committee meetings are also held on an ad hoc basis to consider issues as they arise. In addition, ad hoc working groups involving the Directors are arranged to support the work of the Board or relevant Board Committee on particular topics. Outside the formal meetings, there is also regular contact between the Investment Manager, the Company Secretary, and the Directors. The Chair is responsible for leading the Board and for its overall effectiveness. Their letter of appointment, which is available at the Company’s registered office and at the AGM, clearly sets out their responsibilities. The Senior Independent Director provides a sounding board for the Chair and serves as an intermediary for other Directors and shareholders."
"They also lead any discussions on the appointment of a new Chair and may take on the role of Chair on an interim basis to cover an unexpected vacancy or absence of the Chair. The Board has no Executive Directors and currently comprises eight Independent Non-Executive Directors. The Board is wholly independent, with the Chairman having been considered to be independent on appointment. The Directors’ biographies, including other board commitments, are set out in this report. These show the breadth of the Board’s relevant knowledge and that Directors’ attendance at meetings has not been impacted by their other commitments. A summary of the key skills and expertise that the Board recognizes the Directors should possess is also provided. Every Director on appointment receives an individually tailored induction and the Board, as a whole, receives updates on relevant topics. The Directors are also encouraged to attend industry and other seminars covering issues and developments relevant to investment trusts and to receive other training as necessary. As part of its annual Board evaluation process, the effectiveness of individual Directors is considered. A report on this year’s evaluation process is set out in this report. Each Non-Executive Director’s appointment is governed by written terms which are available for inspection at the Company’s registered office. They are also available at the AGM. The Remuneration Report details the fees payable to the Directors and the indemnities provided by the Company. The Board is of the view that long Board tenure is not necessarily an impediment to the independence of Directors or to their ability to contribute to the Company. The Board believes that a variety of Director tenures within the boardroom can be beneficial to ensure Board quality and continuity of experience and provide flexibility in succession planning. Accordingly, there is no absolute limit to the period for which Directors may serve. A Non-Executive Director may serve. Their appointment may be terminated at any time by notice given by three quarters of the other Directors. However, continuation of each Director’s appointment is subject to satisfactory performance evaluation and annual re-election by shareholders at the Company’s AGM. Subject to the foregoing, each Director will be appointed to serve until the seventh AGM after the date of their appointment. Following that term, the Board may, depending on the circumstances, determine that the continued appointment of a Director is in the best interests of the Company and a Director may be appointed for a further term. In the ordinary course, this is not expected to be for more than three years. Clare Dobie, having been appointed as a Director in May 2016, will have completed her initial tenure at this year’s AGM. On the recommendation of the Nomination Committee, given Clare continues to contribute significantly to the Company, the Board has agreed to extend Clare’s tenure, notwithstanding it shall not exceed nine years from her date of appointment. The Chairman was appointed to the Board in December 2014 and to the role of Chairman in September 2019. In accordance with the Board’s tenure policy, Gregor may potentially serve as a Director until April 2026. Only the Chairman has more than eight years of service as a Director of the Company. Succession Planning In accordance with the Company’s succession plan, Chris Samuel retired as a Director of the Company in April 2022 and Anthony Brooke will complete his tenure at the AGM in 2023. The Board appointed Vicky Hastings and Milyae Park effective 29 September 2022. Vicky and Milyae’s biographies can be found on page 45. Election and Re-election of Directors The individual performance of each Director and their ongoing suitability for re-election was considered and endorsed by the Chairman and the Board. Each of the Company’s Directors has confirmed that they remain committed to their role and have sufficient time available to meet what is expected of them. As planned prior to her appointment, Jo Dixon stood down from one of her external directorships in 2022. Another of her external directorships is due to cease in 2023 upon completion of the members voluntary liquidation. All the Directors who served in 2022 other than Chris Samuel, who stepped down during the year, and Vicky Hastings and Milyae Park who were appointed during the year, served the full financial year. All of these Directors except for Chris Samuel remained in office at the date of signing these Accounts."
"Although the Articles of the Company provide for re-election every three years in accordance with the AIC Code, the Board agreed that all Directors will be subject to annual re-election. Accordingly, with the exception of Anthony Brooke, resolutions proposing the re-election of all Directors will be put to shareholders for approval at this year’s AGM. Vicky Hastings and Milyae Park having been appointed to the Board during the year are subject to formal election by shareholders. Conflicts of Interest The Directors have previously provided details of all interests which potentially could cause a conflict of interest to arise. The unconflicted Directors in each case noted the declarations by the Directors of their other interests and confirmed that at that time none of the interests disclosed was reasonably likely to give rise to a conflict. An annual review of all interests was undertaken as part of the year-end process and this was considered by the Board in February 2023. Procedures are in place to allow Directors to request authority should it be required outside the normal Board meeting schedule. Corporate Governance Directors' Report The Company’s Purpose The Company is a public limited company and an investment company with investment trust status. It aims to generate capital growth over the medium to long term while maintaining an increasing dividend for its shareholders. It does all this at a competitive cost. HM Revenue and Customs has confirmed that Alliance Trust PLC has investment trust status for all financial periods from 1 January 2012. On page 2 we set out the Company’s Investment Objective. This, together with the Investment Policy set out below, was approved by shareholders at the Annual General Meeting held in April 2019. Investment Policy The Company, through its Investment Manager, appoints a number of Stock Pickers with different styles and approaches, each of which will select and invest in stocks for the Company’s single investment portfolio. It will achieve an appropriate spread of risk by holding a diversified portfolio in which no single investment may exceed 10% of the Company’s total assets at the time of investment. Where market conditions permit, the Company will use gearing of not more than 30% of its net assets at any given time. The Company can use derivative instruments to hedge, enhance and protect positions, including currency exposures. While the primary focus of the Company is investment in global equities, the Company may also invest from time to time in fixed interest securities, convertible securities and other assets. Responsible Investment In its Investment Manager’s Report, WTW describes the responsible investment activities it, the Stock Pickers, and EOS have undertaken for the Company. WTW provides details of some of the company-specific engagement activities undertaken in relation to stocks held in the Company’s portfolio as well as how the Stock Pickers have voted at investee company meetings. The Company also reports on these activities in its quarterly Responsible Investment Report which can be found on its website. The Company has not placed any ethical or value-based restrictions on the types of stocks in which the Stock Pickers can invest. However, there are a small number of types of companies in which the Stock Pickers are prohibited from investing. These are companies which illegally manufacture armaments under international law via the Inhuman Weapons Convention, and those weapons covered by standalone conventions, companies with significant exposure to thermal coal and tar sands, investments in Russia and Belarus, the Company itself and other UK listed investment trusts, and Willis Towers Watson. Although the Board believes that effective stewardship and engagement activities are preferable to imposing exclusions, it may decide to impose further restrictions if it is of the view that positive change will not result from engagement or as its approach to responsible investment evolves. This may include, for example, considering restrictions to support the commitment of the Company and the Investment Manager to manage the portfolio in a way that is consistent with achieving Net Zero greenhouse gas emissions by 2050 at the latest. The Company supports the UK Stewardship Code published by the Financial Reporting Council. It aims to enhance the quality of engagement between institutional investors and the companies in which they invest to help improve long-term risk-adjusted returns to shareholders and the efficient exercise of governance responsibilities. WTW is a signatory to the 2020 UK Stewardship Code and reports annually on its adherence to the Code. These reports can be found on its website where you can also find out about its ESG commitments."
"Alternative Investment Fund Manager’s Directive Towers Watson Investment Management Limited was appointed as the Company’s Alternative Investment Fund Manager with effect from 1 October 2019. The Company has appointed NatWest Trustee and Depositary Services Limited as its Depositary under the Directive for the purpose of strengthening the arrangements for the safe custody of assets. Regulatory disclosures, including the Company’s Investor Disclosure Document, are provided on the Company’s website. Disclosures on Remuneration as required under the Directive can also be found on our website. Investment Management Agreement On 19 October 2019, the Company entered into a management agreement with Towers Watson Investment Management Limited. During the year under review, fees paid to Towers Watson Investment Management Limited were as follows: The management fee equates to the sum of £1.5 million per annum increasing in line with UK Consumer Prices Index on 1 April each year plus 0.055% per annum of the market capitalisation of the Company after deduction of the value of Non-core Assets and the value of the Company’s subsidiaries. In 2022 this was £34,225 and in 2021 it was £34,000. The AIFM is also entitled to receive a fixed administration fee, in respect of the provision of certain underlying administration services, which is capped at £0.92 million per annum increasing each year from 1 April in line with the CPI. In 2022 this fee was £1.04 million and in 2021 it was £0.98 million. Investment Management and Distribution Services On 15 December 2022, the Company entered into an amended and restated management agreement with Towers Watson Investment Management Limited. The amendments included details of further marketing, public relations and investor relations services which Towers Watson Investment Management Limited has been appointed to provide from 31 December 2022 as well as a new fee arrangement between the Company and Towers Watson Investment Management Limited that reflected these additional responsibilities and the other changes made to the Company’s operating model. Detail of the investment management and distribution fee payable to Towers Watson Investment Management Limited from 1 January 2023 is as follows: 0.57% per annum on such part of the Company’s market capitalisation that is less than or equal to £2.5 billion, 0.54% per annum on such part of the Company’s market capitalisation that exceeds £2.5 billion but is less than or equal to £4 billion, and 0.52% per annum on such part of the Company’s market capitalisation that is in excess of £4 billion. The investment management and distribution fee accrues daily and is payable monthly in arrears. From the investment management and distribution fee, Towers Watson Investment Management Limited will meet payment of such fees as are agreed from time to time in respect of the Stock Pickers. Each Stock Picker is entitled to a base management fee rate, generally based on the value of assets under management. No performance fees are payable. Each year Towers Watson Investment Management Limited and the Company will also agree a fee which is attributable to the marketing, investor relations and public relations activities that are undertaken by Towers Watson Investment Management Limited on behalf of the Company. Such fee will be met through the payment of the investment management and distribution fee. The amended management agreement may be terminated by either party on not less than six months’ notice or, if terminated by the Company earlier, upon the payment of compensation. The amended management agreement may also be terminated earlier by either party with immediate effect and without compensation on the occurrence of certain events. On termination, Towers Watson Investment Management Limited is entitled to receive its fees pro rata to the date of termination. With effect from 1 April 2023, Administration, Finance and Accounting services will be performed by Juniper Partners Limited. Accordingly, Towers Watson Investment Management Limited will cease to receive a fee for the provision of those services from this date. Company Secretarial, Administration, Finance and Accounting On 15 December 2022, the Company entered into a Secretarial and Administration Agreement with Juniper Partners Limited. Juniper was formally appointed as Company Secretary to the Company on 31 December 2022 and will also provide Administration, Finance and Accounting services to the Company with effect from 1 April 2023. The Company Secretarial and Administration Agreement may be terminated by either party on not less than six months’ notice. Compensation is payable to Juniper in the event notice is given by the Company during an initial two-year period from the date of appointment."
"The Company Secretarial and Administration Agreement may also be terminated earlier by either party with immediate effect and without compensation on the occurrence of certain events. Share Capital and Waiver of Dividends The Company’s issued share capital as at 31 December 2022 comprised 292,759,600 2.5p shares. There are no preference shares or shares held in Treasury. At the last AGM the shareholders renewed the authority for the repurchase of up to 14.99% of the issued shares and also authorised that shares repurchased may be held in Treasury. These authorities will be proposed for renewal at the next AGM. The Company made use of this provision during the course of the year and acquired and cancelled 15,537,581 shares at a cost of £149.6 million. Dividend The dividend payable to shareholders on 31 March 2022 is disclosed on page 33. Voting Rights There are no agreements in respect of voting rights. As at 7 March 2023, being the latest practical date prior to publication of this report, the Company had no shareholders holding an interest in more than 3% of the voting rights of the ordinary shares in issue of the Company. Annual General Meeting This year’s Annual General Meeting will be held on 27 April 2023 at 11:00 a.m. at the V&A Dundee, 1 Riverside Esplanade, Dundee DD1 4EZ. The AGM will also be streamed live to shareholders. A web link will be provided on the AGM Form of Proxy/Form of Direction for those shareholders wishing to attend the AGM via the live stream. In addition to a presentation from the Chair and the Investment Manager, there will be a question-and-answer session where the Board will respond to questions submitted by shareholders in advance and during the meeting. The Board would welcome your attendance at the AGM. Resolutions 1 to 12 inclusive deal with the ordinary business of the meeting, namely the receipt of the Annual Report and Financial Statements, to approve the Directors Remuneration Report, to approve the company’s Dividend Policy, the election or re-election of the Directors of the Company, the re-appointment of the Auditor, and to authorise the remuneration of the Auditor. In addition to the ordinary business, resolutions relating to the following special business will be proposed: Resolution 13: Authority to repurchase the Company’s ordinary shares. This resolution seeks shareholder approval for the Company to renew its power to purchase its own ordinary shares either for cancellation or to hold them in treasury. The Directors believe that the ability of the Company to purchase its own ordinary shares in the market will potentially benefit all shareholders of the Company. The purchase of ordinary shares at a discount to the underlying Net Asset Value will enhance the Net Asset Value per share of the remaining ordinary shares. The Company is seeking shareholder approval to repurchase up to 43,746,006 ordinary shares, representing approximately 14.99% of the Company’s current issued share capital. Treasury shares will only be reissued at prices greater than the prevailing net asset value. Resolution 14: Authority to disapply pre-emption rights on allotment. If the Directors wish to re-issue ordinary shares from treasury for cash, company law requires that these shares are offered first to shareholders in proportion to their existing holdings. The purpose of this resolution is to authorise the Directors to re-issue ordinary shares from treasury for cash either in connection with a pre-emptive offer or otherwise up to a nominal value of £729,586 equivalent to 10% of the total issued ordinary share capital of the Company, excluding those ordinary shares held in treasury, as at 6 March 2023, without the ordinary shares first being offered to existing shareholders in proportion to their existing holdings. The Directors do not intend to re-issue ordinary shares from treasury for cash on a non pre-emptive basis in excess of an amount equal to 7.5% of the total issued ordinary share capital of the Company excluding those ordinary shares held in treasury within a rolling three-year period, without prior consultation with shareholders. As stated in Resolution 13, ordinary shares will only be issued from treasury at prices greater than the prevailing Net Asset Value per ordinary share and where it is in the best interests of shareholders generally. In no circumstances would the Directors use the authority to dilute the interests of existing shareholders by re-issuing ordinary shares at a price which would result in the dilution of the net asset value per share."
