Arena Events Group plc Annual Report & Accounts FY21 Contents Overview 4 Our Business Offering 6 Products & Services 9 The Arena Standard 10 Our Business Model 11 Our Strategy FY21 12 Our Work FY21 16 Our Customer Response to COVID-19 20 Strategic Report 24 Chairman’s Statement 26 CEO’s Report 28 Financial Review 32 Non-Financial Review 46 Principal Risks & Uncertainties 47 Regional Highlights UK & Europe 52 Regional Highlights Middle East & Asia 54 Regional Highlights Americas 56 Corporate Social Responsibility 58 Safety Management 60 Environment & Sustainability 61 Governance 62 Board of Directors 64 Regional Leadership Team 67 Corporate Governance Statement FY21 68 Audit Committee Report FY21 74 Remuneration Committee Report FY21 76 Directors’ Report FY21 82 Directors’ Responsibilities Statement 88 Financial Statements 90 Independent Auditor’s Report to the Members of Arena Events Group plc 92 Financial Statements & Notes 102 Company Offices 156 Shareholder Information 157 3 Annual Report & Accounts FY21 Arena Events Group plc 2 “As to be expected, the Arena high standards have been adhered to for the 2021 Omega Dubai Desert Classic. All the team are a pleasure to deal with and nothing is ever an issue. It is a great testament to everyone that Arena's standards are at the level we all expect especially during these particularly trying times.” Simon Corkill Executive Tournament Director Falcon and Associates Our Business Offering 6 Products & Services 9 The Arena Standard 10 Our Business Model 11 Our Strategy FY21 12 Our Work FY21 16 Our Customer Response to COVID-19 20 Overview 5 Annual Report & Accounts FY21 Arena Events Group plc 4 “This work will enhance the customer experience and bring fans closer to the action, it will also allow us to adapt the venue for our other events in a reduced timeframe, saving significant costs.” Graham Gilmore CEO London Stadium UKE 27% Americas 48% MEA 25% FY 21 Our Business Offering Arena Events Group plc is a global leader in turnkey event solutions. Our expertise is in designing and delivering bespoke temporary structures and associated products and services for the most prestigious sporting events and cultural occasions, as well as for commercial and crisis relief use. With 260 years of experience, you are in safe hands. FY21 Revenue £71.6m Regional Divisions 14 depots in 7 countries across the Americas, UK & Europe and Middle East & Asia regions +10 product categories Revenue by Region • Orlando • San José Chicago • • Fort Irwin • Milwaukee Revenue £34.2m Americas UK & Europe • Dubai Kuala Lumpur • Hong Kong • Seoul • Revenue £17.8m Middle East & Asia UKE 33% Americas 35% MEA 32% FY 20 • St Ives • Membury Coventry • • Wimbledon • Sheffield Revenue £19.6m Countries: UK, US, UAE, Saudi Arabia, Malaysia, Hong Kong and South Korea Riyadh • 7 Annual Report & Accounts FY21 Arena Events Group plc 6 Our core assets are temporary structures, ranging from Alu Hall tents to triple deck structures, temporary seating, furniture, catering equipment, crowd control fencing & barriers and ice rinks. In addition we offer interior design, mass participation events, exhibition services, graphics and signage. The range of vertically integrated products and services we offer allows us to deliver a full turnkey solution of global capabilities to our customers. This is a unique selling point for Arena. Our market leading products and services are utilised across a wide variety of industries, and our expertise is not limited to sporting events: • Television & film • Retail • Medical & education sectors • Corporate conferences • Architecture & construction • Exhibitions • Music concerts • State visits, royal & military events • Disaster & crisis relief Products & Services Exhibition Services • Bespoke stand design • Brand activations Graphics & Signage • Large format print • Office branding • Promotional displays • Vehicle graphics Seating • ClearviewTM seating • Grandstands • Sports stands • Flat seating • Conference seating Ice Rinks • Dry hire • Managed ticketed solutions Interiors • Full design & fit-out Fencing & Barriers • Crowd control solutions • Pedestrian barriers • Heras fencing • Steel shield • Front of stage barriers • Hostile vehicle mitigation barriers Fully Managed Event Solutions • Mass participation events • Start & finish gantries • Stages & media towers • Obstacles • Branding & signage Catering & Kitchen Equipment Hire • Cutlery • Crockery • Glassware • Cold rooms • Linens Structures • I-Novation • Multi-deck • Industrial buildings • Tensioned fabric structures • Arena Super Deck (ASD) Disaster & Crisis Relief • Temporary buildings • Temporary medical facilities • Cold rooms & mortuaries • Emergency shelters • Fencing & barriers Furniture • Tables • Chairs • Sofas & soft furnishings • Decor • Mobile, modular bars 9 Annual Report & Accounts FY21 Arena Events Group plc 8 The Arena Standard Our Business Model The ‘Arena Standard’ sits at the heart of everything that the Arena Group does, it has formed the foundation of our relationships and has contributed to our longevity and success. The Group is renowned for consistently delivering an unrivalled standard of service globally. Inputs • Skilled, experienced staff • Investment in equipment • Strong customer relationships • Robust financial strength • Recognised as a trusted brand What we do • Design and deliver temporary infrastructure • Provide event rental equipment for event organisers • Provide customers with a fully managed and consultative service Why customers choose us • The Arena Standard • Global reach • Reliability — on time, every time • Wide range of products • Strong reputation How we generate revenue • Event equipment rentals • Provide bespoke interior solutions • Longer-term (2/3 years) rentals of temporary structures • Management of events • Provision of turnkey infrastructure services Our vision: Become the leading, most respected, integrated event solutions business in the world. Health & Safety The health and safety of our employees and clients is paramount, the Group recognises the responsibility we have for our employees’ safety and wellbeing. Premium Quality & Style We are dedicated to delivering high quality, sophisticated products coupled with a premium and personal client experience. Innovation & Creativity We strive to bring our customers new and innovative solutions to their brief. Innovation also means challenging the status quo internally, finding more effective ways of working, and trying a different approach. Value for Money We provide the best quality product and customer experience at a fair price. Experience & Expertise With 260 years of experience, we are event experts. When you use Arena, you get peace of mind knowing your event infrastructure needs are in the safe hands of our experienced teams across the globe. Solutions Focused We take a tailored approach to each project, providing bespoke solutions that fit the needs of the customer. We are determined to find the best solution to our clients' challenges. Reliable & Efficient Designing and delivering global events on time, every time. Our clients feel safe knowing they can rely on Arena, entrusting their live event to our in-house experts. Fully Integrated Offering A diverse, extensive product range and integrated service offering around the world. VA L U ES VA L U ES VA L UE S Creating Long-Term Value for Our Stakeholders Teamwork Integrity Excellence 11 Annual Report & Accounts FY21 Arena Events Group plc 10 Our Strategy FY21 During FY21 some areas of the group strategy were “paused” while the business reacted to the challenges presented by the COVID-19 pandemic. During that period, the primary aim was to protect both colleagues and customers alike, to focus on margins and liquidity and ensure the business is positioned for long- term growth as end-user markets recover. Strategy Summary Progress in FY21 Continuously improve our Health & Safety (H&S) focus • The health and safety of our colleagues and customers is our number one priority • We set the goal to put this at the top of our Arena Standard delivery • The Group has a stated commitment to rigorous H&S compliance, with nominated H&S managers for each business unit, and regular monthly reporting to the Board • During the pandemic the health and safety of our customers and colleagues has been the priority. We ensured that all employees had the tools and infrastructure to work remotely wherever possible. We also ensured that field-based teams undertaking projects had the appropriate equipment to operate safely • Where events under our control were re-opened to the public, such as the three UK ice rinks before Christmas 2020, we worked closely with both the venue and Public Health England to ensure all COVID-safe protocols were followed Commitment to CSR • Arena has committed to giving back to our local communities and taking more responsibility for limiting our effect on our surroundings and operating in a sustainable manner • We have focused on: 1. Reducing our carbon footprint 2. Reducing waste by increasing re-use 3. Plastic reduction 4. Recycling • COVID-19 clearly made community interaction far more challenging in FY21. However, a number of free tickets were made available for NHS staff at the ice rinks run in early December 2020 • The reduced levels of activity had a positive effect on our carbon footprint through reduced levels of domestic and international travel. Similar benefits were seen in the reduced level of waste produced by the Group in the period • UK Greenhouse Gas Reporting is included in this Annual Report & Accounts for the first time on Page 86. Going forward, the challenge will be to minimise any increase in emissions as the business recovers and continues to take additional actions to reduce any potential future impact Acquisition integration • Focus on the integration of products and brands or prior acquisitions • Realise the cost reduction benefit of bringing more activities and services in-house • The challenge of COVID-19 led the business to take a fresh review of the integration of historic acquisitions. In the UAE, all office activities were consolidated into a single (former TGP) building, with the other premises handed back to the landlord • In Hong Kong, steps were taken to rationalise trading entities and move resources to a single warehouse location • In the US, all back-office activities (IT, finance, HR) across Arena Americas and Arena Stuart Rentals were brought together at a single site in Milwaukee, Wisconsin • Meanwhile the recent acquisition of the Williams Party Rentals assets was quickly and fully integrated into Arena Stuart Rentals, using the opportunity presented by the quiet end-user market to bring together all activities Strategy Summary Progress in FY21 Promote vertically integrated events solutions • Expand offering to customers by using products and services brought into the Group via acquisition • Continue to position the Group as “easy to do business with” • Ensure our customers are aware of the vertically integrated, global offering • While the COVID-19 pandemic slowed end-user markets, where events did take place, Arena made efforts to fully utilise in-house resources in their delivery, rather than seeking third-party supply • A number of assignments for medical authorities in the UK, MEA and US saw Arena bring together the full portfolio of products and services at the Group’s disposal such as structures, fencing, barriers, interior fit-out, refrigeration capabilities and scaffolding — delivering an agile, fully managed solution Expand reach in the Kingdom of Saudi Arabia (KSA) • Leverage the growth in international events in the KSA • During FY21, the KSA saw similar market challenges to elsewhere given the pandemic backdrop. However, Arena continued to deliver a number of smaller projects for customers in the market • Alongside this, Arena established a legal entity in the KSA and has started the process of building a permanent base in Riyadh, including recruiting local staff and re-locating equipment • There is now a building pipeline of events for FY22 as restrictions are lifted Leverage our global presence and Group capabilities • Arena’s Regions bring a range of expertise, which, when combined globally, make for a compelling proposition • We aim to leverage this globally by facilitating collaboration and consultation across Regions and Divisions and develop our colleagues by transfer opportunities • We aim to present this value proposition to international clients • Collaboration across markets was further enhanced during FY21 with the creation of the EMEA Region. Senior management resources are now shared across the UK & Europe Region and that of the Middle East & Asia, giving consistent oversight and macro-level allocation of resources. A number of staff took the opportunity to transfer between markets as part of these changes • We continue to deliver global solutions to international clients as evidenced by the work to support Tokyo 2020 and the European Tour Annual Report & Accounts FY21 13 Arena Events Group plc 12 Strategy Summary Progress in FY21 Reduce seasonality • Offer products and services which complement the low season and timing differences in markets, to drive better resource utilisation and operational efficiencies • Efforts continue to build a pipeline of work in the quieter periods of the year. Successes in FY21 included providing structures for TV production companies in the UK in October and a long-term rental for an archaeological dig on the HS2 project • In the US, the strength of the Arena product range developed to support previous winter Olympics, created opportunities in FY21 to provide additional social distancing solutions at ski-resorts and support construction companies working in snowy conditions. Both of these projects were during the seasonally quiet winter period • Again, COVID-19 influenced the outturn with year-round support provided to government and medical authorities, industrial clients and retail and hospitality customers, breaking usual seasonal patterns • It is hoped that a legacy of the pandemic will be a higher proportion of work continuing to be delivered outside of events, reducing the seasonal/weather dependent focus Operational delivery improvement • Ensuring operational teams review previous projects and learn from any outcome to improve the customer experience and drive efficiencies without compromising the Arena Standard • Events of FY21 allowed teams in all markets to provide even greater focus on the delivery of projects that did go ahead. In many