"The Directors do not require authority pursuant to section 551 of the Companies Act 2006 to re-issue ordinary shares from treasury. Resolution 15: The Board believes that it is in the best interests of shareholders of the Company to have the ability to call meetings on 14 clear days’ notice should a matter require urgency. Under the Companies Shareholders Rights Regulations 2009 companies are only able to opt for a notice period of 14 days in respect of general meetings other than annual general meetings if authorised annually by shareholders. The Board will therefore, as last year, propose a resolution at the AGM to approve the reduction in the minimum notice period from 21 clear days to 14 clear days for all general meetings other than annual general meetings. The Directors do not intend to use the authority unless immediate action is required. The authorities sought under resolutions 13 to 15, if approved, will expire at the conclusion of the 2024 AGM. The full text of all resolutions is set out in the Notice of Annual General Meeting. The Board considers the resolutions proposed to be in the best interests of the Company and shareholders as a whole and recommends that shareholders vote in favour of each of these resolutions, as the Directors intend to do in respect of their own holdings. The Board remains committed to maintaining a physical AGM, with shareholders and Directors present in person. Use of Financial Instruments Information on the use of financial instruments can be found in Note 18 on pages 100 to 106 of the Accounts. Auditor The Company confirms its compliance with the provisions of The Statutory Audit Services for Large Companies Market Investigation for the year to 31 December 2022. The Directors who held office at the date of approval of the Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Auditor is unaware; and each Director has taken all steps they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Auditor is aware of that information. Streamlined Energy and Carbon Reporting The ways in which the Company addresses the issue of climate change in its investment portfolio is covered in more detail in. The Investment Manager's Report. Here we report on the day-to-day activities of the Company. During 2022, the Company's total energy consumption decreased due to changes in the building management system. The CO2 emissions relating to this change in consumption are represented by the Scope 1 and 2 figures in the table below. The Company's overall level of CO2 emissions increased by 37.5%, mainly due to Scope 3 emissions relating to business travel. The Company's carbon footprint has been calculated based on the GHG Protocol Corporate Accounting and Reporting Standard. All of the Company's energy consumption is in the UK. The emissions reported below have been verified by Carbon Footprint Limited. All figures have been restated to reflect the sale of the Company's operating subsidiaries in 2017 and 2019. Details of our verification statements are available on the Company's website. The Company compensated for its hard-to-decarbonise emissions with certified greenhouse gas removals to achieve a Net Zero position for its non-portfolio related carbon emissions in 2022. Tonnes CO2e Year to 31 Dec 2018 Year to 31 Dec 2019 Year to 31 Dec 2020 Year to 31 Dec 2021 Year to 31 Dec 2022 Total of Scope 1, 2 and 3 Location based 55.3 26.6 12.9 10.4 14.3 Total of Scope 1, 2 and 3 Market based 52.4 24.0 13.7 9.0 13.3 Scope 1 21.6 11.0 6.1 6.2 5.0 Scope 2 Location 6.5 2.9 1.3 1.4 1.0 Scope 2 Market 3.6 0.3 2.1 0.0 0.0 Scope 3 27.1 12.7 5.5 2.8 8.3 Tonnes CO2e per FTE all Scopes location 11.0 5.3 3.1 2.5 3.5 Tonnes CO2e per FTE Scopes 1 and 2 location 5.6 2.8 1.8 1.8 1.5 Total Energy Consumption all UK kWh 38,753 40,168 32,352 Corporate Governance Considering the Company's Stakeholders S172 Statement The Company's Directors have a number of obligations including those under section 172 of the Companies Act 2006. These obligations relate to how the Board takes account of a number of factors in making its decisions including the impact of its decisions on employees, suppliers and the local community as well as shareholders."
"The Board is focused on its responsibilities to stakeholders, corporate culture and diversity as well as contributing to wider society and takes account of stakeholder interests when making decisions on behalf of the Company. Examples of the principal decisions taken by the Board during the year under review are detailed below. Shareholders The Board engages with the Company's shareholders in a number of ways at the AGM and investor events through its investor relations and marketing activities including meetings between individual shareholders and members of the Board and via its website, annual and interim reports, newsletters and factsheets. Shareholders had the opportunity to join three investor forums during the year which took place in person and virtually. Details of all future Company events will be made available on our website, www.alliancetrust.co.uk, and all shareholders who have provided us with their email contact details will be sent electronic invitations. The Head of Investor Relations and Marketing and Broker reported regularly to the Board on meetings with shareholders sharing their views and also reporting on any changes to the composition of the share register. Shareholders wishing to communicate directly with the Board can do so by contacting the Company Secretary by email or post. Contact details can be found on page 113. Following the relaxation of Covid-19 restrictions and for the first time in three years, the Board was pleased to welcome shareholders in person to the Company's AGM. Those shareholders who were not able to attend in person were able to view the meeting and ask questions remotely. The Company's 135th AGM to be held in April 2023 will have the same facility. The Company continued to reunite shareholders with lost shares and dividends. During the year under review, the Company was able to reunite shareholders with 292,800 dormant shares with a value of £2.8 million and £17,400 of unclaimed dividends. The Board concluded its work to simplify and strengthen the Company's operating model. This resulted in the appointment of Juniper as Company Secretary with effect from 31 December 2022. Juniper will also provide finance, administration, and fund accounting services to the Company with effect from 1 April 2023. The Company also appointed TWIM to provide it with further marketing, public relations and investor relations services with effect from 31 December 2022. The changes to the Company's operating model have not impacted the management of the Company's portfolio. The changes will benefit shareholders by reducing risk in the Company's operating model. In addition, the Company's communications will benefit from additional input due to the closer proximity between marketing and investment colleagues. The Board considered the impact of the changes on the Company's small Executive team. Following the changes to the Company's operating model, the Board was pleased that the majority of the Executive team joined either Juniper or WTW apart from one employee who retired. The Board was also mindful of its Dundee heritage of which it is very proud and was pleased that those employees who were based in the Company's Dundee office will remain there with Juniper having taken over responsibility for the office premises. The Investment Association maintains a public register of companies who have received significant shareholder opposition to resolutions put to shareholders at general meetings. At the Company's Annual General Meeting held on 21 April 2022, all resolutions put to shareholders were duly passed with no significant votes against cast. Corporate Governance Directors' Report Employees During the year under review, the Company had a small Executive team of five people who had all been employed for a number of years. There was therefore no need to seek to recruit staff nor a need to consider any promotions. Should such a requirement have arisen the Company would have based its decisions solely on the individual's suitability. There was no discrimination on any basis and should any employee have suffered from a health condition or disability, reasonable adjustments would have been made to allow them to continue to have the same opportunities as any other employee. The Company had two part-time employees one male and one female. The most senior employee was female and all other employees reported directly to her. All the employees were British and white. All employees had the flexibility to work from home or in the office. The table below provides the gender, ethnicity and colour split of the workforce of the Company and the Board as at 31 December 2022."
"As at 31 December 2022 Male Female White British Asian British Board 3 37.5% 5 62.5% 7 87.5% 1 12.5% Senior Board Positions 1 50% 1 50% 2 100% 0 0% Senior Managers 2 66.7% 1 33.3% 3 100% 0 0% Other Staff 0 0% 2 100% 2 100% 0 0% Total 6 38.5% 9 61.5% 14 92.3% 1 7.7% Chair and Senior Independent Director. With effect from 31 December 2022, the Company had no employees. This was primarily as a result of the changes made to the Company's operating model. Society The Company and WTW are targeting Net Zero greenhouse gas emissions by 2050 for the Company's portfolio and aims to reduce emissions over the medium term on a pathway that is consistent with the goals of the Paris Agreement and the principles of the Institutional Investors Group on Climate Change Net Zero Investing Framework. The Board believes that meeting these commitments will improve risk adjusted returns. More detail on how the Investment Manager is approaching this can be found on pages 15 to 16. The Company has an energy efficient office. However, for most of 2022 staff have been working partly from the office and partly from home. The Board has agreed that the day-to-day business operations of the Company should be carbon neutral and it is Net Zero for its non-portfolio related carbon emissions. More details of the Company's carbon footprint can be found on page 58. The Company encourages electronic communications with shareholders whenever possible and uses certifiably sustainable paper for the Annual Report and its other communications. The Company will continue to seek to minimise the impact of its operations on the environment. The Company influences how its investee companies operate through its responsible investment activities. The Company's investment approach takes account of the external impact of investee companies' activities on the environment, their practices' social acceptability, and their good governance. Details of the activities undertaken on behalf of the Company are set out on page 17. The Board has maintained a limited number of types of investment restrictions. During the year, the Board added a restriction on investment in Russia and Belarus. Details of these exclusions can be found on page 54. The Company considers that it does not fall within the scope of the Modern Slavery Act 2015 and it is not therefore obliged to make a slavery and human trafficking statement. The Company considers its supply chains to be of low risk as its suppliers are typically professional advisers. A statement from WTW, the Company's Investment Manager, on the steps it takes to investigate and mitigate the risk of modern slavery and human trafficking can be found on WTW's website. The Company conducts its business honestly, fairly and with transparency and takes anti-bribery measures very seriously. The Company is committed to implementing and enforcing effective measures to counter bribery and corruption and has a zero-tolerance approach to acts of bribery and corruption by Directors, employees or anyone acting on the Company's behalf. The Company also has zero tolerance for financial crime such as tax evasion or the facilitation of tax evasion. Corporate Governance Community The Board, while supportive of the aims of many charities, believes that the Company should not divert shareholders' funds to finance them save in occasional circumstances where there is a close link to the Company or its heritage. The Company has been a supporter of the V&A Dundee since 2015 and made a payment of £50,000 in the year. The Company also provided £200 to fund prizes at Dundee University. Staff were, if they requested it, given time off work to participate in charitable activities or to allow them to support the charities in which they are involved. Service Providers The Company has outsourced various activities, not least, the management of the Company's portfolio to WTW and the responsibilities of safekeeping the Company's assets to its Depositary and Custodian. The Company favours working with suppliers on a long-term basis. For material contracts, the Board will normally conduct a tender process with associated due diligence prior to appointment. Where possible, consideration is given to suppliers local to Dundee. The performance of suppliers is subject to oversight by the Board. The Board receives and considers reporting detailing the performance of the Company's service providers. The Audit and Risk Committee also reviews the performance of the Company's Auditor and makes recommendations to the Board on its continuing appointment."
"The Company complies with its obligations under the Reporting on Payment Practices and Performance Regulations. Other principal decisions taken during the year are as follows: Succession planning Chris Samuel retired as a Director of the Company following the conclusion of the AGM held on 21 April 2022. Anthony Brooke also informed the Board of his intention to retire as a Director of the Company at the 2023 AGM. In accordance with its succession planning the Company undertook a search for new Directors to join the Board. The Company appointed Cornforth Consulting to assist with this process. Following an extensive review of candidates including a formal interview process, Vicky Hastings and Milyae Park were appointed as Directors of the Company on 29 September 2022. Vicky has extensive experience in fund management both as a fund manager and business leader while Milyae's diverse career spans financial services, retail, and technology. They have brought further diversity and fresh perspectives to the Board. Dividends Subject to market conditions and the Company's performance, financial position and outlook, the Board will seek to pay a dividend that increases year on year. During the year, the Board considered income receipts, forecast dividends, inflation, and the dividend yield of other investment trusts in the AIC Global Sector. The Board was pleased to be able to pay total dividends of 24.00p per ordinary share for the financial year ended 31 December 2022, a 26% increase on the previous year. The Board aims to continue delivering a rising dividend year after year as well as capital growth. Directors' Report Viability and Going Concern Statements Viability Statement The Board has assessed the prospects and viability of the Company beyond the 12 months required by the Going Concern accounting provisions. The Board considered the current position of the Company and its prospects, strategy and planning process as well as its principal and emerging risks in the current, medium and long term, as set out on pages 35 to 40. The Company's Investment Objective, which was approved by shareholders in April 2019, is set out on page 2. After the year-end but prior to approval of these Accounts, the Board reviewed how it is performing against its strategic objectives and its principal and emerging risks. The Board received regular updates on performance and other factors that could impact on the viability of the Company. The Board also engaged with the Investment Manager on the longer term impact of climate change and other societal change factors on the portfolio and how the portfolio will be transitioned to a Net Zero greenhouse gas emissions position by 2050. The Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for at least the next five years; the Board expects this position to continue over many more years to come. The Company's Investment Objective is to achieve capital growth and a rising dividend and the Board regards the Company's shares as a long-term investment. The Board believes that a period of five years is considered a reasonable period for investment in equities and is appropriate for the composition of the Company's portfolio. In arriving at this conclusion, the Board considered Financial Strength: As at 31 December 2022 the Company had Total Assets of £3.1 billion with net gearing of 4.7% and gross gearing of 7.8%. At the year end the Company had £88.9 million of cash or cash equivalents. Investment: The portfolio is invested in listed equities across the globe. The portfolio is structured for long-term performance; the Board also considers five years as being an appropriate period over which to measure performance. Liquidity: The Company is closed-ended which means that there is no requirement to realise investments to allow shareholders to sell their shares. The Directors consider this structure supports the long-term viability and sustainability of the Company and have assumed that shareholders will continue to be attracted to the closed-ended structure due to its liquidity benefit. During the year the Investment Manager carried out a liquidity analysis and stress test which indicated that around 94% of the Company's portfolio could be sold within a single day and a further 6% within 10 days without materially influencing market pricing. The Investment Manager performs liquidity analysis and stress testing on the Company's portfolio of investments on an ongoing basis under both current and stressed conditions."
"The Investment Manager remains comfortable with the liquidity of the portfolio under both of these market conditions. The Board would not expect this position to materially alter in the future. Dividends: The Company has significant accumulated distributable reserves which together with investment income can be used to support payment of the Company's dividend. Investment income from the Company's portfolio increased significantly in 2022 to £94.9 million from £61.9 million in 2021 which enhanced this position. The Company has sufficient funds to meet its Dividend Policy commitments. Reserves: The Company has large reserves at 31 December 2022 it had £2.9 billion of distributable reserves and £19.0 million of other reserves. Discount: The Company has no fixed discount control policy. The Company will continue to buy back shares when the Board considers it appropriate and to take advantage of any significant widening of the discount and to produce NAV accretion for shareholders. Significant Risks: The Company has a risk and control framework which includes a number of triggers which if breached would alert the Board to any potential adverse scenarios. The Board has approved various sensitivities to market, credit, liquidity and gearing. Borrowing: The Company has put in place unsecured long-term borrowing arrangements of various durations going out to 2053 amounting to £160.0 million. In addition the Company at the year end had drawn £63.5 million of its approved borrowing facilities of £250.0 million plus an accordion option of a further £50.0 million. The Company comfortably meets its banking covenant tests. Security: The Company retains title to all assets held by the Custodian which are subject to further safeguards imposed on the Depositary. Operations: Throughout the year under review, the Company's key service providers continued to operate in line with service level agreements with no significant errors or breaches having been recorded. The Company concluded the work it was undertaking to strengthen its operating model with changes being made effective from 31 December 2022. The Board concluded that these changes would reduce risk in the Company's operating model. Going Concern Statement In view of the conclusions drawn in the foregoing Viability Statements which considered the resources of the Company over the next 12 months and beyond, the Directors believe that the Company has adequate financial resources to continue in existence for at least 12 months from the date of approval of these accounts. Therefore, the Directors believe that it is appropriate to continue to adopt the Going Concern basis in preparing the financial statements. Directors' Report Audit and Risk Committee Role of the Committee The primary responsibilities of the Committee are to ensure the integrity of the financial reporting statements to ensure that the appointed external Auditor is competent and independent to oversee the process of finalisation and audit of the Annual Report to identify the key risks of the Company and how they. The text is managed to ensure the internal control systems that are being relied upon are operational and that any areas of concern are followed up to resolution. COMPOSITION OF THE COMMITTEE The Committee is comprised of all the Directors of the Board other than the Chairman who ceased to be a member of the Committee during the year. They are all independent and Non-Executive. Due to my recent relevant experience and qualification as a Chartered Accountant, I am the designated financial expert on the Board and head up this Committee. All members are offered training if required. KEY AREAS OF FOCUS Review of Interim Accounts and Annual Report The Committee considered the content of the Company’s Interim Accounts and Annual Report before recommending approval to the Board. The Committee concluded that the Company’s accounts were fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company’s position, business model, and strategy. It also considered whether the narrative was consistent with the underlying numerical disclosures and concluded that these reports did pass that test. Auditor assessment, independence, and appointment The Committee evaluated the external Auditor and was satisfied with the effectiveness of BDO’s performance. BDO LLP were appointed on 23 April 2020 and are recommended for re-appointment at the AGM in April 2023. In its evaluation of the Auditor, the Committee considered the Financial Reporting Council’s Audit Quality Review report and was satisfied that the issues referred to therein did not impact on the audit provided to the Company."
"As part of the appointment process of the Auditor, the Committee reviewed their independence, their audit plan for the Company, the engagement letter, and fees for the work that was required. The Committee regards the continued independence of the External Auditor to be a matter of the highest priority. I am pleased to present the Report of the Audit and Risk Committee for the year ended 31 December 2022. I hope it helps provide insight into the Committee’s role of oversight of the control environment, risk management, and financial reporting. Jo Dixon Chair, Audit and Risk Committee AUDIT AND RISK COMMITTEE The Company policy on non-audit services by the External Auditor ensures that no engagement will be permitted if: - The Auditor is not considered expert providers of non-audit services; - The services are considered to inhibit the Auditor’s independence; and - The provision of such service provides a conflict for the Board or Investment Manager. The policy also provides that the accumulated costs of non-audit services sought from the Auditor in any one year should not exceed 30% of the likely audit fees for that year and not exceed 70% cumulatively over three years. In 2022, the only non-audit work carried out by the Auditor was in relation to agreed upon procedures in respect of the Interim Report for which a fee of £5,330 was paid. During the year, the Audit and Risk Committee Chair had a private meeting with the Auditor. The Audit and Risk Committee as a whole also had private meetings with the Auditor after the conclusion of the 2021 Audit and in February 2023 following completion of the 2022 Audit. The Committee also considered the issue of Internal audit and concluded that, given the reliance on outsourced providers of its investment and administrative arrangements, there was no need for an internal audit function. Identification and Management of risk The Company has a risk management framework that has been refined over several years to identify the key risks and the controls that operate to ensure the security of its assets and the operation of the organization within set guidelines. The Committee conducts an annual review of the effectiveness of the internal control environment and systems operated by key service providers in managing those risks. This is achieved by a review by the Committee of the internal control reports from these key providers. The level of risk being run by the Investment Manager in the portfolio was reviewed and consideration given to the diversification of risk by exposures to different regions, industries, and style. It also considered the level of Active Risk being adopted across the portfolio, the source of that risk, and the impact of the individual Stock Pickers’ risk profile on the portfolio. DIRECTORS' REPORT AUDIT AND RISK COMMITTEE INTERNAL CONTROLS The Committee considered the effectiveness of the control environments of key service providers during the year. During the year under review, the Committee received regular reports from WTW and the Executive team together with reports from the Depositary and the Custodian and Administrator. These third parties have their own internal control systems. For example, WTW performs operational due diligence on the Stock Pickers that are appointed to manage the Company’s portfolio. While the Company has relied on the internal control systems put in place by WTW, third party assurance is also sought. The Committee received WTW’s report on the effectiveness of their risk management and internal control systems, including an Independent Service Auditors’ Assurance Report on Internal Controls prepared by KPMG LLP. In addition, where available, similar reports are obtained from other providers. The 2022 assessment and internal controls assurance reports received by the Committee did not highlight any significant weaknesses or failings in the risk management framework and internal control systems. Internal controls over financial recording and reporting The financial reporting process is managed by WTW, which has delegated certain accounting responsibilities to The Bank of New York Mellon (International) Limited. WTW still remains responsible to the Board for the accuracy and completeness of the financial records of the Company and provides a report to each Board meeting. As previously noted, with effect from 1 April 2023, Administration, Finance, and Accounting services will be performed by Juniper Partners Limited. The role of the Depositary The Company’s depositary is NatWest Trustee and Depositary Services Limited. It provides reports to the Company regularly on the safe custody of the investments and the operation of controls over the movement of cash in settlement of investment transactions."
"Through these reports, the Committee is satisfied that the assets remained protected throughout the year. The Custodian appointed by the Depositary for the Company is The Bank of New York Mellon, London Branch. The Company receives regular reports of their oversight and there were no issues that caused any concern during the period. OTHER MATTERS CONSIDERED IN 2022 In the course of their work in the review of the finalization of the Annual Report, the Committee considered a number of other matters including the following: - Disclosures in the financial statements; - The selection and consistency of accounting policies; - The level of provisioning to ensure prudence; - Judgement on the accounting estimates to ensure reasonableness; - The reclaim processes for withholding tax on overseas dividends; - The appropriateness of the period used in the viability statement of the Company; - The use of the going concern accounting principle being appropriate; - That the UK adopted International Financial Reporting Standards and Companies Act requirements are complied with; - The level, extent, and terms of Directors’ and Officers’ Liability Insurance cover required; and - The outsourcing and controls associated with the appointment of Juniper Partners Limited and the appointment of WTW to provide further marketing, public relations, and investor relations services. COMMITTEE EVALUATION The activities of the Audit and Risk Committee were also considered as part of the Board evaluation process. The conclusion from this process was that the Committee continues to operate effectively, with the right balance of membership, experience, and skills. Jo Dixon Chair of Audit and Risk Committee 8 March 2023 DIRECTORS’ RESPONSIBILITIES The Directors are responsible for preparing the Annual Report and the financial statements in accordance with UK adopted international accounting standards and applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the financial statements in accordance with UK adopted international accounting standards. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for that period. In preparing these financial statements, the Directors are required to: - Select suitable accounting policies and then apply them consistently; - Make judgements and accounting estimates that are reasonable and prudent; - State whether they have been prepared in accordance with UK adopted international accounting standards, subject to any material departures disclosed and explained in the financial statements; - Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and - Prepare a Director’s report, a strategic report, and Directors’ remuneration report which comply with the requirements of the Companies Act 2006. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and Accounts, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the performance, business model, and strategy. Website publication The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. REPORT OF DIRECTORS AND RESPONSIBILITY STATEMENT The Report of the Directors on pages 41 to 63 (other than pages 62 to 63 which form part of the Strategic Report) of the Annual Report and Accounts has been approved by the Board. The Directors have chosen to include information relating to future development of the Company on pages 2 and 3 and relationships with suppliers, customers, and others and their impact on the Board’s decisions on pages 59 to 61 of the Strategic Report."
"Each of the Directors, who are listed on pages 42 to 45 of this report, confirm to the best of their knowledge that: - The Financial Statements, prepared in accordance with the applicable set of UK adopted International Accounting Standards, give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Company; - The Annual Report includes a fair view of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces; and - In the opinion of the Board, the Annual Report and Financial Statements taken as a whole, is fair, balanced, and understandable and provides the information necessary to assess the Company’s performance, business model, and strategy. On behalf of the Board Gregor Stewart Chairman 8 March 2023 DIRECTORS' REPORT REMUNERATION REPORT REMUNERATION The Board as a whole takes all decisions on remuneration matters. The Company’s Remuneration Committee was dissolved on 31 December 2020 as it was not considered necessary to continue with a Remuneration Committee when all of the Directors are Non-Executive and there were only five employees. During the year, the Board agreed employees’ discretionary bonus awards for 2022. The Board did not conduct a review of Directors’ fees during 2022. It is anticipated that a review will be undertaken in 2023. Directors regularly engage with shareholders on all aspects of performance and governance and are open to contact from shareholders at any time. Any comments received from shareholders are always carefully considered. We welcome the opportunity to discuss matters of remuneration with shareholders at our AGM or at any other investor forums held during the year. Although we did not specifically seek the views of our shareholders on remuneration issues, we have not received any representations from shareholders on remuneration matters during the year. REMUNERATION POLICY The Company seeks approval of its Remuneration Policy from shareholders every three years. At the Annual General Meeting held on 21 April 2022, shareholders approved the following Remuneration Policy: The Board’s Remuneration Policy is designed to ensure that the remuneration of Directors is set at a reasonable level commensurate with the duties and responsibilities of each Director and the time commitment required to carry out their roles effectively. Remuneration will be such that the Company is able to attract and retain Directors of appropriate experience and quality. The fees paid to Directors will reflect the experience of the Board as a whole, will be fair, and will take account of the responsibilities attaching to each role given the nature of the Company’s interests, as well as the level of fees paid by comparable investment trusts. Secretarial assistance will be provided to the Chair to assist in the execution of his duties. Additional payments may be made to Directors for time expended over and above that envisaged on appointment and for serving on or chairing committees or for service as Directors of subsidiary boards, or other additional responsibilities. The level of such fees and payments will be subject to periodic review. Directors will be reimbursed for travel and subsistence expenses incurred in attending meetings or in carrying out any other duties incumbent upon them as Directors of the Company. In the event that any such payments are regarded as taxable, Directors may receive additional payments to ensure that they suffer no net cost in carrying out their duties. The level of Directors’ fees paid will not exceed the limit set out in the Company’s Articles of Association. The Board also reserves the right to make payments outside the Policy in exceptional circumstances. The Board would only use this right where it believes that this is in the best interests of the Company, and when it would be disproportionate to seek specific approval from a General Meeting. Any such payments would be fully disclosed on a timely basis. No such payments were made in 2022. REMUNERATION REPORT HOW WE IMPLEMENT OUR POLICY NON-EXECUTIVE DIRECTORS’ FEES The maximum level of ordinary remuneration that may be paid to Directors as a whole is £300,000 per annum. Any change to this level would require shareholder approval. The basic Non-Executive Director’s fee has remained unchanged since 2013. During 2022, the Board received no independent advice in respect of remuneration. Remuneration is fixed at the annual rates set out in the table below."