instances, more in-house resource was used giving even greater control over both efficiencies and the customer experience • Operating within the constraints imposed by local health authorities created an even closer working relationship with those customers that chose to proceed with their projects Cost efficiency • Continuous challenge to the cost base around the world, aligning it to the prevailing project mix and ensuring enough flexibility is retained • During FY21 the rapid change in customer demand required a reassessment of the Group’s cost base. In some markets where government support was available, jobs and skills were preserved, while elsewhere salary reductions, unpaid leave and, unfortunately in some cases, redundancies were used to match costs to the prevailing workload • All costs were rigorously and collectively challenged from the bottom-up, with a renewed focus on project margins and cashflow to maximise Group liquidity and protect the interests of stakeholders Diversification • Arena is a global leader in turnkey event solutions. With our 260 years of experience, expertise in temporary environments, and a broad range of products and services, we recognise the opportunity to operate in a wider market outside of events or in new geographies • As discussed above, the Group continued to expand into new markets or product areas, despite and due to the challenges of the global pandemic. Many of the changes put in place in FY21 will be permanent with the Group continuing to serve its existing and new event customers, but also building on additional non-event relationships established during the year Our Strategy FY21 15 Annual Report & Accounts FY21 Arena Events Group plc 14 Our Work FY21 Arena takes great pride in delivering unique solutions for each of our clients, regardless of size or industry. While the ongoing COVID-19 pandemic has been devastating to the global events industry, Arena has approached the event work that we have delivered with the same level of professionalism and attention to detail that our clients have come to expect. May Jun Jul Apr Sep Oct Nov Aug 2020 Annual Report & Accounts FY21 17 Arena Events Group plc 16 “We have worked with the team at Arena Group over the past 12 years of staging the Nitto ATP Finals in London. Whether building structures to accommodate hospitality guests, practice courts or media facilities, Arena have delivered world-class facilities to suit our needs. ” Adam Hogg Event Director Nitto ATP Finals Jan Feb Mar Dec 2021 19 Annual Report & Accounts FY21 Arena Events Group plc 18 QUEEN'S HOUSE ICE RINK “Through a very difficult and uncertain time, it has been great to have the help and support of Arena for the 2020 ice rink at Hampton Court Palace. I believe the working partnership has been really strengthened as we worked closely to navigate the complicated and ever-changing operational restrictions during COVID-19 and I am so grateful to the team who worked tirelessly to ensure we were able to successfully provide customers with the opportunity to enjoy the skating experience at HCP this winter.” Liz Young Head of Events & Commercial Services Historic Royal Palaces “We absolutely love working with Arena, from the account management to the team on the ground, you always go that extra mile, we couldn’t ask for a better supplier to work with.” Kim Rennie Delivery Project Manager Spinneys Dubai 92 Cycle Challenge FEMA Alternate Care Facility Cold Storage Rooms Froedtert Health Dubai Health Authority Field Hospital Advent Health Stony Brook University Field Hospital Temporary Hospitals & Medical Facilities Testing & Vaccination Sites Memorial Health Systems Froedtert Health The United Center Vaccination Facility Our Customer Response to COVID-19 As the COVID-19 pandemic began to take its toll on the global events industry, it was clear that the Group would need to pivot towards the supply of crisis relief solutions. Throughout FY21, Arena has delivered a wide range of structures that have helped both governments and health authorities cope with unprecedented demand, and have allowed schools and businesses to begin the return to normal. Sunbelt Schools Project Schools & Universities Tesla Assembly Facility Expansion Manufacturing Miner's Camp at Park City Mountain Restaurants 21 Annual Report & Accounts FY21 Arena Events Group plc 20 “Some schools are using the tents to provide students with a mask free area to just breath, others use them for lunch or band practice. The feedback we have received is that the teachers love them, the students like them, and the parents approve. Working together with Arena Americas has been a terrific experience. Arena has been extremely responsive and attentive to the customer’s needs. They appreciate the nervousness of the schools, where safety is paramount, while venturing into new territory amid this COVID-19 crisis.” Heli J. Howe Regional Government Accounts Manager Sunbelt Schools Project “As the global events industry began to shut down due to COVID-19, the Group’s pivot towards the provision of disaster relief solutions has been critical in ensuring our ability to successfully continue trading through the pandemic.” Greg Lawless Chief Executive Officer Arena Group Vail Resorts Social Distancing Structures Virgin Money Unity Arena WWoS NBA COVID-19 Bubble Sports & Events Military Facilities Social distancing structures for soldiers in the UK & US Major League Soccer is Back Matchroom Boxing Fightcamp Superbowl Social Distancing Structures Our Customer Response to COVID-19 23 Annual Report & Accounts FY21 Arena Events Group plc 22 Chairman’s Statement 26 CEO’s Report 28 Financial Review 32 Non-Financial Review 46 Principal Risks & Uncertainties 47 Regional Highlights UK & Europe 52 Regional Highlights Middle East & Asia 54 Regional Highlights Americas 56 Corporate Social Responsibility 58 Safety Management 60 Environment & Sustainability 61 Strategic Report 25 Annual Report & Accounts FY21 Arena Events Group plc 24 “The professionalism and expertise of the Arena team in the build up to the event and during the event weekend was exemplary.” Mark Griffith Head of Operational Planning at London Marathon Events London Marathon Chairman’s Statement Ken Hanna Chairman In my report last year, I indicated that we anticipated a “challenging” outlook for the year ended 31 March 2021. I doubt if anyone could have foreseen quite how prolonged the impact of COVID-19 has been and hence how it has continued to seriously affect our business. Quite simply, the global event business throughout the last year has virtually stopped and this has had a material impact on our results. Revenue for the year was 55% below the prior twelve months. I am however very proud of the way the management team and our employees have reacted to the devastating impact of the pandemic. We have unfortunately had to make some employees redundant, and this is always regrettable, though in the UK we received £3.4m under the Government's Coronavirus Job Retention Scheme, which prevented significant redundancies in that market. We have implemented significant cost reductions throughout the business, conserved cash, strengthened our capital structure and “survived” whilst many others in the sector have not. As part of our drive for increased efficiency, we took the opportunity to streamline our regional structure, merging the management of the UK & Europe business with that of the Middle East & Asia, creating the EMEA Region under combined leadership. We also eliminated a layer of senior management in our Americas business. While cutting costs was the obvious answer to the loss of revenue from our traditional event business, I was particularly pleased with the way our management teams sought out new sources of revenue away from events. In this regard, we were also able to help in the fight against COVID-19 by constructing hospitals, vaccination and testing centres and other medical facilities. It is also hoped that some of this diversification will be permanent, making the business more resilient for the future. We completed a fundraising of £9.5m through a placing and subscription in April 2020 giving us additional liquidity to trade confidently throughout the pandemic. In March 2021, we announced another fundraising of £11.0m, also through a placing and subscription, and this enabled us to both strengthen our capital structure and opportunistically acquire a 50% stake in Aztec Shaffer, a US based competitor with a similar profile of business to Arena. The Shaffer part of the business is a major player in the US Golf market, and we will look to capitalise on our expertise in this area. The Aztec Events division gives the Group a presence in the Houston party rental market, the fourth largest, and a fast-growing, city in the US. Aztec Shaffer is the largest acquisition made by the Group and it demonstrates the opportunities for consolidation in a fragmented market. Our largest shareholder, TasHeel, participated in the placing and now holds 24% of the Group’s issued share capital. We are also grateful for the support of HSBC who initially extended additional overdraft facilities to the Group at the start of the pandemic before we replaced them with a £15.6m CLBILS facility in early October 2020. As I write this report, the vaccination “roll-out” in our major markets is progressing well and there is an expectation and hope that in the second half of 2021 we should see our traditional events returning to normal with a full capacity of spectators. However, the last year has taught us to remain cautious and we have taken steps to ensure that both our capital and cost structure are flexible and able to cope with disruption and uncertainty. It has been a very difficult year for society and for our Arena employees. I sincerely hope that the second half of FY22 will see life beginning to return to normal. Ken Hanna Chairman 6 July 2021 “I doubt if anyone could have foreseen quite how prolonged the impact of COVID-19 has been and hence how it has continued to seriously affect our business.” 27 Annual Report & Accounts FY21 Arena Events Group plc 26 CEO’s Report Introduction The full year results reflect the catastrophic impact of COVID-19 on the world’s global event rental industry. From just before the start of this financial year, the industry was faced with the prospect of no event rental revenues as event after event was either cancelled or postponed. Whilst some relief looked likely late last summer as restrictions were partially lifted across the globe in August and September, these hopes were short-lived as second waves of the pandemic spread across the world. This led to a second global lock down that is only now, gradually, being eased as I write this report, almost seventeen months after we experienced our first revenue hit from COVID-19 in February 2020. However, as previously reported, we took early and decisive action to reduce the impact on our business by securing non-event revenues, reducing our cost base, and raising funds from both our bank, HSBC, and shareholders via a £9.5m placing in April 2020 — all of which put the Group in a solid financial position to enable us to trade through those very difficult times. Full year revenues of £71.6m (FY20 £183.2m) were down 61% on the prior fifteen-month period (55% on a comparable twelve-month basis), but despite this the Group posted Adjusted EBITDA of £5.7m (FY20 £13.2m). The Group reported an operating loss of £9.8m compared to a loss of £19.6m in FY20. Operational Highlights Americas Region The US business performed exceptionally well, in the circumstances, over the last twelve months and delivered a record Adjusted EBITDA result, despite the significant reduction in traditional event and furniture rental revenues. The Region reported revenues of £34.2m (FY20 £64.9m) and Adjusted EBITDA of £10.2m (FY20 £5.4m) which was an incredibly strong performance. The Region’s revenues were delivered from, amongst others, the following non-sporting events and reduced capacity sporting events including: • A 1,038-bed temporary hospital in New York • Temporary extension facilities at schools and hospitals around the US • Numerous temporary test centres across the US • Temporary mass vaccination centre at the United Center in Chicago • Temporary facilities for the US military • Temporary hospitality structures for ski resorts in Colorado • The PGA Championships at Harding Park, California • The US Open at Winged Foot, New York • The NBA at the Walt Disney World Resort in Orlando, Florida Both the national tenting division, Arena Event Services (AES), and our West Coast business, Arena Stuart Rentals (ASR), delivered positive Adjusted EBITDA results. Both benefitted from a number of long-term COVID-19 related rentals, coupled with strong cost control measures that enabled the Region to produce these record results. Cashflow was tightly controlled and helped enable the Group to deliver a strong end-of-year cash number. EMEA Region The Middle East & Asia (MEA) and UK & Europe (UKE) Regions were merged to form the EMEA Region in June of last year in order to provide a more robust platform against a very challenging market backdrop, as well as streamlining customer relationships across a largely common customer base between the two regions. Despite this initiative, the EMEA Region had a torrid year with an Adjusted EBITDA loss of £3.3m (FY20 £9.2m profit), the vast bulk of which was in the MEA. Full year revenues of £37.4m (FY20 £118.3m) were 68% lower than last year, and whilst the Region did manage to secure some non-event revenue in the first half of the year, these all but disappeared in the second half. These regions were also more severely impacted by the second lockdowns in December, resulting in the reduction and subsequent cancellation of the UK’s ice season, alongside early calendar year horse racing events being held behind closed doors. The UKE business unit, with £3.4m of support from the UK Government's Coronavirus Job Retention Scheme delivered Adjusted EBITDA of £1.2m (FY20 £3.3m) on revenues of £19.6m (FY20 £60.1m) which included the following non-event revenues: • Delivery of a new seating layout for London Stadium, the home of West Ham Football Club • Delivery of a new semi-permanent seating stadium for Edinburgh Rugby Club • Numerous temporary test centres across the UK • A number of temporary mortuaries • Temporary structures for military personnel • Temporary archaeological support services for the HS2 rail development The MEA business units had an even tougher time of it and, notwithstanding the securing of a number of significant non-event revenue opportunities in the first half of the year posted an Adjusted EBITDA loss of £4.5m (FY20 £5.9m profit) on revenues of £17.8m (FY20 £58.2m), with £12.9m of the revenue in the first six months of the year. These business units lost the vast bulk of their traditionally busy season revenues (October through to February) as well as the loss of its entire exhibition event revenues this year. As the results demonstrate, this year has certainly taken its toll on the team there and with another few quiet months post year-end, we are not expecting an improvement in trading here until later in 2021. However, I know there is a strong sense of pride of performance in the team, and their focus over the last few months has been on securing as many of the pipeline opportunities that lie in front of them. Indeed, that process has already started, with a big recent job win for 21,000 seats for the inaugural F1 street race in Jeddah in December 2021. Greg Lawless Chief Executive Officer “In a year of complete devastation for the global events industry, the Group demonstrated the real value of many years of tenacity in building a diverse global business, with a broad range of product offerings, delivering sufficient non-event revenues to be able to report a positive full year Adjusted EBITDA performance. Given the challenges faced by the industry this was, indeed, a very robust performance by the Group.” 