"Although permitted under the Company’s Articles of Association, no Director is entitled to a pension or similar benefit nor to any other monetary payment or any assets of the Company except in their capacity as shareholders of the Company. Annual fees are prorated where a change takes place during a financial year. Under the Company’s Articles of Association, in addition to fees, each Director is entitled to reimbursement of reasonable expenses properly incurred by them in the performance of their duties. Directors are not entitled to damages or compensation for loss of office or otherwise upon their resignation or termination as a Director. The Company provides insurance for legal action brought against any of its Directors as a consequence of their position. In addition, separate deeds of indemnity have been agreed with each Director indemnifying them as permitted by company law. The indemnity and insurance arrangements do not extend to cover claims brought by the Company itself, which are upheld by the Courts, nor to criminal fines or penalties. The table below shows the annual fees payable in 2022 to the Chairman, who is the highest paid Director, and all other Directors and the fees which will be payable from 1 January 2023. The table also explains the purpose of each fee. Annual Fees 2022 2023 Purpose Chair £80,000 £80,000 For leadership of the Board and in recognition of the greater time, commitment, and responsibility required. Basic Non-Executive Director £35,000 £35,000 In recognition of the time and commitment required by a Director of a public company. Committee Membership £6,000 £6,000 For the additional time required on Committee business. Chair of Audit and Risk Committee £8,000 £8,000 For the additional responsibility and the time required on the Company’s financial affairs and reporting. Senior Independent Director £3,000 £3,000 For supporting the Chair in the delivery of their objectives and leading the evaluation of the Chair and their succession process. Directors' Report NON-EXECUTIVE DIRECTORS’ CONTRACTS Each Non-Executive Director’s appointment is governed by written terms which are available for inspection at the Company’s registered office. They are also available at the AGM. Details of the Company’s policy on Directors’ tenure may be found on page 53. STAFF REMUNERATION The Company has no Executive Directors. Until 31 December 2022, it also had a small Executive team comprising five members of staff, two of whom worked part-time. The Board took all decisions in respect of salary, pension contributions, and discretionary cash bonuses for these members of staff on the recommendation of the Company Secretary and Head of Operations (other than in respect of her own remuneration). These staff members were entitled to receive pension contributions of up to 17% of their salary. Employees were not members of any share-based incentive arrangements nor of any long-term share award schemes. For the year ended 31 December 2022, average employee fixed remuneration increased by 1.1%, taxable benefits increased by 44.0%, and variable remuneration increased by 10.6%. RELATIVE IMPORTANCE OF SPEND ON PAY The chart below shows the actual expenditure of the Company in 2021 and 2022 on remuneration, distributions to shareholders by way of dividend and share buybacks, as well as investment management fees incurred. The Executive team received £0.7 million in remuneration for the year to 31 December 2022 and the Non-Executive Directors received £0.3 million. REMUNERATION REPORT SINGLE TOTAL FIGURE OF REMUNERATION The figures in the table represent the total remuneration paid to the Non-Executive Directors. In each case, the only remuneration payable was the Director’s. Annual Fee as detailed on page 69; there was no variable remuneration paid or taxable benefits provided to any of the Directors. The total Basic Non-Executive Director fees paid for 2022 was £283,647, and the maximum Basic Non-Executive Director fees which may be paid is £300,000 per annum. The remuneration figures reflect any changes in roles of each Director as detailed in the footnote below."
"Non-Executive Director 2022 £000 2021 £000 Gregor Stewart 80 80 Sarah Bates 144 35 Anthony Brooke 41 41 Dean Buckley 241 34 Jo Dixon 349 49 Clare Dobie 41 41 Vicky Hastings 410 - Milyae Park 410 - Chris Samuel 513 41 Karl Sternberg 6 - 22 Total 329 343 ANNUAL PERCENTAGE CHANGE IN TOTAL REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS AND EMPLOYEES The table opposite is a disclosure under The Companies Directors’ Remuneration Policy and Directors’ Remuneration Report Regulations 2019 and sets out the annual percentage change in each Director’s remuneration received in the financial period ended 31 December 2022 compared to the financial years ended 31 December 2021 and 31 December 2020. The remuneration figures reflect any change in a Director’s role or pro-rata fees as detailed in the footnote below. The percentage change of the average employee remuneration over the three-year period is also detailed. 1. Sarah Bates was appointed to the Board on 4 March 2021, and Senior Independent Director from 30 June 2021. 2. Dean Buckley was appointed to the Board on 4 March 2021. 3. Jo Dixon was appointed to the Board on 29 January 2020, and Chair of the Audit and Risk Committee on 6 March 2020. 4. Vicky Hastings and Milyae Park were appointed to the Board on 29 September 2022. 5. Chris Samuel retired from the Board on 21 April 2022. 6. Karl Sternberg retired from the Board on 30 June 2021. Change in Total Remuneration (%) 2022 2021 2020 Gregor Stewart - - - 22.3 Sarah Bates 124.3 - - Anthony Brooke - - - 4.7 Dean Buckley 221.0 - - Jo Dixon 3 - 10.1 - Clare Dobie - - - Vicky Hastings 4 - - - Milyae Park 4 - - - Chris Samuel 5 - 69.2 - - Karl Sternberg 6 - - 50.0 - 2.2 Average Employee 29.4 - 4.1 49.5 Directors' Report REMUNERATION REPORT PERFORMANCE GRAPH The graph below shows the Total Shareholder Return for holders of Alliance Trust PLC Ordinary Shares, measured against the MSCI All Country World Index rebased to 100 at 31 January 2013. The Company believes that this is the most appropriate index as it represents the performance of listed equities across a range of global markets and is the one against which the Company’s performance is measured. At the year-end, the Company was almost wholly invested in listed equities. Total Shareholder Return Source: Morningstar and MSCI Inc. Data to 31 December 2022. DIRECTORS’ SHAREHOLDINGS (AUDITED) All Directors are required to hold 3,000 shares in the Company. Details of the shareholdings of all Directors and their connected persons, together with details of shares acquired, are shown below. None of these shares are subject to performance conditions. In 2022, the Company issued no options to subscribe for shares and there are no options held by the Directors or by any member of staff. Directors’ shareholdings As at 31 December 2021 As at 31 December 2022 Acquired between 31 December 2022 and 8 March 2023 Gregor Stewart 25,235 25,235 – Sarah Bates 27,198 27,198 – Anthony Brooke 25,000 25,000 – Dean Buckley 3,000 10,000 – Jo Dixon 3,000 6,500 – Clare Dobie 4,666 9,975 – Chris Samuel 162,936 N/A – Vicky Hastings 2 – 6,076 – Milyae Park 2 – 3,000 – 1. Chris Samuel retired as a Director on 21 April 2022. 2. Vicky Hastings and Milyae Park were appointed as Directors on 29 September 2022."
"REMUNERATION REPORT VOTING AT ANNUAL GENERAL MEETING At the AGM held on 21 April 2022, votes cast by proxy and at the meeting in respect of the resolution relating to remuneration were as follows: Resolution Votes for % Votes against % Total votes cast Votes withheld (abstentions) Directors’ remuneration report (excluding Remuneration Policy) 79,466,384 99.61 313,729 0.39 79,780,113 958,436 At the AGM held on 21 April 2022, votes cast by proxy and at the meeting in respect of the resolution relating to the Directors’ Remuneration Policy were as follows: Resolution Votes for % Votes against % Total votes cast Votes withheld (abstentions) Directors’ Remuneration Policy 78,607,611 99.24 602,462 0.76 79,210,073 1,528,248 APPROVAL The Remuneration Report comprising pages 70 to 73 has been approved by the Board and signed on its behalf by: Gregor Stewart Chairman 8 March 2023 Directors' Report INDEPENDENT AUDITOR’S REPORT OPINION ON THE FINANCIAL STATEMENTS In our opinion, the financial statements: - give a true and fair view of the state of the Company’s affairs as at 31 December 2022 and of its loss for the year then ended; - have been properly prepared in accordance with UK adopted international accounting standards; and - have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Alliance Trust Plc for the year ended 31 December 2022 which comprise the Statement of Comprehensive Income, the Statement of Changes in Equity, the Balance Sheet, the Cash Flow Statement and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing UK and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the Audit and Risk Committee. Independence Following the recommendation of the Audit and Risk Committee, we were appointed by the Board of Directors on 22 April 2020 to audit the financial statements for the year ended 31 December 2020 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 3 years, covering the years ended 31 December 2020 to 31 December 2022. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company. INDEPENDENT AUDITOR’S REPORT CONCLUSIONS RELATING TO GOING CONCERN In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included: - Assessing the appropriateness of the Directors’ assumptions and judgements made by comparing the prior year forecasted costs to the actual costs incurred to check that the projected costs are reasonable; - Assessing the projected management fees for the year to check that it was in line with the current assets under management levels and the projected market growth forecasts for the following year; - Sensitising the forecasts based on an economic downturn and calculating financial ratios to ascertain the financial health of the Company, including performing calculations assessing the net asset position of the Company to understand the reliance on loans; - Evaluating the appropriateness of the Directors’ method of assessing the going concern assumption in light of market volatility and the present uncertainty in economic recovery; - Reviewing the Directors’ assessment, corroborating inputs used in the assessment to supporting documentation; - Challenging Directors’ assumptions and judgements made in their forecasts by performing an independent analysis of the liquidity of the portfolio; - Checking the availability of cash to meet forecast expenditure in both the base case and sensitised scenarios; and - Reviewing the loan agreements to identify the covenants and assessing the likelihood of them being breached based on the Directors’ forecasts and our sensitivity analyses."
"Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. OVERVIEW Key audit matters Revenue recognition Valuation and Ownership of Investments AN OVERVIEW OF THE SCOPE OF OUR AUDIT Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement that we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How the scope of our audit addressed the key audit matter Revenue recognition Income arises from dividends and interest and can be volatile but is often a key factor in demonstrating the performance of the portfolio. As such, there may be an incentive to recognise income as revenue where it is more appropriately of a capital nature. Additionally, judgement is required by management in determining the allocation of dividend income to revenue or capital for certain corporate actions or special dividends. For this reason, we considered revenue recognition to be a key audit matter. We responded to this matter by utilising data analytics to test 100% of the portfolio. We derived an independent expectation of income based on the investment holding and distributions per independent sources and compared to that recorded by the Company. We assessed the treatment of dividend income from corporate actions and special dividends and challenged if these had been appropriately accounted for as income or capital by reviewing the underlying reason for the issue of the dividend and whether it could be driven by a capital event. We analysed the whole population of dividend receipts to identify items for further discussion that could indicate a capital distribution, for example where a dividend represents a particularly high yield. In these instances, we performed a combination of inquiry with management and our own independent research, including inspection of financial statements of investee companies, to ascertain whether the underlying event was indeed of a capital nature. Key observations: Based on our procedures performed, we found the judgements made by management in determining the allocation of income to revenue or capital to be appropriate. Key audit matter How the scope of our audit addressed the key audit matter Valuation and ownership of listed investments The investment portfolio at the year-end comprised of listed equity investments and investments in related and subsidiary companies held at fair value through profit or loss. There is a risk that the prices used for the listed investments held by the Company are not reflective of fair value and the risk that errors made in the recording of investment holdings result in the incorrect reflection of investments owned by the Company. Therefore, we considered the valuation and ownership of listed investments to be the most significant audit area as the listed investments also represent the most significant balance in the financial statements and underpin the principal activity of the entity. Furthermore, we consider the valuation disclosures to be a significant area as they are expected to be a key area of interest for the users of the financial statements."
"We responded to this matter by testing the valuation and ownership of the whole portfolio of listed investments. We performed the following procedures: - Confirmed the year-end bid price was used by agreeing to externally quoted prices; - Assessing if there were contra indicators, such as liquidity considerations, to suggest bid price is not the most appropriate indication of fair value by considering the realisation period for individual holdings; - Recalculating the valuation by multiplying the number of shares held per the statement obtained from the custodian by the valuation per share; and - Obtained direct confirmation of the number of shares held per equity investment from the custodian regarding all investments held at the balance sheet date. We also considered the completeness, accuracy and clarity of investment-related disclosures against the requirements of relevant accounting standards. Key observations: Based on our procedures performed, we did not identify any matters to suggest the valuation or ownership of the listed equity investments was not appropriate. OUR APPLICATION OF MATERIALITY We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Company financial statements 2022 £m 2021 £m Materiality 28.9 33.5 Basis for determining materiality 1% of Net Assets Rationale for the benchmark applied As an investment trust, the net asset value is the key measure of performance for users of the financial statements. Performance materiality 21.7 25.1 Basis for determining performance materiality 75% of materiality based on our risk assessment and consideration of the control environment. We also considered the history of misstatements based on our knowledge obtained in the previous year, aggregation effect of planned nature of testing and the overall size and complexity of the entity. Specific materiality We also determined that for items impacting revenue return, a misstatement of less than materiality for the financial statements as a whole, specific materiality, could influence the economic decisions of users. As a result, we determined materiality for these items based on revenue return before tax to be £4,200,000. Specific materiality was determined using 5% of revenue return before tax. We further applied a performance materiality level of 75% of specific materiality to ensure that the risk of errors exceeding specific materiality was appropriately mitigated. Reporting threshold We agreed with the Audit and Risk Committee that we would report to them all individual audit differences in excess of £210,000. We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. OTHER INFORMATION The directors are responsible for the other information. The other information comprises the information included in the Annual Report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. CORPORATE GOVERNANCE STATEMENT The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review."
"Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit. Going concern and longer-term viability - The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified; and - The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate. Other Code provisions. Directors' statement on fair, balanced and understandable on page 67. Board's confirmation that it has carried out a robust assessment of the emerging and principal risks. The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on pages. The section describing the work of the Audit and Risk Committee set out on pages 64 to 66. Directors' Report Independent Auditor’s Report Other Companies Act 2006 Reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic Report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. The Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report. Directors’ Remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion, adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us, or the financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns, or certain disclosures of Directors’ remuneration specified by law are not made, or we have not received all the information and explanations we require for our audit. Responsibilities of Directors As explained more fully in the Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Independent Auditor’s Report Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud."
"The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: We gained an understanding of the legal and regulatory framework applicable to the Company and industry in which it operates and considered the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud. We considered the significant laws and regulations to be the Companies Act 2006, the UK Listing Rules, the DTR rules, the principles of the UK Corporate Governance Code, industry practice represented by the AIC SORP and UK adopted international accounting standards. We also considered the Company’s qualification as an Investment Trust under UK tax legislation. We focused on laws and regulations that could give rise to a material misstatement in the Company financial statements. Our tests included agreement of the financial statement disclosures to underlying supporting documentation, enquiries of management and those charged with governance relating to the existence of any non-compliance with laws and regulations, review of minutes of Board and Audit and Risk Committee meetings throughout the period for any instances of non-compliance with laws and regulations, obtaining an understanding of the control environment in monitoring compliance with laws and regulations, and reviewing the calculation in relation to Investment Trust compliance to check that the Company was meeting its requirements to retain their Investment Trust Status. We assessed the susceptibility of the financial statements to material misstatement, including fraud and considered the fraud risk areas to be revenue recognition and management override of controls. Our tests included, but were not limited to, the procedures set out in the Key Audit Matters section above, recalculating investment management fees in total, obtaining independent confirmation of bank balances, and testing journals which met a defined risk criteria by agreeing to supporting documentation and evaluating whether there was evidence of bias by the Investment Manager and Directors that represented a risk of material misstatement due to fraud. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Directors' Report Independent Auditor’s Report Use of Our Report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Peter Smith, Senior Statutory Auditor, For and on behalf of BDO LLP, Statutory Auditor, London, UK, 8 March 2023. BDO LLP is a limited liability partnership registered in England and Wales with registered number OC305127."
"Financial Statements Statement of Comprehensive Income for year ended 31 December 2022 Statement of Changes in Equity for year ended 31 December 2022 Balance Sheet as at 31 December 2022 Cash Flow Statement for year ended 31 December 2022 Notes Statement of Comprehensive Income for the Year Ended 31 December 2022 Year to 31 December 2022 Year to 31 December 2021 Revenue Capital Total Revenue Capital Total Income 95,521 - 95,521 62,282 - 62,282 Loss/gain on investments held at fair value through profit or loss - (358,675) (358,675) - 500,959 500,959 Profit on fair value of debt - 54,682 54,682 - 11,957 11,957 Total 95,521 (303,993) (208,472) 62,282 512,916 575,198 Investment management fees (3,197) (9,586) (12,783) (3,532) (10,595) (14,127) Administrative expenses (5,562) (912) (6,474) (5,003) (919) (5,922) Finance costs (2,156) (6,469) (8,625) (1,958) (5,876) (7,834) Foreign exchange gains/(losses) - 486 486 - (3,999) (3,999) Profit/(loss) before tax 84,606 (320,474) (235,868) 51,789 491,527 543,316 Taxation (6,435) (342) (6,777) (3,110) (183) (3,293) Profit/(loss) for the year 78,171 (320,816) (242,645) 48,679 491,344 540,023 All profit/(loss) for the year is attributable to equity holders. Earnings per share attributable to equity holders Basic (pence per share) 26.14 (107.28) (81.14) 15.48 156.23 171.71 Diluted (pence per share) 26.14 (107.28) (81.14) 15.48 156.22 171.70 The Company does not have any other comprehensive income and hence the total profit/(loss), as disclosed above, is the same as the Company’s total comprehensive income. Statement of Changes in Equity for the Year Ended 31 December 2022 Distributable reserves Share capital Capital redemption reserve Merger reserve Realised capital reserve Unrealised capital reserve Revenue reserve Total distributable reserves Total Equity At 1 January 2021 8,040 10,958 645,335 1,850,043 389,750 99,174 2,338,967 3,003,300 Total Comprehensive income: Profit for the year - - - 399,917 91,427 48,679 540,023 540,023 Transactions with owners, recorded directly to equity: Ordinary dividend paid - - - - - (52,680) (52,680) (52,680) Unclaimed dividends returned - - - - - 49 49 49 Own shares purchased (337) 337 - (131,512) - - (131,512) (131,512) Transfer to capital reserves - - (645,335) 645,335 - - 645,335 - At 31 December 2021 7,703 11,295 - 2,763,783 481,177 95,222 3,340,182 3,359,180 Total comprehensive income/(loss): Profit/(loss) for the year - - - 56,607 (377,423) 78,171 (242,645) (242,645) Transactions with owners, recorded directly to equity: Ordinary dividend paid - - - - - (71,086) (71,086) (71,086) Unclaimed dividends returned - - - - - 27 27 27 Own shares purchased (389) 389 - (150,457) - - (150,457) (150,457) At 31 December 2022 7,314 11,684 - 2,669,933 103,754 102,334 2,876,021 2,895,019 The £103.8m of Capital reserve arising on the revaluation of investments is subject to fair value movements and may not be readily realizable at short notice, as such it may not be entirely distributable. The capital reserve includes movements on the unsecured fixed rate loans of £54.7m which are not distributable. Balance Sheet as at 31 December 2022 Non-current assets Investments held at fair value 3,012,492 3,650,282 Right of use asset 54 504 Total 3,012,546 3,650,786 Current assets Outstanding settlements and other receivables 9,648 14,624 Cash and cash equivalents 88,864 88,579 Total 98,512 103,203 Total assets 3,111,058 3,753,989 Current liabilities Outstanding settlements and other payables (9,344) (15,863) Bank loans (63,500) (180,500) Lease liability (38) (251) Total (72,882) (196,614) Total assets less current liabilities 3,038,176 3,557,375 Non-current liabilities Unsecured fixed rate loan notes held at fair value (143,141) (197,823) Lease liability (16) (372) Total (143,157) (198,195) Net assets 2,895,019 3,359,180 Equity Share capital 7,314 7,703 Capital redemption reserve 11,684 11,295 Capital reserve 2,773,687 3,244,960 Revenue reserve 102,334 95,222 Total Equity 2,895,019 3,359,180 All net assets are attributable to equity holders. Net asset value per ordinary share attributable to equity holders Basic and diluted (£) 9.89 10.90 The financial statements were approved by the Board of Directors and authorised for issue on 8 March 2023. They were signed on its behalf by Gregor Stewart, Chairman."
"Cash Flow Statement for the Year Ended 31 December 2022 Cash flows from operating activities (Loss)/profit before tax (235,868) 543,316 Adjustments for: Losses/(gains) on investments 358,675 (500,959) Gains on fair value of debt (54,682) (11,957) Foreign exchange (losses)/gains (486) 3,999 Depreciation 174 203 Finance costs 8,625 7,834 Scrip dividends (503) (854) Operating cash flows before movements in working capital 75,935 41,582 Increase in receivables (3,189) (1,074) Decrease in payables (1,153) (1,206) Net cash inflow from operating activities before income tax 71,593 39,302 Taxes paid (7,302) (3,454) Net cash inflow from operating activities 64,291 35,848 Cash flows from investing activities Proceeds on disposal at fair value of investments through profit and loss 2,202,258 3,817,847 Purchases of fair value through profit and loss investments (1,920,913) (3,717,464) Net cash inflow from investing activities 281,345 100,383 Cash flows from financing activities Dividends paid - Equity (71,086) (52,680) Unclaimed dividends returned 27 49 Purchase of own shares (149,033) (131,512) (Repayment)/drawdown of bank debt (117,000) 35,500 Principal paid on lease liabilities (293) (250) Interest paid on lease liabilities (17) (25) Finance costs paid (8,435) (7,465) Net cash outflow from financing activities (345,837) (156,383) Net decrease in cash and cash equivalents (201) (20,152) Cash and cash equivalents at beginning of year 88,579 112,730 Effect of foreign exchange rate changes 486 (3,999) Cash and cash equivalents at end of year 88,864 88,579 Notes General Information Alliance Trust PLC was incorporated in the United Kingdom under the Companies Acts 1862-1886. The address of its registered office is given on page 113. The nature of the Company’s operations and its principal activity is a global investment trust. The following notes refer to the year ended 31 December 2022 and the comparatives, which are in brackets, refer to the year ended 31 December 2021. The financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Company operates. Summary of Significant Accounting Policies Basis of accounting The financial statements have been prepared in accordance with UK-adopted international accounting standards. The financial statements have been prepared on the historical cost basis, except that investments and unsecured fixed rate notes are stated at fair value through the profit and loss. The Association of Investment Companies issued a Statement of Recommended Practice: Financial Statements of Investment Companies in July 2022. The Directors have sought to prepare the financial statements in accordance with the AIC SORP where the recommendations are consistent with IFRS. The Company qualifies as an investment entity. Presentation of statement of comprehensive income Additional analysis is provided on the Statement of Comprehensive Income between items of a revenue and capital nature to improve accuracy, this follows guidance provided by the AIC. The net revenue profit for the year is the measure the Directors use in assessing the Company’s compliance with certain requirements set out in Section 1158 of the Corporation Tax Act 2010. Going concern The Directors having assessed the principal risks of the Company have, at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence for at least 12 months from date of approval. The Company’s assets, the majority of which are investments in quoted equity securities and are readily realizable, significantly exceed its liabilities. They therefore continue to adopt the going concern basis of accounting in preparing the financial statements. The Company’s business activities, together with the factors likely to affect its future development and performance are set out in the Strategic Report. Critical accounting estimates and judgements The preparation of the financial statements necessarily requires the exercise of judgement both in the application of accounting policies, which are set out below, and in the selection of assumptions used in the calculation of estimates. The Board reviews these judgements and estimates on an ongoing basis taking into account historical experience and other relevant factors. The same accounting policies, presentations, and methods of computation are followed in these financial statements as were applied in the Company’s last annual audited financial statements. However, actual results may differ from these estimates. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting period include the Company’s unsecured debt, which is measured at fair value for financial reporting purposes. In estimating the fair value, the Company engages third-party qualified valuers to perform the valuation. New and amended IAS Standards that are effective for the current year."
"In the current year, the Company has applied a number of amendments to UK-adopted international standards that are mandatorily effective for an accounting period that begins on or after 1 January 2022. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements. Not yet applied. The Company does not expect any other standards endorsed by the UK Endorsement Board, but not yet effective, to have a material impact. Principal accounting policies. Financial instruments. Financial assets and financial liabilities are recognized on the Company’s balance sheet when the Company enters into a contract for a financial instrument. The Company will only offset financial assets and financial liabilities if it has a legally enforceable right of offset and intends to settle on a net basis. Investments. Investments are recognized and derecognized on the trade date where a purchase or sale is made under a contract whose terms require delivery within the time frame established by the market concerned. These investments are initially valued at cost, excluding transaction costs. Investments are principally designated as fair value through the profit and loss upon initial recognition, excluding transaction costs. Listed investments are valued after their initial recognition at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Investments that are not listed or which are not frequently traded are valued at the Directors’ best estimate of fair value. In arriving at their estimate, the Directors make use of recognized valuation techniques and may take account of recent arm’s-length transactions in the same or similar instruments. The following wholly owned subsidiaries are not consolidated and are valued at fair value through the statement of comprehensive income as they do not provide services that relate directly to the investment activities of the Company nor are they themselves regarded as investment entities: Name: AT2006 Limited Shares held: Ordinary Country of incorporation: Scotland Principal Activity: Intermediate holding company Name: The Second Alliance Trust Limited Shares held: Ordinary Country of incorporation: Scotland Principal Activity: Inactive Liquidators were appointed to Allsec Nominees Limited on 18 May 2022, with the company formally being dissolved on 29 December 2022. Derivative financial instruments. Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts of similar maturity dates. Changes in the fair value of derivative financial instruments are recognized in the statement of comprehensive income. Cash and cash equivalents. Cash and cash equivalents are defined as short-term, highly liquid investments that are readily convertible to known amounts of cash and are not subject to significant changes in fair value. Outstanding settlements and other receivables and payables. Other receivables do not carry any interest and are initially recognized at fair value plus those transaction costs that are directly attributable to their acquisition or issue. They are subsequently valued at their amortized cost using the effective interest rate method, less provision for impairment. Other payables are non-interest bearing and are initially recognized at fair value and subsequently valued at their amortized cost using the effective interest method. Bank loans and unsecured fixed-rate loan notes. Interest-bearing bank loans are initially recognized at the proceeds received, net of direct issue costs. They are subsequently valued at their amortized costs. Interest payable on the bank loans is accounted for on an accrual basis in the statement of comprehensive income. Unsecured fixed-rate loan notes are initially recognized at the value of the proceeds received. After initial recognition, they are valued at fair value through the profit and loss. The borrowings are invested with the aim of enhancing long-term returns. In line with fair value movements in investments, related movements on the unsecured debt are recognized in capital. Finance charges are accounted for through the statement of comprehensive income on an accruals basis using the effective interest rate. Foreign currencies. Transactions in currencies other than pounds sterling are recorded at the rates of exchange on the dates of the transactions. At each balance sheet date, monetary items and non-monetary assets and liabilities that are fair valued and which are denominated in foreign currencies are restated at the rates prevailing on that date."
"Foreign exchange differences are recognized as capital and shown in the capital column of the statement of comprehensive income if they are of a capital nature, and recognized as revenue and shown in the related income line if they are of a revenue nature. Revenue recognition. Dividend income from investments is recognized when the shareholder’s right to receive payment has been established, normally the ex-dividend date. Where the Company has elected to receive its dividends in the form of additional shares rather than cash, the amount of cash dividend foregone is recognized as income. Any excess in the value of shares received over the amount of cash dividend foregone is recognized as a capital gain in the statement of comprehensive income. Rental income from property and income from historic mineral rights are recognized on a time-apportioned basis. Interest receivable from cash and short-term deposits is accrued to the end of the period. Special dividends are either treated as repayment of capital or as income, depending on the facts of each case. Expenses. All expenses and interest payable are accounted for on an accruals basis. Where there is a connection with the maintenance or enhancement of the value of the Company’s investments and it is consistent with the AIC SORP, the Company attributes indirect expenditure including management fees and finance costs – 25% to revenue and 75% to capital profits. Specific exceptions to this general principle are: Expenses which under the AIC SORP are chargeable to revenue profits – these are recorded directly to revenue. Expenses connected with rental income and mineral rights income – these are included as administrative expenses. Taxation. The Company carries on its business as an investment trust and conducts its affairs so as to qualify as such under the provisions of Section 1158 and 1159 of the Corporation Tax Act 2010. Taxable profit differs from the net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years as well as items that are never taxable or deductible. The Company’s liability for current tax is calculated using the rates applicable as at balance sheet date. The Company does not recognize deferred tax assets or liabilities on capital profits or losses on the basis that its investment trust status means no tax is due on the capital profits or losses of the Company. Dividends payable. Interim dividends are recognized in the period in which they are paid. Realized and unrealized reserves. Each of the realized and unrealized reserves can be described as follows: Capital redemption reserve. This reserve was created in 2006 by the cancellation and repayment of the Company’s preference share capital when the Company merged with The Second Alliance Trust PLC. This is not distributable. Merger reserve. This reserve was created as part of the arrangements for the acquisition of the assets of The Second Alliance Trust Limited in 2006. Following the approval by shareholders at the Company’s Annual General Meeting held on 22 April 2021 to convert this into a distributable reserve, the Court on 8 July 2021 approved the reduction of the bonus shares. The Court Order became effective on 9 July 2021, at this time the Merger reserve was transferred into Capital reserves. Capital reserve. The following are accounted through this reserve: Gains and losses on realization of investments and derivative financial instruments. Increases or decreases of the value of investments and fair value debt held at the year end. Foreign exchange differences of a capital nature. Costs of purchase of own shares or purchases of shares for employee benefit trust. Where consistent with the AIC SORP, 75% of indirect expenditure including management fees, finance costs, and relevant administrative expenses are charged to capital profits. Revenue reserve. Revenue profits and losses of the Company that are revenue in nature are recorded within this reserve, together with the dividend payments made by the Company. An analysis of the Company’s revenue is as follows: Income from investments Listed dividends – UK: 14,795 Listed dividends – Overseas: 80,135 Total: 94,930 Other income Property rental income: 257 Other interest: 323 Other income: 11 Total: 591 Total income: 95,521 Dividend income from the portfolio in 2022 exceeded forecast; the rate of increase may not be sustained in 2023."