29 Annual Report & Accounts FY21 Arena Events Group plc 28 Equity Fundraisings & Additional Lending Facilities In April 2020 we completed a £9.5m fundraising (pre-expenses) through the placing and subscription of shares at an issue price of 10 pence per ordinary share. This fundraising was carried out to strengthen the Group’s balance sheet and to give the business a longer runway to withstand the commercial and financial impacts of the COVID-19 virus. At the same time, our lender, HSBC, extended an additional £4.75m overdraft facility. This overdraft facility was subsequently replaced by a larger £15.6m lending facility under the UK Government backed Coronavirus Large Business Interruption Loan Scheme (CLBILS) in October 2020. £4.0m of this loan was drawn down just after year-end as part of the requirement to utilise the facility within six months to retain continued access to the full level of lending. In March 2021, we announced another fundraising of £11.0m (pre-expenses), through a placing and subscription at an issue price of 14 pence per ordinary share. This fundraising was completed shortly after the year-end and part of these funds, £2.4m plus fees, have subsequently been used to acquire a 50% stake in Aztec Shaffer, as described further below. Acquisitions Williams Party Rentals As reported in our Interim Results in November 2020 we acquired the assets of a small San Jose-based party rental business, Williams Party Rentals, at a discount to net book value. Whilst this was a very small value transaction, Williams had been a strategic target for several years and provides our US West Coast based business, Arena Stuart Rentals, with the opportunity to expand its presence in San Jose, CA. Aztec Shaffer (post year-end) On 26 April 2021, together with our co-bidders, Summit Investment Partners and AIG, we completed the acquisition of Aztec Shaffer, based in Houston, Texas. Arena holds an initial 50% equity stake in Aztec Shaffer and has control of the business. Aztec Shaffer comprises two businesses, Aztec Events & Tents and Shaffer Sports & Events. Aztec is a very similar business to Arena Stuart Rentals, the US operations of Arena Events Group, based in California. It has a diversified customer and event base with its products including party/ wedding tents as well as tables, chairs, linens, tabletop items, dance floors and decorative items. By contrast, the significant majority of Shaffer’s historical revenues has come from golf, supporting in excess of fifteen tournaments a year including the Players Championship and the Presidents Cup. Other sports served by Shaffer include motorsports and horse racing. Shaffer’s focus on sports is well aligned with Arena Events Services which has a broader customer mix, and also serves many events outside of the sporting world. Aztec Shaffer suffered a significant reduction in revenues over the last fifteen months, compounded further by its filing for Chapter 11 relief. As a result of this bankruptcy filing, a multi-year long-term contract held with the US Tour was initially replaced by a short-term agreement up to the end of May 2021 and now extended to December 2021. All other significant customer contracts have been retained and the company is continuing discussions with the US Tour with a view to securing a new multi-year contract over the coming months. We are very pleased to have secured this significant and strategically important asset as it gives the US Region a full-service party rental business based in the fourth largest US city as well as a valuable extension to its US national structures footprint. The acquisition has traded well in the first two and a half months as part of the Arena Group. Conclusion The Arena Group can trace its origins back 260 years and there is little doubt that this will have been amongst the toughest years of trading ever witnessed by the Group. However, the events world is gradually returning, and whilst we are still a few months away from a return to full normality, we are cautiously optimistic about the recovery of the Business. We therefore believe that FY22 will be a year of transition to full normality as events begin to allow some level of spectators, as evidenced by a number of recent golf events in the US, and in soccer and rugby stadia in the UK. With the support of our stakeholders we have been fortunate to have been able to successfully trade through the last twelve months without a hit to the integrity and strength of our balance sheet. Others have been less fortunate, and this has enabled us to complete two acquisitions at prices well below historic levels. All of this would not have been possible without the continued support of our shareholders and our bank, HSBC. This year, we demonstrated the real value of being a public company, with the ability to secure shareholder support through, not one but, two placings. These placings have enabled us to strengthen our balance sheet, complete two acquisitions and leave net debt (Senior Facility covenant definition, excluding IFRS16 but including finance leases and deferred consideration. Definition also excludes debt on the balance sheet of Arena Aztec Shaffer LLC) at the end of May at £17.6m, a full £18.0m below the figure at the end of March 2020. We do, however, anticipate that net debt will increase somewhat this year as we transition to a normal trading pattern, and unwind some of the positive working capital benefits that helped us achieve such a strong liquidity position at the end of this year. It would be remiss of me not to mention the support and efforts of our global management teams and all our employees. These last twelve months have been very tough on the entire team, with significant personal sacrifices made by each and every one of our staff which has helped us trade through these very difficult times. My sincere thanks to each and every one of our team, including my senior executive colleagues, our Board and Chairman for their continued support and commitment during this last year, and we look forward to better days as live audience events make a welcome return to the global calendar. Greg Lawless Chief Executive Officer 6 July 2021 “We therefore believe that FY22 will be a year of transition to full normality as events begin to allow some level of spectators” CEO’s Report 31 Annual Report & Accounts FY21 Arena Events Group plc 30 Our Financial Results are summarised below: The Group uses alternative performance measures such as Adjusted EBITDA to allow the users of the financial statements to gain a clearer understanding of the underlying performance of the business without the impact of one-off non- recurring costs of an exceptional nature. Adjusted EBITDA (further excluding the impact of IFRS16) is also part of the Group’s covenant structure in its Senior Facility Agreement. Non-recurring costs include redundancy costs resulting from the reshaping of operations during the year, while the prior period additionally included a significant goodwill impairment and the one-off proceeds from a large insurance claim. Share option costs (FY21 credit, prior period expense) have been separately presented given their year-on-year volatility. Notes: 1. Adjusted EBITDA is defined as earnings before interest, tax, depreciation, intangible amortisation, exceptional items, share option costs and acquisition costs Year ended 31 March 2021 (audited) Year ended 31 March 2020 (unaudited) 15 months ended 31 March 2020 (audited) £m £m £m Revenue 71.6 160.6 183.2 Gross profit 27.0 50.4 55.4 Gross profit % 37.7% 31.4% 30.2% Operating expenses (excluding exceptional costs, depreciation, amortisation and share option charges) (21.3) (33.9) (42.2) Adjusted EBITDA1 5.7 16.5 13.2 Adjusted EBITDA1 margin % 8.0% 10.3% 7.2% Depreciation and amortisation (before impairment) (13.1) (12.1) (15.0) Share option credit/(expense) 0.4 (0.3) (0.3) Exceptional costs (including goodwill impairment) (2.7) (17.2) (17.5) Acquisition costs (0.1) - - Operating loss (9.8) (13.1) (19.6) Finance costs (3.0) (2.8) (3.4) Tax credit 0.1 0.1 0.1 Loss after tax (12.7) (15.8) (22.9) Financial Review Introduction In the year ended 31 March 2021, the Group delivered Adjusted EBITDA of £5.7m, a reduction of 57% on the fifteen-month period ended 31 March 2020 (£13.2m). Operating loss was £9.8m compared to a prior period loss of £19.6m Back in 2019, the decision was taken to change the Group’s accounting reference date from 31 December to 31 March to better match the seasonality of the business. This resulted in a transitional fifteen-month period ended 31 March 2020, with the latest results being for the year ended 31 March 2021. Steve Trowbridge Chief Financial Officer 33 Annual Report & Accounts FY21 Arena Events Group plc 32 Revenue Revenue for the year ended 31 March 2021 was £71.6m compared to £183.2m for the fifteen-month period to 31 March 2020. The annualisation of acquisitions had no discernible impact in the year. Instead, performance was dominated by the global response to the COVID-19 pandemic. The business had seen the first signs of disruption early in the first calendar quarter of 2020, with the effects mainly concentrated in Asia where a number of events were deferred or cancelled. By contrast the year ended 31 March 2021 was characterised by national lockdowns, widespread event cancellations and deferrals and a refocussing of the business on non-event revenue streams, whilst also supporting customers who went ahead with events behind closed doors. All Regions delivered temporary structures for COVID-19 medical and testing facilities. Meanwhile the UK & Europe Region supported the reactivation of the European Tour golf at numerous venues, built facilities for the Nitto ATP Finals at the O2, completed new seating systems at the London Stadium, built a new stadium for Edinburgh Rugby Club at Murrayfield and supported two construction companies protecting sites during archaeological and other works. The Middle East & Asia undertook work for a large international customer at the Expo 2020 Dubai, golf events in Dubai, Abu Dhabi and the KSA, and continued to support the Tokyo 2020 Olympics with seating. The Americas delivered a wide range of COVID-19 related structures for governmental, industrial, educational and hospitality customers, supported the reactivation of the NBA season in Orlando, provided facilities for the US Open golf and PGA Championships and built a large number of structures for the Super Bowl LV in Tampa. Gross Margin & Operating Expenses For the year ended 31 March 2021, the Group gross margin improved to 37.7% due in part to geographic mix, as the Americas Region delivered a higher proportion of Group revenue, with a transformed cost base following the Region's business rationalisation programme in late 2019. The margins in all Regions also benefitted from a change in mix towards more longer-term structure rentals. For the fifteen-month period ended 31 March 2020 Group gross margin was 30.2% reflecting the inclusion of two seasonally weaker January to March periods. Operating expenses, excluding exceptional and acquisition costs, depreciation, amortisation and share option charges, were £21.3m for the year ended 31 March 2021. This compares to £42.2m in the fifteen-month period to 31 March 2020. The reduction was in part due to the differing length periods, with additional cost saving actions taken in response to the COVID-19 pandemic. In the UK, the Group received £3.4m under the Government’s Coronavirus Job Retention Scheme which prevented significant redundancies, although unfortunately the Group was not eligible for any Business Rates relief as event rental companies were excluded from the scheme. In most other parts of the world the Group was unable to access any salary-support schemes and had to match staffing levels and related costs to the workload through salary reductions, unpaid leave and a reduction in the number of roles. The Group also negotiated some rent reductions and decreased its property footprint, particularly in the EMEA Region. Depreciation & Amortisation Depreciation and amortisation expenses of £13.1m for the year ended 31 March 2021 compares to £15.0m for the fifteen-month period ended 31 March 2020. Within this, depreciation of fixed assets in the year ended 31 March 2021 of £7.8m (FY20 £9.5m) was higher when adjusted for the differing time periods due to additional equipment investment in 2019 and early 2020 in support of the planned 2020 US golf calendar, alongside the impairment of assets no longer expected to be usable after the pandemic. The depreciation of right of use assets was £4.7m in the year ended 31 March 2021, compared to £4.7m in the fifteen-month period ended 31 March 2020. Share Option Expense In the year ended 31 March 2021 there was a £0.4m credit, compared to a £0.3m charge in the fifteen-month period ended 31 March 2020. This credit resulted from the surrender of options under the Arena 2017 Share Option Plan by participants in the Arena 2020 Share Option Plan. More detail on this is given in the Remuneration Committee Report on Pages 76–81. Exceptional & Acquisition Costs Exceptional