"Profit/(loss) before tax is stated after charging the following expenses: Investment management fees: 3,197 Total staff costs: 298 Total Auditor’s remuneration: 53 Depreciation: 174 WTW finance and administration: 1,443 Depositary and custody services: 480 Other administrative costs: 3,114 Total administrative costs: 5,562 Staff costs: 245 Social security costs: 37 Pension costs - defined contribution scheme: 16 Total Staff Costs: 298 Auditor’s remuneration. Fee payable to the Auditor for the audit of the Group’s annual accounts: 48 All other services: 5 Total Auditor’s remuneration: 53 In addition to the audit fees paid by the Company disclosed above, fees payable to the Company’s Auditors for the audit of the non-consolidated subsidiaries amount to 3,000, with no audit-related services for these entities during either 2021 or 2022. Total audit fees were 48,000 and non-audit fees were 5,200. Total remuneration paid to BDO in 2022 amounted to 53,200. Total Directors’ remuneration recorded for the year was 329,000. Total basic Directors’ remuneration for the year was 283,000. The balance of the staff costs relates to the Executive team. Further details are given in the Remuneration Report. The average full-time equivalents in the year was four. The cost of insured benefits for staff is included in Staff costs. Total Company expenses consist of investment management fees and administrative expenses. Finance costs: Bank loans interest and associated costs: 583 Unsecured fixed rate notes: 1,070 Interest on lease liabilities: 4 Other finance costs: 74 Total: 2,156 Bank loan interest has increased in line with higher average interest rates. The value of bank loans utilized at the year end was 63.5 million. Taxation: UK corporation tax - Revision of prior year estimate: - Overseas taxation - Revision of prior year estimate: - Overseas taxation: 6,435 Tax expense for the year: 6,435 The profit/(loss) of the Company for the year ended 31 December 2022 is taxed at the standard UK corporation tax rate of 19%. Taxation for overseas jurisdictions is calculated at the rates prevailing in the respective jurisdictions. Dividends Paid: Fourth interim dividend of 3.595p per share: - First interim dividend of 3.702p per share: - Second interim dividend of 3.702p per share: - Third interim dividend of 5.825p per share: - Fourth interim dividend 5.825p per share: 17,752 First interim dividend 6.000p per share: 17,921 Second interim dividend 6.000p per share: 17,791 Third interim dividend 6.000p per share: 17,622 Total: 71,086 We also set out below the total dividend payable in respect of the financial year, which is the basis on which the requirements of Section 1158/1159 of the Corporation Tax Act 2010 are considered. Dividends Earned: First interim dividend of 3.702p per share: - Second interim dividend of 3.702p per share: - Third interim dividend of 5.825p per share: - 2021 Fourth interim dividend 5.825p per share 17,948 2022 First interim dividend 6.000p per share 17,921 2022 Second interim dividend 6.000p per share 17,791 2022 Third interim dividend 6.000p per share 17,622 2022 Fourth interim dividend 6.000p per share 17,555 70,889 59,217 Earnings per share The calculation of the basic and diluted earnings per share is based on the following data Revenue 2022 Capital 2022 Total 2021 Revenue 2021 Capital 2021 Total Ordinary shares Earnings for the purposes of basic and diluted earnings per share being net profit or loss attributable to equity holders 78,171 (320,816) (242,645) 48,679 491,344 540,023 Number of shares Weighted average number of ordinary shares for the purpose of basic earnings per share 299,027,659 314,504,909 Weighted average number of ordinary shares for the purpose of diluted earnings per share 299,027,937 314,508,968 The basic figure is arrived at by reducing the number of ordinary shares by nil 2021 1,611 ordinary shares held in a trust that was set up to satisfy awards made under historic share award schemes no new awards will be made. The 1,611 ordinary shares held in trust were sold on 3 March 2022. The trust was terminated on 1 April 2022. Financial Statements Investments held at fair value 2022 2021 Investments designated at fair value through profit and loss Investments listed on a recognised investment exchange 3,012,458 3,650,248 Investments in related and subsidiary companies 34 34 3,012,492 3,650,282 Investments in related and subsidiary companies contains the remaining subsidiary companies as disclosed in note 2. Unlisted investments relate to directly held private equity investments."
"Listed equity investments Other equity Related and subsidiary companies Unlisted investments Total Opening book cost at 1 January 2021 2,828,600 648 2,829,248 Opening investment holdings gains or losses 440,351 34 (77) 440,308 Opening valuation as at 1 January 2021 3,268,951 34 571 3,269,556 Movements in the year Purchases at cost 3,685,646 Sales proceeds (3,804,637) (635) (607) (3,805,879) Gains on investments 500,288 635 36 500,959 Closing valuation as at 31 December 2021 3,650,248 34 3,650,282 Closing book cost 3,131,040 Closing investment holdings gains 519,208 34 519,242 Closing valuation as at 31 December 2021 3,650,248 34 3,650,282 Opening book cost at 1 January 2022 3,131,040 Opening investment holdings gains 519,208 34 519,242 Opening valuation at 1 January 2022 3,650,248 34 3,650,282 Movements in the year Purchases at cost 1,914,453 Sales proceeds (2,193,640) 364 (292) (2,193,568) Losses or gains on investments (358,603) (364) 292 (358,675) Closing valuation at 31 December 2022 3,012,458 34 3,012,492 Closing book cost 2,925,726 Closing investment holdings gains 86,732 34 86,766 Closing valuation as at 31 December 2022 3,012,458 34 3,012,492 In Other equity, the losses or gains on investments relate to losses and gains on futures contracts held for the purposes of efficient portfolio management. Detail on the hierarchical valuation of investment is given in note 18. Losses or gains on investments excluding derivatives (358,311) 500,324 Losses or gains on derivatives (364) 635 Total losses or gains on investments (358,675) 500,959 Transaction costs (2,374) (3,171) Net losses or gains on investments (361,049) 497,788 The Company received 2,193.6m from investments sold in the year. The book cost of these investments when they were purchased was 2,119.8m. These investments have been revalued over time and, until they were sold, any unrealised gains or losses were included in the fair value of the investments. Outstanding settlements and other receivables 2022 2021 Sales of investments awaiting settlement 76 8,766 Dividends receivable 5,521 2,282 Other debtors 292 342 Recoverable overseas tax 3,759 3,234 9,648 14,624 Outstanding settlements and other receivables do not carry any interest and are initially recognised at fair value plus those transaction costs that are directly attributable to their acquisition or issue. They are subsequently valued at amortised cost using the effective interest rate method, less provision for impairment. The Directors consider that the value recognised of other receivables approximates to their fair value. Outstanding settlements and other payables 2022 2021 Purchases of investments awaiting settlement 2,155 9,118 Amounts due to subsidiary companies 35 35 Amounts payable for share buybacks 1,424 Other creditors 3,563 4,716 Interest payable 2,072 1,899 Tax payable 95 95 9,344 15,863 Outstanding settlements and other payables are not interest bearing and are initially recognised at fair value and subsequently valued at their amortised cost using the effective interest method. The Directors consider that the value recognised of other payables approximates to their fair value. Financial Statements Bank loans and unsecured fixed rate loan notes Bank loans 2022 2021 Bank loans repayable within one year 63,500 180,500 Analysis of borrowings by currency Bank loans sterling 63,500 180,500 The weighted average interest rates payable Bank loans 1.70% 0.81% The estimated fair value of the borrowings Bank loans 63,500 180,500 Opening bank loans balance 180,500 145,000 Repayment or drawdown of bank loans (117,000) 35,500 Closing bank loans balance 63,500 180,500 Unsecured fixed rate loan notes 2022 2021 4.28 percent Unsecured fixed rate loan notes due 2029 98,434 122,178 2.657 percent Unsecured fixed rate loan notes due 2033 16,378 22,844 2.936 percent Unsecured fixed rate loan notes due 2043 14,644 25,309 2.897 percent Unsecured fixed rate loan notes due 2053 13,685 27,492 143,141 197,823 The expiry dates for the total bank loan committed facilities of 250m are disclosed in note 18.7. At 31 December 2022 the Company has a 150m facility which will expire on 16 December 2023 and a 100m facility which will also expire on 16 December 2023. As at 31 December 2022 63.5m of the 100m facility has been drawn down. The loans are drawn down through a utilisation request and are repayable on the maturity date of that utilisation. Loans have been classified as short term in line with the date of repayment within the utilisation request. 100m of unsecured fixed rate loan notes were drawn down in July 2014, with 15 years duration at 4.28%. On 28 November 2018 the Company issued 60m fixed rate unsecured privately placed notes each of 20m and with maturities of 15, 25 and 35 years and coupons for each respective tranche of 2.657%, 2.936% and 2.897%."
"The fair value of unsecured debt is estimated by discounting future cash flows using quoted benchmark interest yield curves as at the end of the reporting period and by obtaining lender quotes for borrowings of similar maturity to estimate credit risk margin. Any change to these inputs, or the comparative borrowings used, would result in a change in the fair value. The fair value of the items classified as loans and borrowings are classified as Level 3 under the hierarchical fair value hierarchy. Total borrowing and unsecured fixed rate notes 2022 2021 The total weighted average interest rate 2.91% 2.26% SHARE CAPITAL 2022 2021 Allotted, called up and fully paid 292,579,600 ordinary shares of 2.5p each 7,314 7,703 The Company has one class of ordinary share which carries no right to fixed income. During the year the Company bought back 15,537,581 ordinary shares at a total cost of 149,635,644 all of which were cancelled. The full cost of all shares bought back is included in the capital reserves. 2022 2021 Ordinary shares of 2.5p each Opening share capital 7,703 8,040 Share buybacks (389) (337) Closing share capital 7,314 7,703 Net asset value per ordinary share The calculation of the net asset value per ordinary share is based on the following 2022 2021 Equity shareholder funds 2,895,019 3,359,180 Number of shares at year-end basic 292,579,600 308,115,570 Number of shares at year-end diluted 292,579,600 308,117,181 The diluted figure is the entire number of shares in issue. The basic figure is arrived at by reducing the number of ordinary shares by nil 2021 1,611 ordinary shares held in a trust that was set up to satisfy awards made under historic share award schemes no new awards will be made. The 1,611 ordinary shares held in trust were sold on 3 March 2022. The trust was terminated on 1 April 2022. SEGMENTAL REPORTING The Company has identified a single operating segment, the investment trust, whose objective is to be a core investment delivering a real return over the long term through capital growth and a rising dividend. The accounting policies of the operating segment, which operates in the UK, are the same as those described in the summary of significant accounting policies. The Company measures its performance based on Net Asset Value Total Return and Total Shareholder Return. RELATED PARTY TRANSACTIONS There are amounts of 1,222 and 34,225 owed to AT2006 and The Second Alliance Trust Limited, respectively, at year end. There are no other related parties other than those noted below. Transactions with key management personnel Details of the Non-Executive Directors are disclosed on pages 42 to 45. For the purpose of IAS 24 Related Party Disclosures, key management personnel comprised the Non-Executive Directors of the Company. Details of remuneration are disclosed in the Remuneration Report on pages 68 to 73. Total emoluments 329 343 Financial Statements ANALYSIS OF CHANGE IN NET CASH OR DEBT 2020 Cash flow Other losses or gains 2021 Cash flow Other gains 2022 Cash and cash equivalents 112,730 (20,152) (3,999) 88,579 (201) 486 88,864 Bank loans and unsecured fixed rate loan notes (354,780) (35,500) 11,957 (378,323) 117,000 54,682 (206,641) Net debt or cash (242,050) (55,652) 7,958 (289,744) 116,799 55,168 (117,777) Other gains or losses includes 486m foreign exchange losses on cash balances and fair value movements of 54.682m gain on the fixed rate loan notes. FINANCIAL INSTRUMENTS AND RISK The Strategic Report details the Company’s approach to investment risk management on pages 2 to 40 and the accounting policies on pages 80 to 91 explain the basis on which investments are valued for accounting purposes. The Directors are of the opinion that the fair values of financial assets and liabilities carried at amortised cost are not materially different from their carrying values. Capital risk management The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximising the return to stakeholders through optimising its use of debt and equity. The Company’s overall strategy remains unchanged from the year ended 31 December 2022. The capital structure of the Company consists of debt including the borrowings disclosed in Note 12, cash and cash equivalents, and equity attributable to equity holders of the Company comprising issued ordinary share capital, reserves and retained earnings. The Board reviews the capital structure of the Company periodically. The Company has decided that gearing should at no time exceed 30% of its net assets."