costs of £2.7m in the year ended 31 March 2021 are set out in more detail in Note 4 to the accounts. These mainly comprise the costs of restructuring activities to lower the cost base in the face of COVID-19 pressures. In the fifteen-month period ended 31 March 2020 these comprised the costs of restructuring in: the US Arena operation; the UK Structures and Well-Dressed Tables business units; the Arena Exhibitions & Events Services division in Dubai; and operations in a number of Asian markets. In addition, the impact of COVID-19 at the end of the fifteen-month period led to a detailed review of the carrying value of certain fixed and current assets and their subsequent impairment as their value in use was not expected to be fully recovered. A £16.1m impairment was also taken against the carrying value of goodwill on the UK business driven by a revised trading outlook, in part due to COVID-19. These charges were partially offset by an insurance recovery relating to the settlement of the legacy DOJ case in the US. For the year ended 31 March 2021, there were £0.1m of acquisition costs, whereas there were no acquisition costs in the previous fifteen-month period. In FY20 a revised view on the level of deferred consideration payable on 2018 acquisitions, in the light of the outlook driven by COVID-19, gave rise to a credit from a reduction in provisions. Finance Expenses Finance costs comprise cash interest incurred on bank borrowings, accrued interest on shareholder loans, the amortisation of debt arrangement fees paid in previous periods and finance charges payable under lease liabilities. When the differing period lengths are taken into consideration, the main driver of the increase in cost is the annualisation of interest on the shareholder loan taken out in late 2019. Tax The tax credit of £0.1m (FY20 credit £0.1m) in the year ended 31 March 2021 mainly relates to deferred tax movements in the US offsetting a small underlying charge in the KSA, where group relief was not available. In the previous fifteen months ended 31 March 2020 tax payable was also a credit due to a deferred tax movement. Financial Review Annual Report & Accounts FY21 35 Arena Events Group plc 34 Debt & Cash Position Cash at the end of March 2021 was £18.4m, giving a net debt position of £21.1m (covenant definition, excluding IFRS 16, but including £0.4m of finance leases and £0.1m of deferred consideration). At the end of March 2021, the Group’s drawn senior debt facility was £34.5m, broadly in line with the March 2020 position, supplemented by overdraft and guarantee facilities in the US and Middle East. As at the end of March 2021, a further £2m was drawn under a short-term financing facility with Lombard Odier Investment Management (LOIM). Excluding capitalised interest, the drawn principal amount was the same year on year. On 29 March 2021, the Group announced the conditional raising of £11.0m (before expenses) by way of a placing and subscription for new ordinary shares at 14 pence per share. As well as strengthening the Group’s balance sheet, the net proceeds of the capital raise will be used to take advantage of the opportunities presented by the COVID-19 affected market to acquire attractive assets on favourable terms, including the acquisition of the business and assets of Aztec Shaffer (which completed in April 2021). The capital raising was conducted in two separate tranches with £3.5m received prior to the end of March 2021 and the balance in mid-April 2021 once shareholder approval had been obtained. In October 2020, the Group obtained £15.6m additional debt facilities from its existing lender HSBC as part of the UK Government’s Coronavirus Large Business Interruption Lending Scheme (CLBILS). This funding was incorporated into the Group’s existing facility agreement as a Term B loan alongside the existing £35.0m Term A facilities. At the end of March, the CLBILS facility remained undrawn, although as part of the terms of the agreement, a drawing was required in early April 2021 to maintain access to the facility. A second draw and final draw, if required, must be made before the first anniversary of the facility in October 2021. The Group typically operates with a negative or close to nil working capital position as a significant proportion of customer receipts are invoiced and collected ahead of the event date, although this can vary significantly during the year due to the seasonality of the business. This position was exacerbated at 31 March 2021 due to the higher than normal level of customer deposits received for postponed 2020 events that have been retained to be applied to 2021 events. In addition, net working capital contained £1.2m of VAT and PAYE rescheduled under the UK Government’s COVID-19 Deferral Schemes. Both these factors are expected to largely unwind in the first half of the FY22 financial year, returning the net working capital closer to the FY20 position. Working Capital The Group had net working capital at 31 March 2021 of £(17.4)m, compared to £(8.0)m at the end of March 2020. This is calculated as follows: Financial Review Calculation of adjusted net income Year ended 31 March 2021 (audited) Year ended 31 March 2020 (unaudited) 15 months ended 31 March 2020 (audited) Statutory loss after tax (£m) (12.7) (15.8) (22.9) ADDBACK: Exceptional costs (£m) 2.7 17.2 17.5 Acquisition costs (£m) 0.1 - - Exceptional finance costs (arrangement fees, loan note interest) (£m) 0.2 0.3 0.6 Share option (credit)/charge (£m) (0.4) 0.3 0.3 Adjusted (loss)/earnings (£m) (10.1) 2.0 (4.5) Average number of shares (m) 244.1 152.7 152.5 Adjusted basic (loss)/earnings per share (pence) (4.1) 1.3 (3.0) Basic loss per share (pence) (5.2) (10.3) (15.0) 31 Mar 2021 (audited) 31 Mar 2020 (audited) £m £m Inventories 2.3 7.8 Trade & other receivables 8.2 31.9 Current assets (excluding cash) 10.5 39.7 Trade and other payables (16.0) (24.8) Accruals (8.7) (13.9) Deferred revenue (3.2) (9.0) Current liabilities (excluding borrowings, overdraft, lease liabilities and deferred consideration) (27.9) (47.7) Net working capital (17.4) (8.0) Earnings Per Share & Dividend The actual earnings per share in the year ended 31 March 2020 was negative due to lower levels of activity driving an operating loss. By contrast the result in the fifteen- month period to March 2020 was negative mainly due to the exceptional and acquisition costs described above. In order to better understand the underlying performance of the business, the table below sets out an adjusted earnings figure, and an adjusted basic earnings per share figure. An interim dividend was declared in September 2019, but in the light of COVID-19 and the need to maximise balance sheet flexibility no interim or final dividend have been declared or recommended in the year ended 31 March 2021. This means the total dividend is nil pence per share for the year ended 31 March 2021, compared to 0.25 pence for the fifteen-months ended 31 March 2020. Acquisitions There were no material acquisitions in the year ended 31 March 2021 with just the assets of William Party Rentals acquired in July 2020. There were also no acquisitions in the fifteen-month period ended 31 March 2020. 37 Annual Report & Accounts FY21 Arena Events Group plc 36 Financial Review Capital Expenditure Total net capital expenditure (additions less proceeds from disposals) in the year ended 31 March 2021 was £3.8m. This much reduced level of spend compared to £15.1m in the fifteen months ended 31 March 2020 and reflects only essential equipment investment during the year as the lower number of events due to COVID-19 reduced the need to expand the rental fleet. Expenditure that did occur reflected commitments made prior to the COVID-19 pandemic, Health & Safety related expenditure, or the replacement of equipment sold to medical authorities in the Americas. Also included in the year ended 31 March 2021 is £0.2m of expenditure related to the purchase of rental equipment and other assets from Williams Party Rentals in San Jose, CA. Key Performance Indicators (KPIs) The Group monitors a number of key performance indicators (“KPIs”) which are reviewed at Divisional and Board level. As the fifteen-month period ending 31 March 2020 contains two loss-making January–March periods, the fifteen months is not deemed a meaningful period over which to assess these KPIs. We have therefore presented the data for consistent twelve-month periods. During the year ended 31 March 2021, attention was shifted towards gross margin, cashflow and liquidity measures to ensure the business was adapting to the challenges presented by COVID-19. The table below therefore shows the previously tracked measures, alongside the gross margin, cash and liquidity measures that were used: Steve Trowbridge Chief Financial Officer 6 July 2021 KPIs Year ended 31 March 2021 (audited) Year ended 31 March 2020 (unaudited) Adjusted EBITDA (pre-IFRS16)1 as a % of revenue 1.5% 7.7% Adjusted earnings per share (pence) (4.1) 1.3 ROCE %2 n/m 3.8% Net debt to Adjusted EBITDA (pre-IFRS16)1, 3 >10.0x 2.9x ADDITIONAL KPIS MEASURED IN FY21: Gross margin 37.7% 31.4% Reported cash (£m)4 18.4 5.8 Available liquidity (£m)5 33.8 5.7 Stakeholder Engagement examples and further references within this Annual Report & Accounts Employees • With a wide geographic footprint, the Company recognises that engagement is best led locally, not globally. Messaging is carefully balanced to showcase what is happening at a Group-level, but tailored to local market and cultural requirements, recognising that “one size does not fit all” • An open and constructive dialogue is maintained through town-hall meetings, employee forums and regular engagement surveys • Benefits are tailored to local markets, reflecting that opportunities need to extend beyond a salary into other areas such as healthcare, discount schemes and, in some markets, accommodation • We offer training and development to ensure employees, not only are able to work safely, but also reach their full potential. Job opportunities are prominently displayed internally and applicant referrals are rewarded in some markets • During FY21 the Board has been deeply grateful for the sacrifices that employees have made to ensure the Group was able to navigate through the COVID-19 pandemic and was acutely aware of feedback via various channels of the need to return to normality as soon as possible See also: the Corporate Social Responsibility and Regional Highlights sections of this Annual Report & Accounts Considering all our stakeholders (s172) The Board is mindful of all its stakeholders when considering the likely consequences of our strategy and long-term decisions. However, it is not always possible to provide a positive outcome for all stakeholders, meaning that the Board sometimes has to make decisions based on competing priorities. It is through regular stakeholder engagement that the Board is able to understand the issues that are most important to each group and to carefully consider all the relevant factors and select the course of action that leads to high standards of business conduct and promotes the long-term success of Arena Events Group plc. The Board considers its key stakeholders to be its employees, customers, suppliers, shareholders and lenders, the communities in which it operates, the environment, Governments and industry bodies. This section comprises our Section 172 statement, setting out how the Directors have, in performing their duties over the course of the year, had regard to the matters set out in Section 172 (1) (a) to (f) of the Companies Act 2006. How the Group engages with its key stakeholders Notes: 1. IFRS16 is excluded in all internally used measures of Adjusted EBITDA, as it remains excluded from the definitions used in the Group’s Senior Facility Agreement with its Lenders 2. Return on Capital Employed (“ROCE”) is calculated as the ratio of adjusted operating profit (being Adjusted EBITDA less depreciation and amortisation) divided by total average capital employed for the year. Capital employed is defined as the net book value of fixed assets, intangible assets, goodwill, plus working capital. The calculation for the 12 months ended 31 March 2020 had £4.0m of adjusted operating profit divided by average capital employed of £105.6m. Adjusted operating profit was negative for the 12 months ended 31 March 2021, rendering the calculation "not meaningful" 3. Includes pre-IFRS16 finance leases and deferred consideration which are included in the covenant definition of net debt 4. Defined as cash reported at period end including cash-in-transit 5. Defined as bank account cash plus undrawn senior debt / CLBILS facilities, a measure reported weekly in the Group’s 13 & 26 week cashflow forecasts — balance is calculated at nearest Friday to period-end date Annual Report & Accounts FY21 39 Arena Events Group plc 38 Stakeholder Engagement examples and further references within this Annual Report & Accounts Customers • Regular engagement with customers at multiple levels within both organisations • Detailed feedback sessions held on “what could be done better” and “how can we further improve the Arena Standard” and “building better relationships” • Board-level review of contracts that have not gone as well as planned (for Arena or the customer, or both parties) to ensure that learnings are understood and that the customer experience can be improved • Detailed interaction during project delivery to adapt solutions for changing customer requirements • During FY21 COVID-19 required Arena and our customers to work even more closely as the pandemic evolved, with “lockdowns” and “releases” creating late changes in project scope. We also had to take additional steps to ensure the safety of both our employees and those of our customers, while working on-site See also: the CEO’s Report, Our Work, and Regional Highlights sections of this Annual Report & Accounts Suppliers • The Directors recognise the key role that suppliers play in providing Arena with high quality equipment, products and services • Most supplier relationships are managed locally, with limited Group-level purchasing or interaction, except for certain areas of professional and advisory services • With suppliers often working alongside Arena on customer sites, we ensure high standards of safety and that our suppliers carefully manage their employee’s working conditions and well being • During FY21, the COVID-19 pandemic has placed additional challenges on supplier relationships, with projects moving forward at short notice or being subject to late