"2022 2021 Debt (206,641) (378,323) Cash and cash equivalents 88,864 88,579 Net debt (117,777) (289,744) Net debt as % of net assets 4.1% 8.6% If debt had been valued at par, net debt as a percentage of net assets would be 4.7% 2021 7.4%. RISK MANAGEMENT POLICIES AND PROCEDURES As an investment trust the Company invests primarily in equities consistent with the investment objective set out on page 2. In pursuing this objective, the Company is exposed to a variety of risks that could result in a reduction in the value of its net assets or a reduction in the profits available for payment as dividends. The principal financial instruments at risk comprise those in the Company’s investment portfolio. The risks and the Directors’ approach to managing them are set out below under the following headings market risk comprising currency risk, interest rate risk and other price risk, credit risk, liquidity risk and gearing risk. The assumptions and sensitivities within each risk are considered appropriate and are based on the Directors’ wider knowledge of the investment market. The Company has a risk management framework in place which is described in detail on pages 35 to 40. The policies and processes for managing the risks, and the methods used to measure the risks, have not changed from the previous accounting period. MARKET RISK Market risk embodies the potential for both losses and gains and includes currency risk, interest rate risk and other price risk. Market risk is managed on a regular basis by TWIM as AIFM. The AIFM manages the capital of the Company within parameters set by the Directors on investment and asset allocation strategies and risk. The Company’s strategy on investment risk is outlined in our statement of investment objectives and policy. Details of the equity investment portfolio at the balance sheet date are disclosed on pages 20 to 31. CURRENCY RISK A significant amount of the Company’s assets, liabilities and transactions are denominated in currencies other than its functional currency of pounds sterling. Consequently, the Company is exposed to the risk that movements in exchange rates may affect the pounds sterling value of those items. Currency risk is assessed and managed on an ongoing basis by the AIFM within overall investment and asset allocation strategies and risk guidelines. The Company may enter into forward exchange contracts to cover specific foreign currency exposure. The currency exposure for overseas investments is based on the currency determined by its listing, while the currency exposure for net monetary assets is based on the currency in which each asset or liability is denominated. At the reporting date the Company had the following exposures Currency exposure Overseas investments 2022 Net monetary assets 2022 Total currency exposure 2022 Overseas investments 2021 Net monetary assets 2021 Total currency exposure 2021 US dollar 1,899,107 27,196 1,926,303 2,510,185 23,418 2,533,603 Euro 396,421 2,371 398,792 420,000 1,759 421,759 Yen 131,642 421 132,063 101,633 282 101,915 Other non sterling 305,403 1,760 307,163 297,782 3,720 301,502 2,732,573 31,748 2,764,321 3,329,600 29,179 3,358,779 Sensitivity analysis If pounds sterling had strengthened by 10% relative to all currencies, with all other variables constant, the statement of comprehensive income and the net assets attributable to equity holders would have decreased by the amounts shown below. The analysis is performed on the same basis as for the year ended 31 December 2021. The revenue return impact is an estimated figure for 12 months based on the cash balances at the reporting date. 2022 2021 Income statement Revenue return (8,014) (4,891) Capital return (276,432) (335,878) Net assets 284,446 340,769 A 10 percent weakening of pounds sterling against the above currencies would have resulted in an equal and opposite effect on the above amounts, on the basis that all other variables remain constant. Financial Statements Interest Rate Risk The Company is exposed to interest rate risk in several ways. A movement in interest rates may impact income receivable on cash deposits and interest payable on variable rate borrowings. The Company finances part of its activities through borrowings at levels which are approved and monitored by the Directors. The possible effects on fair value and cash flows as a result of an interest rate change are considered when making investment or borrowing decisions. Unsecured fixed rate loans are excluded from the sensitivity analysis. The following table details the Company’s exposure to interest rate risks for bank and loan balances."
"Exposure to floating interest rates Cash at bank 88,864 88,579 Bank loans repayable within 1 year 63,500 180,500 25,364 91,921 Sensitivity analysis If interest rates had decreased by 0.5 percent, with all other variables held constant, the statement of comprehensive income result and the net assets attributable to equity holders would have changed by the amounts shown below. The revenue return impact is an estimated figure for the year based on the cash balances at the reporting date. Income statement Revenue return 364 108 Capital return 239 338 Net assets 125 230 A 0.5 percent increase in interest rates would have resulted in a proportionate equal and opposite effect on the above amounts, on the basis that all other variables remain constant. Other Price Risk Other price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether caused by factors specific to an individual investment or its issuer, or by factors affecting all instruments traded in that market. As almost all of the Company’s financial assets are carried at fair value with fair value changes recognised in the statement of comprehensive income, all changes in market conditions will directly affect gains and losses on investments and net assets. The Directors manage price risk by having a suitable investment objective for the Company. The Directors review this objective and investment performance regularly. The risk is managed on a regular basis by TWIM, within parameters set by the Directors on investments and asset allocation strategies and risk. TWIM monitors the Stock Pickers’ compliance with their mandates and whether asset allocation within the portfolio is compatible with the Company’s objective. Concentration of exposure to other price risks A listing of the Company’s equity investments can be found on pages 20 to 31 and on the Company’s website. The largest geographical area by value for equity investments is North America, with significant amounts also in Europe, Asia and the UK. A breakdown of investments by geography and sector can be found on page 12. The following table details the Company’s exposure to market price risk on its quoted and unquoted equity investments. Investments at fair value through profit and loss Investments listed on a recognised investment exchange 3,012,458 3,650,248 Investments in related and subsidiary companies 34 34 3,012,492 3,650,282 Sensitivity analysis 99.9 percent of the Company’s investment portfolio is listed on stock exchanges. If share prices had decreased by 10 percent with all other variables remaining constant, the statement of comprehensive income result and the net assets attributable to equity holders of the parent would have decreased by the amounts shown below. Statement of comprehensive income Capital return 301,246 365,025 Net assets 301,246 365,025 A 10 percent increase in share prices would have resulted in a proportionate equal and opposite effect on the above amounts, on the basis that all other variables remain constant. Credit Risk Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. This risk is managed as follows: The Company contracts only with creditworthy counterparties and obtains sufficient collateral where appropriate as a means of mitigating the risk of financial loss from defaults. Investment transactions are carried out with a number of well-established, approved brokers on a cash against receipt, or cash against delivery, basis. Outsourced providers are subject to regular oversight by the Board, the Executive team and the Depositary. The Company’s Depositary is responsible for the safekeeping of the Company’s assets and liable to the Company for any loss of assets. Reports from the Depositary and Custodian are regularly reviewed and daily reconciliation of the Company’s assets is undertaken. The Company minimises credit risk through banking policies which restrict banking deposits to high rated financial institutions. At the reporting date, the Company’s cash and cash equivalents exposed to credit risk were as follows: Credit rating A1 88,864 88,262 A1 317 Average maturity 88,864 1 day 88,579 1 day The Company’s UK and overseas listed equities are held by The Bank of New York Mellon, London Branch, as custodian. Bankruptcy or insolvency of the custodian may cause the Company’s rights with respect to securities held by the custodian to be delayed or limited. Liquidity Risk Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities."
"This is not a significant risk for the Company as most of its assets are investments in quoted equities that are readily realisable. It also can borrow, which gives it access to additional funding when required. At the balance sheet date, it had the following facilities: Committed multi-currency facility The Bank of Nova Scotia, London Branch 150,000 16/12/2023 150,000 16/12/2022 Amount drawn 150,000 Committed multi-currency facility The Bank of Nova Scotia, London Branch 100,000 16/12/2023 100,000 16/12/2023 Amount drawn 63,500 30,500 15-year 4.28 percent unsecured fixed rate loan notes 100,000 31/07/2029 100,000 31/07/2029 Amount drawn 100,000 100,000 15-year 2.657 percent unsecured fixed rate loan notes 20,000 27/11/2033 20,000 27/11/2033 Amount drawn 20,000 20,000 25-year 2.936 percent unsecured fixed rate loan notes 20,000 27/11/2043 20,000 27/11/2043 Amount drawn 20,000 20,000 35-year 2.897 percent unsecured fixed rate loan notes 20,000 27/11/2053 20,000 27/11/2053 Amount drawn 20,000 20,000 Total facilities 410,000 410,000 Total drawn 223,500 340,500 All the facilities are unsecured and have covenants on the maximum level of gearing and minimum net asset value of the Company. The fair value of fixed rate loan notes is shown in Note 12. The Bank of Nova Scotia, London Branch £150 million facility due to expire on 16 December 2023 has an option to increase the commitment by £50 million to £200 million, subject to certain conditions being met. Gearing Risk This is the risk that the movement in the fair value of the assets of the Company is amplified by any gearing that the Company may have. The exposure to this risk and the sensitivity analysis is detailed below. Investments after gearing 3,012,492 3,650,282 Gearing 206,641 378,323 Investments before gearing 2,805,851 3,271,959 Gearing is expressed based on debt at fair value. Sensitivity analysis If the fair value of gearing had increased by 10 percent, with all other variables held constant, the statement of comprehensive income result and the net assets attributable to equity holders would have further decreased by the amounts shown below. Income statement Capital return 20,664 37,832 Net assets 20,664 37,832 A 10 percent increase in the fair value of gearing would have resulted in an equal and opposite effect on the above amounts, on the basis that all other variables remain constant. Hierarchical Valuation of Financial Instruments Accounting Standards recognise a hierarchy of fair value measurements, for financial instruments measured at fair value in the Balance Sheet, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The classification of financial instruments depends on the lowest significant applicable input. The table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined as follows: Level 1 Unadjusted, fully accessible and current quoted prices in active markets for identical assets or liabilities. Included within this category are investments listed on any recognised stock exchange. Level 2 Quoted prices for similar assets or liabilities or other directly or indirectly observable inputs which exist for the duration of the period of investment. Examples of such instruments would be forward exchange contracts and certain other derivative instruments. Level 3 Valued by reference to valuation techniques using inputs that are not based on observable market data. The value is the Directors’ best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instrument. The following table analyses the fair value measurements for the Company’s assets and liabilities measured by the level in the fair value hierarchy in which the fair value measurement is categorised at 31 December 2022. All fair value measurements disclosed are recurring fair value measurements. The Company valuation hierarchy fair value through profit and loss through the statement of comprehensive income: Assets Listed investments 3,012,458 3,650,248 Unlisted investments Other 34 34 Total assets 3,012,458 34 3,012,492 3,650,248 34 3,650,282 Liabilities Unsecured fixed rate Loan notes 143,141 197,823 Total liabilities 143,141 197,823 There have been no transfers during the year between Levels 1, 2 and 3. The following table shows the reconciliation from the beginning balances to the ending balances for fair value measurement in Level 3 of the fair value hierarchy."
"Balance at 1 January 34 605 Sales proceeds 292 607 Gains on investments 292 36 Balance at 31 December 34 34 Fair value gains or losses on the unsecured fixed rate loan notes are disclosed on the face of the Statement of Changes in Equity. Subsidiaries Investments in subsidiary companies are valued in the Company accounts at 34,000. Leases Right of use property assets Cost Balance at 1 January 1,021 984 Lease modification 908 37 Balance at 31 December 113 1,021 Depreciation Balance at 1 January 517 390 Lease modification 632 76 Depreciation charge for the year 174 203 Balance at 31 December 59 517 Net book value at 31 December 54 504 Property lease liabilities Maturity analysis contractual undiscounted cash flows Less than one year 38 251 One to five years 16 372 Total undiscounted lease liabilities at 31 December 54 623 Amount recognised in profit or loss Income from sub-leasing right of use assets 257 321 Amounts recognised in the statement of cash flows Total cash outflow for leases 293 250 Other Information Staying Close to Shareholders The routes and access to stock markets have changed dramatically in recent years. Many more shares are now in the hands of retail investors, buying through platforms and obtaining their information about investments from a wide variety of sources, increasingly online, as opposed to relying on companies formal financial reporting. The Company has been seeking to increase the size of its shareholder contact database. The information on this database is used to keep shareholders informed of Company developments and the performance of its investment strategy. By providing their email addresses shareholders can receive monthly factsheet emails which detail the latest performance information. They can also receive invites to Company events as well as Connection, the Company’s quarterly newsletter which often contains interviews with the Company’s Stock Pickers. The Company’s website, which is its key interface with retail investors, is frequently updated with new information and shareholders are encouraged to familiarise themselves with the different pages. At the bottom of each of the main pages, there is a form to sign up for regular communications. Questions or enquiries can be sent to the Company through the Help and Contact page. Connecting with Shareholders Attracting New Investors Recognising changes in how shareholders can obtain information about their investments, the Company has been seeking to raise its profile in a range of different media through regular contact with journalists and by investing in promotions, including advertising. As well as serving as another, indirect avenue for existing shareholders to stay in touch with their investments, this also has the benefit of marketing the Company to new investors. Together with good investment performance, increased awareness and recognition of the Company’s offering by new investors can help boost demand for its shares. This has a direct benefit for existing shareholders if it increases the share price rating. Reuniting Lost Shareholders There can be so many things to remember in life that it’s not surprising that assets get lost through the generations. It can be incredibly easy to lose track of investments, for example, by forgetting to update your address after moving home or not keeping a proper record of shares you have bought or sold. The Company has taken a very proactive approach to reuniting dormant shareholders with their lost Alliance Trust shares and been delighted to surprise some of them with unexpected windfalls or alert family members to unanticipated inheritances. On page 59 you can read in more detail about the Company’s efforts to trace missing shareholders, reunite them with their shares and pay them the dividends they might otherwise have forgone. Monthly Factsheet 31 October 2021 Monthly Factsheet Alliance Trust aims to be a core equity holding for investors that delivers a real return over the long term through a combination of capital growth and a rising dividend. The Company invests primarily in global equities across a wide range of industries and sectors to achieve its objective. The Company’s investment manager, Willis Towers Watson, has appointed a number of stock pickers with different styles, who each ignore the benchmark and only buy a small number of stocks in which they have strong conviction. Therefore, we believe investors get the benefit of both highly focused stock picking to increase potential outperformance versus the benchmark and manager diversification which should reduce risk and volatility. We believe that the Company’s diversified but highly active multi-manager portfolio is competitively priced."