amendment or even cancellation. The Group has tried to protect its supply chain wherever possible, recognising the need to support each other through this period. In some instances, suppliers have acted as additional sales channels, introducing Arena to their customers to create joint, flexible solutions Shareholders & Lenders • The Executive Directors undertake a formal roadshow twice a year to meet with existing and prospective shareholders, after the full-year and interim results. Outside of closed periods, additional ad-hoc meetings are held whenever requested by investors • Shareholders are invited to submit questions to the Board at the Group’s Annual General Meeting, held in September. Investor questions are also invited throughout the year, via the dedicated investor@arenagroup.com email address • Henry Turcan also provides “the voice of shareholders” at Board meetings bringing an important perspective to discussions • Investor information, company financial reports and updates are published via the dedicated Investors section of the Group’s corporate website • There is regular engagement with the Group’s lenders, particularly HSBC. Frequent meetings are held with the Bank’s Relationship Team and both the CFO and CEO • In FY21 the equity raising required a dedicated roadshow, with over 30 investor meetings held. It was pleasing to see a number of new shareholders invest in the company after meeting with the CEO and CFO and hearing the strategic plan. • The Remuneration Committee consulted with major shareholders ahead of implementing the Arena 2020 Share Option Plan See also: the Governance Section of this Annual Report & Accounts Stakeholder Engagement examples and further references within this Annual Report & Accounts Communities & Environment • The Arena Group undertakes the majority of such initiatives at a local level. Such interaction includes listening and acting on neighbours’ concerns around site operating hours through to targeting the local area for staff roles or supplier opportunities • The main offering of the Group — namely rental — seeks to promote the re-use and sustainability of infrastructure rather than one-off investment • The Group continues to seek ways to reduce its impact on the environment with a particular focus currently to reduce the use of short-life, timber-based flooring. Another area of focus is to extend the useful life of assets such as PVC coverings by applying them across a wider range of assignments where aesthetic characteristics are less important • Action is being taken to encourage the use of electric vehicles with charging points now provided at a number of Group sites, while the rapid shift to video-conferencing between locations necessitated by COVID-19 will likely drive a permanent reduction in the level of international travel • During FY21, the pandemic made the interaction with local communities hard to maintain at previous levels of engagement. As the restrictions placed on social interaction are eased, this will be a key area to resume See also: the Corporate Social Responsibility and Directors Report of this Annual Report & Accounts Governments (& tax authorities) & Industry Bodies • The Group has processes in place to monitor new regulations and compliance requirements that may impact the business, consulting with key advisers wherever necessary. This includes new Health & Safety regulation, financial accounting & reporting updates, and local and national tax reporting and compliance • The Group actively engages with industry bodies across the world supporting collective lobbying for positive changes to the sector • During FY21, COVID-19 required differing levels of engagement, with Public Health bodies, tax authorities, and immigration agencies to access appropriate levels of support and to protect both employees and the general public See also: the Principal Risks & Uncertainties and Governance sections of this Annual Report & Accounts 41 Annual Report & Accounts FY21 Arena Events Group plc 40 Board decision Considerations The Board reviewed the Group’s financial facilities in the light of the impact of COVID-19 on the business and agreed: • A £9.5m equity raising completed in April 2020 • To put in place additional banking facilities under the UK Government’s CLBILS scheme • Not to declare an interim or final dividend • The requirement for additional funding due to the impact of COVID-19 on the Group’s trading and cash flow, to provide liquidity to enable the Group to be able to respond to changing customer requirements and to protect the long-term viability of business during the increased near-term uncertainty • Pricing of the fundraise was important to prevent shareholder dilution — in the end it was set at 10 pence per share, a premium to the prevailing share price • Dialogue with HSBC regarding lending capacity was important, with an initial £4.75m overdraft facility, subsequently replaced by the £15.6m CLBILS facility • The requirement to preserve short-term cash flow, led to the decision not to declare the interim or final dividend. Shareholder feedback confirmed that this was acceptable and that balance sheet strength should be prioritised In response to the impact of COVID-19 on the key stakeholders of the business the Board approved the following actions: • Closure of offices and a move to remote working, wherever possible • Salary reductions among staff, with the Directors leading by example • Delay to deferred consideration payments on the Stuart Rentals acquisition • Timing of the removal of salary reductions as restrictions were lifted • Increased engagement with key customers • Collaborative and fair rescheduling of purchases and rent payments • Acceptance of Government support schemes in markets where available • Move to a smaller warehouse in Hong Kong and a reduced property footprint in the Middle East • The requirement to prioritise the welfare, health and safety of employees and customers • The need to preserve liquidity to ensure the long-term viability of the company and to provide as much financial flexibility as possible • The importance of the Board leading by example from the outset, and being among the last to return to pre-pandemic salary levels • Ensuring the vendors of Stuart Rentals, who remain in the business as senior employees, were fully consulted on the plans • The requirement to support key customers and supply partners, recognising the impact that unilateral decisions would have on future relationships and the supply chain Board decision Considerations The approval of the merger of the UK & Europe Region and the Middle East & Asia Region creating the EMEA Region*, accompanied by a restructuring of the US senior leadership team * CGUs and segment reporting remain unaffected • To recognise that the management structures of both regions had been designed to support a more active acquisition- led strategy • That it was appropriate to pause acquisitions until the financial situation became clearer • To ensure that the management structure appropriately reflected the short to medium term workload in each region, governance requirements and the most appropriate cost base to retain financial flexibility The appointment of a new Non-Executive Director • To recognise the value that could be brought to Board discussions by including a representative of a major shareholder • To bring additional capital markets insight to the Group, strengthening the Board as we navigate a challenging external backdrop The need to have a clear view of forecast future trading, given the fast-moving pandemic-led backdrop — resulting in regular 3+9 (three months of actuals, nine months of forecasts), 5+7, 7+5 and 10+2 reforecasts of the expected FY21 outturn The review and approval of the FY22 budget, reflecting the uncertain outlook • The importance of balancing costs against revenue expectations to optimise cash generation and liquidity • Identification of key customer risks and opportunities • The ability of the business to build an effective recovery plan as markets reopened, balancing investment and cash preservation In early 2021, the Board agreed to consider the purchase of Aztec Shaffer and allowed a small team based around the Executive Directors and US senior management to undertake diligence and assess funding options It was agreed that existing balance sheet strength should not be put at risk, and that separate funding had to be sourced to complete any transaction It was agreed to proceed with an equity issue and to extend the repayment of a shareholder loan to September 2021 • The strategic importance of acquiring a key player in the US market, opening up a new geographic base in the fourth largest US city and creating a platform for future growth • The importance of ensuring that the financial risk of the acquisition was managed. Major shareholders were consulted as part of the equity raising and were supportive, with new shareholders increasing the level of demand • Ensuring that existing bank facilities were protected by raising additional equity and stand-alone non-recourse debt • Ensuring that all employees understood the rationale for the acquisition and that the employees of Aztec Shaffer could be retained Key Board decisions in FY21 43 Annual Report & Accounts FY21 Arena Events Group plc 42 Board decision Considerations In 2020 the Board agreed the purchase of the assets of Williams Party Rentals, based in San Jose, CA, based on: • The low purchase cost • That it strengthened Arena Stuart Rentals local presence, consolidating the market • That it brought a significant asset base, well in excess of the proposed consideration, reducing future capex requirements • That it came with an existing, small sales pipeline • That financial assistance with the integration was to be provided by the vendor • That the timing of the acquisition, in the middle of the pandemic, would present challenges and required additional scrutiny • That committed financial resources should be minimised through deferred payments if possible • That the quiet end-user market due to COVID-19 presented a good opportunity to complete the full merger of the two businesses before demand returned • That the long-term value creation was compelling, purchasing assets significantly below replacement cost, and covering the capex requirements of Arena Stuart Rentals for FY21 and into FY22 The Board approved the creation of a new Group entity in the Kingdom of Saudi Arabia (KSA) • With a number of recent projects in the KSA and a developed pipeline of opportunities, it is important to have a base in the country • That the establishment of a legal entity will facilitate a smoother working relationship with key Government and regulatory stakeholders • That the tax regime is more supportive of businesses that invest in the country, rather than service projects from elsewhere The creation of additional Governance oversight on major contracts in the EMEA Region due to increasing size, volume and complexity • That the growth of the Group was presenting opportunities to bid on larger, more complex contracts and solutions • To deliver the best outcome to the customer and to effectively manage the Group’s resources and risk, that dedicated oversight was required on the development of contracts and subsequent project delivery • That larger contracts typically demand a more developed supply chain requiring new, more diverse or specialised supplier partnerships The appointment of a new US Broker to service the growing investor interest in Arena • That interest was building among US investors given the growing presence of the Group in the US rental market and the perceived undervaluation of the Group’s shares relative to US and global peers • That a resource with dedicated reach and experience of the US market would be beneficial • That increasing the breadth of the shareholder base would be beneficial for the company in any future capital raising The approval of a new share option plan (“the Arena 2020 Share Option Plan”) to incentivise senior management • To ensure shareholder dilution was minimised, participants in the plan were required to surrender existing unexercised options • Major shareholders were consulted to ensure the objectives of the scheme were fully aligned with their goals 45 Annual Report & Accounts FY21 Arena Events Group plc 44 Non-Financial Review Principal Risks & Uncertainties The Directors, in preparing this Strategic Report, have sought to comply with s414C of the Companies Act 2006 in relation to providing relevant non-financial information. This Strategic Report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Arena Events Group plc and its subsidiaries when viewed as a whole. Non-Financial Information Statement The table below references where non-financial information is included within the Annual Report: Information Reference The Group’s business model Page 11 The Group’s strategy Pages 12–14 The Group’s development, performance and position and impact of its activity, relating to environmental matters, employees, social matters, respect for human rights and anti-corruption and anti-bribery matters Pages 39–41, 58–61, and Page 75 Principal risks and uncertainties Pages 47–50 References to, and additional explanations of, amounts included in the entity’s annual accounts Pages 32–38 Risks Mitigation Health & Safety (H&S) The installation of temporary structures and grandstand seating is complex and may require working at height. Whilst the Group holds suitable insurance coverage, an employee or third-party incident relating to the use of Group equipment could have a detrimental effect on the future reputation and performance of the Group. • The Group has a stated commitment to, and a market reputation for, rigorous H&S compliance • There are nominated H&S managers in each business and regular reporting of any safety incidents to the Board each month • Third-party advisers and consultants are engaged where appropriate to support internal H&S teams • H&S performance is reported to the Board of Directors each month and reviewed as part of Board meetings, with follow-up actions where necessary Potential business and operational risks are regularly reviewed by the Board and appropriate procedures put in place to monitor and mitigate them. The principal risks identified by the Board and the related mitigation strategies are set out below. Annual Report & Accounts FY21 47 Arena Events Group plc 46 Principal Risks & Uncertainties Risks Mitigation COVID-19 (and other socially transmittable diseases) The Group operates in markets based upon supporting mass gatherings at sports and music events, exhibitions, private and corporate meetings and other mass participation events. As has been shown with COVID-19, a prolonged period of social distancing or a reduction in the desire of attendees to travel could put the future of such events at risk. • The response to COVID-19 in 2020/21 demonstrated that event organisers may take differing approaches, given local market restrictions and other stakeholder requirements (e.g. media rights) • With COVID-19 a number of events were not cancelled, but instead postponed or held behind closed doors, reducing the financial impact on Arena. The Group has supported these changes and expects to continue to do so, which in some instances have been accompanied by extensions to multi-year contracts • The Group’s diversified geographic footprint provides some resilience as not all markets respond in the same way or at the same time, with domestic audiences typically returning ahead of international visitors • The Group’s products also provide additional flexibility to those seeking to operate within social distancing guidelines by temporarily increasing available areas that can be used • The permanent cessation of such events would require the Group to reset its commercial offering, focus on other sectors requiring temporary structures and reduce its cost base and investment plans to maintain necessary levels of cash generation and liquidity. This backdrop may also lead to a reduction in the number of competing suppliers • The Group response will also continue to be influenced by local government actions, such as wage support schemes or tax waivers and deferrals Dependence on key individuals / management Arena’s future success is substantially dependent on a relatively small number of people and the Directors therefore view the continued service of certain of its Directors, senior management and other key personnel as important. • The Directors are taking steps to ensure that knowledge, skills and expertise are shared so as to avoid the Group being unduly dependent on individuals • Succession plans are being developed for key individuals and these plans are reviewed by the Board at least annually Equipment failure Due to the nature of the business, a catastrophic failure of equipment could lead to serious injury or loss of life. The repercussions of any such incident would almost certainly affect the Group’s ability to win or retain business in the local geography and internationally, across all sectors in which Arena operates. • The Group has a rigorous safety culture to ensure all temporary structures and grandstand seating is constructed to appropriate standards, with third-party sign off where relevant • All temporary structures and grandstand seating is designed and certified to meet all engineering and safety specifications • Continuous training is provided in construction standards, safety measures and precautions for construction staff Risks Mitigation Reduction in quality of service could have a negative impact on reputation The strength of the Arena brand and the Group’s ability to deliver iconic events on time, every time, is fundamental to the Group’s success in winning new business. As the Group expands internationally and acquires businesses it becomes more challenging to ensure a consistent quality of product and service. • To manage this risk the Group develops integration plans for any acquired businesses and actively promotes the ‘Arena Standard’ to all existing and new employees • Intra-company movement of staff is encouraged, enabling senior staff to lend their skills and experience to more developing divisions Competition The event rental industry is highly competitive, and the Group regularly comes under pricing pressure from competitors. On occasion the Group will therefore lose work to a competitor that has a different offering, usually priced at a discount to the Arena service. Pricing pressure can also lead to existing contracts being extended at lower than normal levels of pricing to ensure work is not lost to a competitor. • The Group typically differentiates itself from its competitors on quality of service and product and does not compete purely on price • To mitigate the risk of losing customers, the Group focuses on securing multi-year contracts with key customers for annual events where possible, and building strong relationships with regular customers and event organisers • The Group also has a developed pipeline process, seeking out new opportunities in both new and existing markets Ability to recruit and retain personnel As the Group grows it will need to continue hiring staff with a mix of experience in temporary structure construction and other related skills, in both field and office-based roles. Any future challenges to the recruitment or retention process could have an impact on the Group’s ability to take on new business or to service existing contracts. In both the UK and US regions there are particular challenges to hire, train and retain field-based labour at current rates of pay given market conditions. If higher rates of pay are required to attract and retain employees, this will impact financial performance. • The Group has put in place appropriate recruitment and training programmes in each region to source and then train employees • Divisions anticipate and allow adequate time for recruiting for temporary positions during the busy season — ensuring sufficient training in Health & Safety • The Group is reviewing market pay rates in each region and implementing a skills matrix to allow employees to clearly identify the skills required to progress and develop their career within the Group Increasing costs In addition to payroll and agency labour costs, the largest portion of the Group’s delivery costs are made up of items such as transport, plant hire, materials and consumables. If these costs increase by more than the overall regional RPI, then there is a risk that project margins will reduce on long term customer contracts where the customer price increase is limited to a maximum of RPI. • Each major project delivered under a multi-year contract is reviewed each year and opportunities identified to reduce delivery costs where possible from more efficient use of resources or better procurement • For all new contracts, a detailed cost budget is prepared as part of the bidding process • Underlying cost pressures are also discussed with customers to ensure transparency and openness and some contracts allow inflationary pressures to be passed on through linked pricing 49 Annual Report & Accounts FY21 Arena Events Group plc 48 Risks Mitigation Economic uncertainty Any economic uncertainty in the regions in which we operate can lead to discretionary or one-off events and projects to be postponed or cancelled. Whilst such contracts make up a relatively small proportion of our overall revenue, the loss of such work can have a material impact of overall profitability given the fixed costs of the Group. • The Group has a sales and marketing process to identify, price and secure projects each year in addition to the base of contracted and recurring contracts • The pipeline of significant contract bids is reviewed regularly by the Executive Directors Operating in new territories As the Group grows it is likely that new contracts will be won and delivered in new territories and jurisdictions. A new operating base has recently been established in the KSA and work is underway to do the same in Qatar. • When working in new territories the Group generally identifies a local partner and then works with that partner to support the local delivery of product and services • Once a market becomes more established a local team and local advisers are then engaged, supported by existing, relocated Arena personnel Introduction of more onerous regulation The Group adheres to all local regulatory codes in each region, however, any material change to these rules, in particular with regard to Health & Safety (H&S) or the application of certain H&S standards to the temporary event sector could lead to additional costs, not all of which can be passed on to the customer, resulting in an impact on profitability. • The Group ensures it is aware of relevant changes in regulations through training and use of external advisers • Any additional costs incurred as a result of such changes are passed on to the customer where possible, but for multi-year contracts this may not be possible until the contract renewal Brexit Having taken effect in late 2020, Brexit is now part of day-to-day operating challenges. Additional paperwork can place delays on the movement of equipment, and customs duty can be levied on goods moving out of or into the country, even on a temporary basis. Controls on the freedom of movement of people may impact the availability of European workers in the UK, tightening the recruitment market. • The Group’s existing exposure to cross European border trade remains limited. Potential delays to the movement of goods and additional charges are now better understood and are built into project planning • The freedom of movement of workers and its impact on the availability of suitably qualified staff remains an issue. The Group has sought to maintain as much flexibility in the employment market as possible, identifying key roles and personnel and working to retain those individuals where-ever possible, while also seeking to use more domestically sourced labour wherever possible Principal Risks & Uncertainties 51 Annual Report & Accounts FY21 Arena Events Group plc 50 People The UK & Europe Region became part of the EMEA region in June 2021 under the leadership of Paul Berger, CEO EMEA. Tom Evans relocated to the UK from Dubai, taking on the role of EMEA Chief Operating Officer, while Simon Gillott became EMEA Chief Financial Officer. COVID-19 heavily impacted activity levels in the UK, with numerous “lockdowns” during FY21 impacting mass participation events. This meant that staff levels had to be adjusted to these reduced volumes, with Arena making extensive use of the UK Coronavirus Job Retention Scheme to limit the number of permanent departures. Highlights Delivered numerous structures for temporary COVID-19 medical facilities and testing centres Seating for Tokyo 2020 Olympics remained in place under a new contract extended to 2021 Built temporary structures to protect archaeological investigations on the HS2 railway project Completed installation of new seating systems at the north and south stands at the London Stadium Regional Highlights UK & Europe Major Events The Group designed and installed a new seating system, delivering an enhanced match-day experience for West Ham United’s dedicated fanbase as well as providing a flexible solution that allows for faster seat reconfigurations between events. Arena supported long-standing partner, Matchroom Boxing, in bringing top-tier boxing back, with the supply of temporary event infrastructure for their revolutionary Fight Camp series of events. At the end of 2020 we installed a number of ice rinks around the UK including Hampton Court Palace, Queen's House Greenwich and Warwick Castle. All rinks were delivered to the Arena ‘Gold Standard’ of safety. During FY21 the UK & Europe became part of the enlarged Europe, Middle East & Asia (EMEA) Region, with a single management team now providing oversight for the entire Region. We have maintained the visibility of the UK & Europe Region in this Annual Report & Accounts as FY21 was a transitional year, and the impact of and response to COVID-19 materially differed by location. Annual Report & Accounts FY21 53 Arena Events Group plc 52 Highlights Built a large medical facility in the UAE to assist in the response to COVID-19 Completed three major golf events in Dubai, Abu Dhabi and the KSA in January 2021 Fully integrated previous acquisitions across the region, consolidating operating locations People With a vastly reduced schedule of events due to COVID-19, the Region needed to adjust its headcount to match. Unfortunately, only Malaysia provided governmental support to employers, with no job retention scheme available in the UAE, Arena’s biggest hub in the region. As a result, a number of employees left the Group, and many more took unpaid leave or salary reductions. Major Events Arena started the European Tour’s Desert Swing series with the delivery of temporary structures and fit-out at the Abu Dhabi Golf Championship for the 13th year in a row. The Omega Dubai Desert Classic saw Arena deliver a COVID-secure set of structures, including a split level viewing deck at the 18th hole and a range of interior fit-outs. The final Desert Swing event, the Saudi International, included a two-storey Hospitality Pavilion with terrace along with a host of other on-course structures, interior design and fit-out, and branding. Regional Highlights Middle East & Asia After exceptionally strong growth in the fifteen-month period to March 2020, the MEA Region was the first to be impacted by COVID-19, mainly in Asia, in early 2020. This impact continued through FY21 with the reduction in international travel having a significant impact and leading to the cancellation or postponement of many events. The MEA Region was brought under the same leadership team as the UK & Europe Region in early June, creating the EMEA Region. Annual Report & Accounts FY21 55 Arena Events Group plc 54 Highlights Built one of the largest vaccination centres in North America at the United Center in Chicago Provided structures to a major industrial project in Minnesota Supported the reactivation of the NBA season in Orlando Delivered structures in support of the Super Bowl LV in Tampa in January 2021, attended by over 20,000 spectators Arena Americas has been a partner of The Diamond Resorts Tournament of Champions for the past two years providing all tenting infrastructure for both operational and hospitality needs. Arena Stuart Rentals created an outdoor card room for a casino in California to allow them to open from September 2020 complying with COVID-19 restrictions. Arena Americas delivered multiple areas and venues around the Super Bowl including the NFL Experience and the NFL Tailgate Party. Regional Highlights Americas People Early in FY21, Paul Bryant stepped down as Americas CEO after three years leading the Region, with Jon Tabeling moving from COO to President Arena Americas alongside Michael Berman who remains President Arena Stuart Rentals. Arena was unable to access any funding under the US Government response to