"Summary of Approach Risk warnings Past performance is not a reliable indicator of future returns. The value of shares and the income from them can rise and fall, so investors may not get back the amount originally invested. Net Asset Value performance is not the same as share price performance and investors may not realise returns in line with NAV performance. Exchange rate changes may cause the value of overseas investments to go down as well as up and can impact on both the level of income received and capital value of your investment. Investment trusts may borrow to finance further investment. The use of gearing is likely to lead to volatility in the NAV, meaning that a relatively small movement, down or up, in the value of an investment trust’s assets will result in a magnified movement, in the same direction, of that NAV. This may mean that you could get back less than you invested or nothing at all. Key Statistics Share Price Net Asset Value per Share Premium Discount 1,032.0 1,102.8 6.4 percent Charges Targeted Ongoing Charges Ratio OCR 8 OCR Year to 31 Dec 2020 90.65 percent OR Less 0.64 percent Key Facts Market Capitalisation Total Assets Net Assets Gross Gearing Net Gearing Net Yield Year End Incorporated Dividend Paid Shares in Issue Buybacks in October TIDM ISIN AIC Sector Next AGM 3,191.5 million 3,789.0 million 3,410.3 million 9.9 percent 6.7 percent 1.4 percent 31 December 21 April 1888 March, June, September, December 309,249,181 2,183,000 shares at a cost of 22.2 million 0.71 percent of the issued share capital ATST GB00B11V7W98 Global April 2022 Alliance Trust has been awarded the AIC’s Dividend Hero award and is proud to have over 50 years of consecutive dividend growth. Notes All data is provided as at 31 October 2021 unless otherwise stated. All figures may be subject to rounding errors. Sources Investment Performance data is provided by The Bank of New York Mellon Performance and Risk Analytics Europe Limited, Morningstar and MSCI Inc; Key Statistics, Key Facts and Charges data is provided by The Bank of New York Mellon International Ltd. NAV and NAV total return is based on NAV including income with debt at fair value, after all manager fees and including Willis Towers Watson’s fees. Allows for any tax reclaims when they are achieved. The NAV total return shown in factsheets up to May 2018 was based on NAV excluding income with debt valued at par. ISIN stands for International Securities Identification Number. TIDM stands for Tradable Instrument Display Mnemonics. AIC stands for Association of Investment Companies. ATST stands for Alliance Trust PLC. Growth NAV per Share MSCI ACWI Share price 01.04.17. Investment Performance Absolute Performance Total Return in Sterling to 31 October 2021. 5 Years Since 01.04.17. 3 Years 1 Year YTD Month Total shareholder return 90.9 63.3 50.1 30.2 15.8 1.8. NAV total return 79.9 64.7 49.4 32.0 19.4 2.8. MSCI ACWI total return 477.0 64.7 51.1 29.5 16.5 3.4. Cumulative Performance The NAV total return reflects the impact of owning investments other than global equities prior to 30 June 2019, which had a drag on the return. Between 1 April 2017 and 31 October 2021, the performance of the equity portfolio before fees, a good approximation of the NAV total return after costs had these legacy investments not been included, was 65.8% versus the return on the MSCI ACWI Index of 64.7%. Discrete Performance From To 31-Oct-20 31-Oct-21 31-Oct-19 31-Oct-20 31-Oct-18 31-Oct-19 31-Oct-17 31-Oct-18 31-Oct-16 31-Oct-17. Total shareholder return 30.2 4.9 10.0 0.4 26.6. NAV total return 32.0 3.6 9.3 1.5 18.6. MSCI ACWI total return 429.5 5.0 11.2 3.4 13.3. For an explanation of how we measure performance, please refer to our website. Total borrowings at par value divided by net assets with debt at par. Total borrowings at par value minus total cash and equivalents, divided by net assets with debt at par. Annual dividend per share divided by share price. MSCI All Country World Index Net Dividends Reinvested. 1 April 2017 was the date that Willis Towers Watson was appointed investment manager. The OCR target of 0.65% is based on NAV reported as at 31 December 2017. The OCR for year to 31 December 2020 was calculated in line with the industry standard using the average of net asset values at each NAV calculation date. Alliance Trust Diversified High Conviction Research shows that active equity managers add most value through a small number of their highest conviction positions."
"Yet the performance of concentrated portfolios can also be highly volatile. The Alliance Trust portfolio mitigates this risk by blending together the best ideas of ten best-in-class stock pickers, each with different complementary styles. We believe our diversified high conviction global equity strategy should deliver more consistent outperformance and lower volatility than a strategy run by a single manager. We believe that returns from single manager strategies are often prone to sharp up and down moves; we aim to provide investors with a smoother ride. Quarterly Newsletter Autumn 2021. Technological advancements and biological breakthroughs have helped scientists better understand the causes of disease. Stephen Zachary, partner at Sands Capital explains. The coronavirus pandemic has highlighted the importance of the healthcare ecosystem and demonstrated the rapid innovation cycles taking place in life sciences. Numerous research breakthroughs in recent decades enabled scientists to develop Covid-19 vaccines in record time. However, we are only beginning to see the far-reaching effects of this life sciences revolution, which has the potential to improve patient outcomes and healthcare economics globally. The complex process of drug development has typically taken years to go from discovery to commercialization. However, researchers were able to take the Covid-19 vaccine from concept to the public in less than a year. Scientists ability to rapidly sequence the virus genome was one of many factors that allowed researchers to begin developing diagnostics and therapeutics targeting the virus within weeks. Though we cannot expect the research community to function at the same breakneck speed for every disease, we do foresee an era of faster drug discovery and deployment. While the Covid-19 pandemic shone a light on the most recent innovations, Sands Capital has studied the evolution of the life sciences sector for many years. By Stephen Zachary. Result of Dividend Review Announced. Gregor Stewart, Chairman of Alliance Trust, has announced the results of the Company’s review of its dividend. He said, Shareholder feedback has indicated there is support for a higher dividend, as long as it is affordable and sustainable. We have therefore decided to reset the dividend to a more attractive level. Alternative Performance Measures are defined as being a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable accounting framework. The APMs detailed below are used by the Board to assess the Company’s performance against a range of criteria and are viewed as particularly relevant for an investment trust. All data is as at 31 December in the respective financial year. NAV Total Return measures the increase or decrease in NAV per share including any dividends paid in the period, which are assumed to be reinvested at the time that the share price is quoted ex-dividend. Opening NAV per share 1,090.0 933.9. Closing NAV per share 989.5 1,090.0. Change in NAV (%) (9.2) 16.7. Impact of dividend reinvested (%) 2.1 1.9. NAV Total Return (%) (7.1) 18.6. Total Shareholder Return measures the increase or decrease in share price including any dividends paid in the period, which are assumed to be reinvested at the time that the share price is quoted ex-dividend. Opening share price 1,032.0 901.0. Closing share price 948.0 1,032.0. Change in share price (%) (8.1) 14.5. Impact of dividend reinvested (%) 2.3 2.0. Total Shareholder Return (%) (5.8) 16.5. Discount or Premium to NAV. The amount, expressed as a percentage, by which the Company’s share price is less than or greater than the net asset value per share of the Company. Closing NAV per share 989.5 1,090.0. Closing share price 948.0 1,032.0. Discount or Premium (%) (4.2) (5.3). Ongoing Charges Ratio. The sum of the management fee and all other administrative expenses expressed as a percentage of the average daily net assets during the year. Investment Management fee 12,781 14,127. Other expenses 6,477 5,921. Non-recurring costs 672 520. Ongoing charges 18,586 19,528. Average net assets 3,050,503 3,281,536. Ongoing Charges Ratio (%) 0.61 0.60. Alternative Performance Measures and Glossary of Terms. Glossary of Terms. Throughout this document we use several defined terms including specific terms to describe performance. Active Risk is a measure of the risk in a portfolio that is due to active management decisions. It is calculated as the standard deviation of the excess returns of a portfolio over its benchmark. For the Company’s portfolio as at 31 December 2022 this was calculated as 2.5% in relation to the MSCI ACWI benchmark."
"Active Share is a measure of how actively a portfolio is managed; it is the percentage of the portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index. For the Company’s portfolio as at 31 December 2022 this was calculated as 79% in relation to the MSCI ACWI benchmark. AIC is the Association of Investment Companies. The AIC sector classification provides meaningful and relevant categories for numerous forms of analysis, including performance rankings, data tables and peer group comparisons. The AIC Global Sector is a peer group of investment trusts managing predominantly global equity strategies. The number of members of the peer group varies from time to time depending on trusts entering or leaving that sector. Discount is where the share price of an investment trust is below its net asset value. As of 31 December 2022 the Company’s shares traded at a discount of 4.2%. Gearing, at its simplest, is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders’ assets is called gearing. If the Company’s assets grow, the shareholders’ assets grow proportionately more because the debt remains the same. But, if the value of the Company’s assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets. Gearing Gross is Total Gearing and is a measure of the Company’s financial leverage. It is calculated by dividing the Company’s total borrowings by its Net Asset Value. The Gross Gearing calculation includes any cash and cash equivalents or non-equity holdings. As at 31 December 2022, the Company had Gross Gearing of 7.8%. Gearing Net is a measure of the Company’s financial leverage and after considering cash balances, it is calculated by dividing the Company’s net borrowings by its Net Asset Value. As at 31 December 2022, the Company had Net Gearing of 4.7%. Investment Manager means the investment manager appointed by the Company to manage its portfolio. As at 31 December 2022, this was Towers Watson Investment Management Limited, a member of the Willis Towers Watson group of companies. Leverage for the purposes of the Alternative Investment Fund Managers Directive is a term used to describe any method by which the Company increases its exposure, whether through borrowing or through leverage embedded in derivative positions, or by any other means. As required by AIFMD, the Company’s leverage is calculated using two methods: the gross method which gives the overall total exposure, and the commitment method which takes into account hedging and netting offsetting positions. As the leverage calculation includes exposure created by the Company’s investments, it is only described as leveraged if its overall exposure is greater than its Net Asset Value. This is shown as a leverage ratio of greater than 100%. Details of the Leverage employed for the Company is disclosed annually by WTW in its AIFMD Disclosure which can be found on the Company’s website. Stock Picker means a manager selected and appointed by Willis Towers Watson to invest the Company’s portfolio. MSCI means MSCI Inc. which provides information relating to the benchmark, the MSCI All Country World Index, against which the performance target for the equity portfolio has been set. MSCI’s disclaimer regarding the information provided by it and referenced by the Company can be found on the Company’s website. MSCI All Country World Index is a market capitalisation weighted index designed to provide a broad measure of equity market performance throughout the world. It is comprised of stocks from both developed and emerging markets. This measures performance in Sterling. The variant of the MSCI ACWI used is the Net Dividend Reinvested variant of the MSCI ACWI. This variant gives the return that a shareholder could expect to actually receive because it includes the effects of foreign withholding tax on dividend payments. NAV Excluding Non-core Assets Total Return is a measure of the performance of the Company’s Net Asset Value that excludes the impact of the Non-core Assets held by the Company, over a specified time period. The Company’s NAV Excluding Non-core Assets Total Return for 2022, after fees and including income with debt at fair value, was -7.1% as at 31 December 2022."
"NAV Total Return is a measure of the performance of the Company’s Net Asset Value over a specified time period. It combines any change in the NAV and dividends paid. The comparator used for the Company’s NAV Total Return is the MSCI ACWI total return. The Company’s NAV Total Return for 2022, after fees and including income with debt at fair value, was -7.1% as at 31 December 2022. Net Asset Value is the value of the Company’s total assets less its liabilities including borrowings. The Company’s NAV per share is calculated by dividing this amount by the number of ordinary shares in issue and is stated on an including income basis with debt at fair value. The Company’s balance sheet Net Asset Value as at 31 December 2022 was £2.9 billion which, divided by 292,579,600 ordinary shares in issue on that date, gave a NAV per share of 989.5 pence. Non-core Assets are the assets the Company holds aside from the global equity portfolio. At the end of 2022 there was one interest in a private equity investment which has now sold all of its assets but is not able to complete its liquidation for another year. Any further return on this investment will be insignificant. The total value of these Non-core Assets as at 31 December 2022 was £34,225. Ongoing Charges Ratio is the total expenses incurred by the Company as a percentage of the Company’s average NAV with debt at fair value. We calculate the OCR in line with the industry standard using the average of net asset values at each NAV calculation date. The OCR for year to 31 December 2022 was 0.61%. Ongoing Charges represent the Company’s total ongoing costs and are calculated in accordance with the guidelines issued by the Association of Investment Companies. Peer Group Median is the median of the Morningstar universe of UK retail global equity funds. Responsible or Sustainable Investment is an investment strategy that integrates financial-driven strategies with non-financial Environmental, Social and Governance factors and stewardship for the purpose of managing long-term risk and enhancing long-term returns. Stewardship represents active ownership practices, such as engagement and voting, aimed at achieving positive change in a company’s ESG practices and delivering improved risk management and long-term investment returns outcomes, as well as a more sustainable outcome for society and all stakeholders. Total Assets represents non-current assets plus current assets, before deduction of liabilities and borrowings. Total Shareholder Return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend. The comparator used for the Company’s TSR is the MSCI ACWI total return. This measure shows the actual return received by a shareholder from their investment. The Company’s TSR for the 12 months to 31 December 2022 was -5.8%. Turnover is the lesser of the value of stocks sold or purchased in the year expressed as a percentage of the value of the equity portfolio. Turnover can be affected by the investment activity of the Stock Pickers, rebalancing of the Company’s portfolio between the Stock Pickers, the appointment of a new Stock Picker, additional funds being made available for investment or the need to realise cash for the Company. In the period ending 31 December 2022 turnover was 56.7%. Information for Shareholders Incorporation Alliance Trust PLC is incorporated in Scotland with the registered number 1731. The Company’s Register of Members is held at Computershare Investor Services PLC, Edinburgh House, 4 North St Andrew Street, Edinburgh, EH2 1HJ. General Enquiries If you have an enquiry about the Company, or wish to receive a paper copy of our Annual Report, please contact the Company Secretary at our registered office: Juniper Partners Limited, River Court, 5 West Victoria Dock Road, Dundee, DD1 3JT. Tel: 01382 938320. Email: investor@alliancetrust.co.uk. The Company’s website www.alliancetrust.co.uk contains information about the Company, including the most recent information on its investment performance in its monthly factsheet, and a daily update on the Company’s share price and Net Asset Value. Share Register Queries Change of address notifications and enquiries for shareholdings registered in your own name should be sent to the Company’s Registrars. You should also contact the Registrars if you would like the dividends on shares registered in your own name to be sent to your bank or building society account. You may check your holdings and view other information about Alliance Trust shares registered in your own name at www-uk.computershare.com/investor. Registrar The Company’s Registrar is Computershare Investor Services PLC."