COVID-19. However, the business responded early to the changing pattern of demand by a combination of voluntary salary reductions and a reduced level of headcount, with recruitment building back since early 2021. The Americas Region restructured its operations during late 2019 to reduce the focus on one-off projects and reset its cost base accordingly. When COVID-19 began to impact the Region towards the end of March 2020, the business was able to quickly adapt and provided significant support across the country with drive-through testing facilities and a major temporary hospital that was built in New York in early April. Some events continued behind closed doors through the summer months and the regional recovery started in early Autumn, ending the financial year strongly as vaccinations were rolled out and lockdown measures were eased. Major Events 57 Annual Report & Accounts FY21 Arena Events Group plc 56 Corporate Social Responsibility Doing the Right Thing Arena’s Corporate Social Responsibility (CSR) policy has two primary focuses; firstly, our employees and local communities; and secondly the environment and sustainability. In both areas we strive to meet the specific needs and interests of our stakeholders that also align with our Company goals. CSR activities are identified and implemented on a Divisional level, and then evaluated by the Board. This year, due to the devastating effect that the COVID-19 pandemic has had on the global events industry, our CSR focus has been almost entirely inwards — the health and wellbeing of our employees has been, and will continue to be, our primary responsibility. Throughout FY21, we strived to safeguard the physical health of our employees while they continued to deliver both event and crisis relief work. A key objective has been to instil an enhanced culture of safety throughout the business, while we complied with all prevailing advice and regulations. The measures that were taken differed by Region, however the following is an overview of our key activities: • Physical distancing — giving our employees the necessary resources to work remotely or flexibly has allowed us to reduce the density in our facilities, resulting in physically distanced workspaces. This has also allowed us to further protect our operational teams, many of whom are unable to work remotely • Increased safety for employees by implementing a number of protocols at our sites including temperature checks, sanitisation stations, and regular full sanitisation of offices, warehouses and vehicles • A number of our Americas facilities were fitted with air purification devices to limit the spread of COVID-19 • Where appropriate employee accommodation was increased to ensure that physical distancing could be maintained at home, as well as while at work, and additional facilities were procured to allow any employee who needed to quarantine to do so safely In addition to protecting the physical health of our employees, the Group recognises the vital importance of safeguarding mental health and wellness. Many have found the course of the COVID-19 pandemic to be extremely stressful and this has been compounded by the constant threat to physical health, national lockdowns and restrictions, a potential lack of job security and financial pressures as a result of salary reductions or unpaid leave. As a business, the Group has introduced a number of measures to help support our employees: • Increased internal communication — internal communication is always of the upmost importance, however as most employees have been working from home or under lockdown conditions for a significant portion of FY21, the Group has taken steps to increase internal communication channels to help mitigate any feelings of isolation or anxiety that our employees may have been feeling. This has taken different forms in different Regions however some examples have included: – Significantly increased volume of company updates via email – Regular updates on changing restrictions in each country – Video messages from the senior team – Employee forums via video conferencing • Provided access to mental health support facilities, again the specifics of the support offered differed by region but examples have included free tele- counselling and support as well as communications providing resources to help employees cope with working remotely during times of crisis • In our UKE Region additional training was delivered to a number of managers and leaders who had volunteered to become ‘Mental Health Champions’. The training, provided by Strongmind Resilience Training Limited, has enabled the Mental Health Champions to better support their teams through the COVID-19 pandemic. It was also delivered to our teams working to support the UK’s National Health Service with their crisis response in order to tackle any issues that may have arisen due to the nature of the tasks and activities they were carrying out The Group has also introduced schemes to help increase physical activity as a way to support mental health and general wellness, examples of this include a company steps challenge and a cycle to work scheme which will be rolled out later in the year It’s clear that the COVID-19 pandemic has presented historic challenges for our employees along with the wider community. At the pandemic’s outset, the Group’s teams established core values to guide our business decision-making: employee health and safety, business continuity for our customers and doing our part to help our communities globally. To support the effort to combat COVID-19, we remained open and operating wherever possible, supplying services such as testing centres and temporary medical facilities in each of our Regions, along with a wide range of temporary facilities that have supported the return to school and work effort. Our response to the pandemic reflects our awareness of our employees and our culture, and we will continue to support our stakeholders in any way we can until COVID-19 is safely behind us. Arena strives to act in an ethical, safe, and sustainable way. We take every opportunity to limit our environmental impact and recognise the relevant social issues relating to our activities in each of our Divisions. 59 Annual Report & Accounts FY21 Arena Events Group plc 58 Safety Management Water • Monitor site water usage and aim for a reduction in usage against the previous year baseline • Offices to identify their usage and ways to reduce water demand Energy & Carbon Reduction • Monitor energy usage on sites and offices to reduce energy usage against the previous year baseline utilising opportunities identified through the Energy Savings Opportunities Scheme [ESOS] • Recognise opportunities to reduce the production of CO2 by Group activities through efficient monitoring and reporting as seen in the Streamlined Energy Carbon Reporting [SECR], see Page 86 Waste • Raise employee awareness of the environmental impact of waste through training, and in turn, reduce the volume of waste produced • Targeting 85% of waste to be diverted from landfill Responsible Sourcing • Monitor the use of responsibly sourced timber through a detailed approved supplier scheme Biodiversity • Improve employee awareness on the critical importance of biodiversity through training, while committing to protecting and improving the biodiversity of our sites Environment & Sustainability Arena focuses its environmental efforts in the following areas, in order to support the conservation of the physical environment and the prevention of pollution at our facilities and task sites. This focus is now supported by a full-time employee looking at efficiencies and initiatives across the Group. We strive always to develop new practices across the Company which will engage our employees’ commitment to maintaining our historically safe practices, whether that be on the warehouse floor, in our storage yards, out on sites, or in our offices. Regional Safety Management Highlights: UK & Europe • Significant reduction in Lost Time Incident Frequency Rate for the Region (based on 100,000 man hours worked) from 3.41 in FY20 to 0.43 in FY21 • Members of the Arena UKE team continued project delivery throughout FY21 and the COVID-19 pandemic in order to support health services, major infrastructure projects, and some permitted events, including Arena’s managed Ice rinks. Arena’s targeted COVID-19 risk management strategy based on ‘time, distance, shielding and cleaning’ has resulted in the successful completion of over 250,000 working hours without a single confirmed COVID-19 case • The strategy of ‘time, distance, shielding and cleaning’ was successfully adapted and applied to Arena’s managed ice rinks under the banner of the ‘Gold Standard’. This Gold Standard safeguarded visitors to the Hampton Court, Greenwich Museum and Warwick Castle rinks, with no confirmed COVID-19 cases or incidents • Employees have been offered lateral flow tests in order to complete at home testing to aid in the identification of asymptomatic cases in the community and workplace • The delivery of Construction Industry Training Board [CITB] level qualifications [SMSTS and SSSTS] to members of the Arena team has seen a marked increase in risk awareness and perception • Arena continues to work towards the attainment of the ISO45001 in order to complement the already attained ISO9001 [Quality] and ISO14001 [Environmental] systems. The intention is that these systems will be incorporated into an Integrated Management system in FY22 Middle East & Asia • Achieved a Lost Time Incident Frequency Rate of 1.6 in FY21 • Meticulous operational planning and the implementation of COVID-19 contingencies such as ‘team bubbles’ has allowed the MEA team to deliver all contracted projects in FY21, despite several cases of COVID-19 within the operational and management teams • The implementation of thrice weekly COVID-19 Task Force meetings to ensure that all key personnel were aware of and responding to critical issues as they arose • Employee consultation is a key feature of the safety management system adopted by Arena. Involvement of key operatives in decisions and planning ensures that points are not overlooked, and control measures are not restrictive to project success. These consultation opportunities have been completed through COVID-19 Task Force meetings, and project planning and problem solving sessions • Increased the number of Health & Safety toolbox talks completed throughout the year to address additional COVID-19 concerns and regulations Americas • Reduction in Lost Time Injury Rate from 3.04 in FY20 to 0.82 in FY21 • Hazard assessments conducted at all Arena Americas sites to minimize or eliminate any potential safety risks to our employees • The introduction of a new Safety Health Environmental Health Management System (SHEMS) at the outset of FY21 • Achieved high standards for COVID-19 preparedness in conjunction with local/city municipalities, while delivering a significant volume of COVID-19 disaster relief work • The introduction of the ‘Pandemic Response Plan’ which included details on mitigation measures such as travel restrictions, staggered work schedules, and additional sanitisation procedures Providing a safe environment for employees, customers, suppliers and visitors is of paramount importance to the Arena Group. Strategic Report The Strategic Report on pages 24 to 61 has been approved and signed by order of the Board. S Trowbridge Director/Company Secretary 6 July 2021 61 Annual Report & Accounts FY21 Arena Events Group plc 60 Board of Directors 64 Regional Leadership Team 67 Corporate Governance Statement FY21 68 Audit Committee Report FY21 74 Remuneration Committee Report FY21 76 Directors’ Report FY21 82 Directors’ Responsibilities Statement 88 Governance 63 Annual Report & Accounts FY21 Arena Events Group plc 62 “We have been really impressed with Arena in what has been an incredibly challenging year, they have delivered an amazing Ice Rink experience this Christmas.” Claire Bastin Head of Events, Royal Museums Greenwich The Queen’s House Ice Rink Board of Directors Ken Hanna Chairman Ken was appointed Chairman of the Board in July 2017 and is Chair of the Audit Committee. Ken brings international financial and leadership experience from his role as the Chairman of Aggreko plc, which he has held since 2012 and from which he will be retiring this year. Ken is also Chairman of RMD Kwikform, a privately owned engineering services company. Until 2009, Ken spent five years as Chief Financial Officer of Cadbury plc. He has also held positions as Chair of Inchcape plc, Operating Partner for Compass Partners, Group Chief Executive at Dalgety plc, Group Finance Director of United Distillers plc and Group Finance Director of Avis Europe plc and is a Fellow of the Institute of Chartered Accountants in England & Wales. Ian Metcalfe Non-Executive Director Ian was appointed Non-Executive Director of the Group in July 2017, and is Chairman of the Remuneration Committee Ian brings significant experience with sporting organisations to the Board. He is currently Chairman of Commonwealth Games England and a Non-Executive Director on the Board of the Birmingham 2022 Commonwealth Games organising committee. He has previously held roles on the Boards of the Rugby Football Union and ER 2015 Limited, the organising committee of the 2015 Rugby World Cup held in England. Outside the world of sport, Ian is Chairman of Mercia Asset Management plc and Chairman of its Remuneration Committee. He is also a Non-Executive Director of the UK headquartered global waste management group TRRG Holdings Limited, a Dutch/Spanish joint venture. Ian is a qualified solicitor, having retired as Managing Partner of International law firm Wragge & Co in April 2014 after eight years in post. Prior to managing the business, Ian was a corporate partner at the firm for fourteen years. Ian has an MA in Law from Cambridge University. Henry Turcan Non-Executive Director Henry was appointed Non-Executive Director of the Group in June 2020. Henry has worked in financial services since 1996, with a focus on equity capital markets. Having spent the majority of his career advising growth companies within investment banking, he joined the Volantis team at Henderson Global Investors in 2015, which subsequently transferred to Lombard Odier Investment Management in 2017 becoming known as 1798 Volantis. Henry graduated with an MA (Hons) in Modern Languages from Edinburgh University and is a Member of the Securities Institute. Henry is a representative of the funds managed or sub-advised by Lombard Odier Investments Manager group entities, collectively one of the Group’s largest shareholders. 65 Annual Report & Accounts FY21 Arena Events Group plc 64 Paul Berger CEO — Arena EMEA Paul was appointed CEO of Arena Middle East & Asia in 2009 and Arena EMEA CEO in June 2020. Paul is responsible for Arena’s operations in the region which encompasses the UK, Europe, UAE, KSA, Malaysia, Hong Kong, Japan and South Korea. Paul is also the current President of the International Live Events Association (ILEA) in the Middle East. Paul brings a long history of working in events and a strong knowledge of the Middle East, having moved to Dubai in 1993 with BBDO (part of OMNICOM Group), working as an Account Director for global brands such as Pepsi, Emirates and General Motors. In 2004 Paul set up his own sports marketing business, focusing on F1 and other motor sports. In 2008 he became a Director of Harlequin Marquees, becoming the CEO and a shareholder a year later, which was then acquired by Arena Group and became part of Arena Middle East & Asia. Michael Berman President — Arena Stuart Rentals From 2003, Michael grew The Stuart Rental Company with his business partner, initiating a regional roll-up of six existing party rental companies in the San Francisco Bay area of California. He served as CEO of the company and helped build it into one of the top 25 event rental companies in the US until it was acquired by the Arena Group in 2018, when he assumed the role of President, Arena Stuart Rentals. Prior to Arena Stuart Rentals, Michael was a manager with KPMG Consulting’s Technology Strategy management consulting group, where he supervised and staffed projects for companies including Chevron, Boeing, Verizon, Brocade and Microsoft. Michael practiced law in Philadelphia from 1994 to 1998 before obtaining his MBA from the University of Chicago. Jon Tabeling President — Arena Americas Jon was appointed President, Arena Americas in May 2020, having been Chief Operating Officer since 2015 and previously VP Operations for the division. Jon has over 22 years of special events experience having originally joined Arena’s predecessor company in 2009. He has managed Arena’s military division, served as the North East Structures General Manager and pioneered Arena Americas’ entry into major golf events. From 2006 to 2009 Jon was a senior manager at Oaks Development and previously held senior roles at United Rentals based in North Carolina managing the Special Events Division and overseeing broadcast power projects such as Super Bowls, The Masters and PGA Championships. Earlier in his career Jon was Marketing Manager Tours & Events at Warner Avalon, working with major international brands. Regional Leadership Team Greg Lawless Chief Executive Officer Greg became CEO of Arena Group in 2011, following the acquisition of Arena Structures and Seating in 2007. Greg joined Davy Stockbrokers in 1987 and was a Director of Davy Corporate Finance until 1992. In 1993 he joined Allegro Limited, an Irish distribution business, and was part of the senior executive team that carried out a buy-out of the business later that year. He left the business in 2000 shortly after the business was sold. He held a number of posts during 2000–2004, mainly on a consultancy basis and he acquired his first business in the event rental sector in 2004 called Hireall along with his former Allegro business partner. Greg qualified as an accountant with Deloitte in 1984 and is a member of the Institute of Chartered Accountants in Ireland. Steve Trowbridge Chief Financial Officer Steve joined Arena as CFO in September 2019 and was appointed to the Board in October 2019. In his role, Steve oversees all financial matters including reporting, risk management, insurance, banking, acquisitions and fundraising. Steve has held executive roles in a number of public and private businesses, most recently with Evans Cycles where he was CFO from August 2016 and then became CEO upon its sale to Sports Direct International in 2018. Prior to his role at Evans, Steve was at HSS Hire Group plc for over seven years and was CFO from 2014. Steve has also held senior finance roles at Thomson Reuters plc and was an equity analyst at Société Generale (SG Securities). Steve qualified as a Chartered Accountant at Ernst & Young, is a Fellow of the Institute of Chartered Accountants in England & Wales and has an MA from Oxford University. Board of Directors 67 Annual Report & Accounts FY21 Arena Events Group plc 66 Chairman’s Introduction The Board recognises the importance of good Corporate Governance and continues to follow the QCA Corporate Governance Code (“QCA Code”). We believe that the Arena Group’s corporate values of integrity, teamwork and excellence provide a good foundation to uphold effective Corporate Governance and deliver long term shareholder value. A robust Corporate Governance framework is integral to the effectiveness of the Board. The Board believes that it complies with all of the principles of the QCA Code, in a manner consistent and proportional to the size, risks and complexity of the Group’s operations; and as described in more detail below. This is our fourth Annual Report & Accounts as an AIM-listed Group. Composition of the Board The Board, which is headed by the Chairman, comprises five Directors of which two are Executive and three Non- Executive, reflecting a blend of different experience and backgrounds. The skills and experience of the Board are set out in their biographical details in the Board of Directors section of the Report and on the Group website. The experience and knowledge of each of the Directors gives them the ability to constructively challenge strategy and to scrutinise performance. The Board considers two of the three Non-Executive Directors, Ken Hanna and Ian Metcalfe, to be independent. The third Non-Executive Director, Henry Turcan, as the representative of one of our largest shareholders is not considered to be independent. Mr Turcan joined the Board in June 2020 and, within the constraints of COVID-19, was given a thorough induction covering all aspects of the business. Details of the Directors’ remuneration is set out in the Remuneration Committee report. How the Board Operates The role of the Board is to provide leadership to the Group and to ensure the obligations of being a public company are met. The Board meets regularly to collectively review, formulate and approve the Group’s strategy, budgets and corporate actions, and to oversee the Group’s progress towards its goals with due consideration of risk and the resources available. The Board is also responsible for ensuring that a framework of effective controls is in place. The Board receives a Board pack every month which includes the Group’s internal management accounts, a regional performance analysis including a Health & Safety summary and a report from the CEO and CFO. The Board aims to meet a minimum of six times per year. The core activities of the Board and its Committees are covered in scheduled meetings held during the year. Additional ad hoc meetings are also held to consider and decide matters outside scheduled meetings. The Non- Executive Directors are encouraged to communicate directly with Executive Directors and senior management between formal Board meetings. If a Director is unable to attend a meeting because of exceptional circumstances, they still receive the papers in advance of the meeting and have the opportunity to discuss with the relevant Chair or the Company Secretary any matters on the agenda which they wish to raise. Feedback is provided to the Director on the decisions taken at the meeting. All Directors holding office at the time attended the Annual General Meeting held on 1 September 2020. Unfortunately, the constraints placed by COVID-19 upon travel and face-to-face interaction have required all Board meetings in FY21 to be held by videoconference. However face-to-face sessions are currently expected to resume in the Summer of 2021 and the Board hopes to visit a small number of regional bases later in the year as travel restrictions are lifted. This will help enhance the Board’s understanding of trading opportunities and challenges. Corporate Governance Statement FY21 69 Annual Report & Accounts FY21 Arena Events Group plc 68 Director Role Board meetings1 Audit Committee meetings Remuneration Committee meetings Ken Hanna Non-Executive Chairman 18/23 2/2 6/6 Ian Metcalfe Non-Executive Director 17/23 2/2 6/6 Henry Turcan2 Non-Executive Director 15/23 0/2 3/6 Greg Lawless CEO 23/23 2/2 5/6 Steve Trowbridge CFO 23/23 2/2 5/6 Notes: 1. Five procedural meetings relating to document signing were agreed to be delegated to a quorum of the CEO and CFO. 2. Henry Turcan was appointed as a Non-Executive Director on 8 June 2020 The Chairman is responsible for ensuring the effectiveness of the Board and setting its agenda. The Company Secretary (CFO) compiles the Board and Committee papers which are circulated to the Directors prior to meetings. The Company Secretary prepares minutes of each meeting and every Director is aware of the right to have any concerns minuted and to seek independent advice at the Group’s expense where appropriate. The primary matters reviewed by the Board during the period are as set out below: • Health & Safety matters • The response required to COVID-19 • Strategy, annual budget and frequent reforecasts • Regional trading performance, management structures and succession planning • Board membership and delegation of authority • Senior management remuneration (including temporary COVID-related reductions) • Corporate statutory reporting • Cash flow projections, capital structure, lender interaction and covenant compliance • Share register composition and dividend policy • Corporate governance, internal controls and risk management (including annual insurance renewal) • Acquisition opportunities Board Committees The Board is supported by the Audit and Remuneration Committees, details of which are set out below. Each Committee has written terms of reference setting out its duties, authority and reporting responsibilities. The Group does not have a Nomination Committee as those duties that would be undertaken by such a committee are handled by the Board. • The Audit Committee is chaired by Ken Hanna, who is a Chartered Accountant, and includes Ian Metcalfe. The Audit Committee is responsible for monitoring the integrity of the Group’s financial statements, reviewing significant financial reporting issues and monitoring the quality of internal controls and risk management. The Committee meets at least twice each year, inviting the external auditors and other Directors to attend as necessary. • The Remuneration Committee is chaired by Ian Metcalfe and also includes Ken Hanna. The Remuneration Committee reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to their remuneration and terms of service. The Committee meets at least twice each year. The Directors’ attendance at the Board and Committee meetings held during the year ended 31 March 2021 is set out below. The above average number of meetings was initially driven by a regular review of actions required in response to COVID-19, and latterly by discussions relating to corporate finance activities such as accessing CLBILS lending in October 2020, the March 2021 equity placing and subscription, and the proposed Aztec Shaffer acquisition which was completed in April 2021. Corporate Governance Statement FY21 Corporate Culture The Group upholds a corporate philosophy which comprises of a Vision, Mission, Values, and Arena Standard. The Group’s Vision is to become the “leading, most respected, integrated event solutions business in the world” and its Mission is to “Deliver the Arena Standard to the World.” Further information on our corporate culture is set out in the Vision, Mission and Values section of this Annual Report & Accounts on Pages 10–11. Election of Directors All Directors of the Group will offer themselves for re-election at the Annual General Meeting. Descriptions of Directors’ relevant experience, skills and qualities are set out in the Board of Directors section of this report. Board Effectiveness and Development The Chairman currently assesses the performance of the Board on an informal continual basis taking into account the contribution each Director makes to the business. Directors are also encouraged to provide feedback on all areas of the board efficacy, having due regard to the balance of skills, experience, independence and knowledge contributed by members of the Board. Given the constraints of COVID-19, the Board has not undertaken a formal evaluation of its effectiveness during the year, however, the need for such an evaluation will be kept under constant review. The Board considers and reviews the requirement for continued professional development. The Group’s regulatory adviser, Nomad, and other external advisers serve to strengthen this development by providing guidance and updates as required. The Board and senior management from time to time seek advice on significant matters from external advisers. These advisers include, amongst others, the Group’s nominated adviser and broker, public relations adviser, external auditors and legal advisers. External Appointments The Board may authorise Executive Directors to take Non- Executive positions in other companies and organisations, provided the time commitment does not conflict with the Director’s duties to the Group. The acceptance of appointment to such positions is subject to the approval of the Chairman. Internal Controls and Risk Management The Board has ultimate responsibility for the Group’s system of internal control and for reviewing its effectiveness. However, any such system of internal control can provide only reasonable, but not absolute, assurance against material misstatement or loss. The Board considers that the internal controls and procedures in place are appropriate for the current size, complexity and risk profile of the Group. The principal elements of the Group’s internal control system include: • A detailed annual budget is prepared including an integrated income statement, balance sheet and cash flow. The budget is approved by the Board • Financial and operational performance against the budget is prepared and reviewed by the Board on a monthly basis, with variance analysis and periodic reforecasts • the Group has developed a set of Minimum Control Standards and each division’s controls and procedures are reviewed on an annual basis • Each division has an appointed a H&S (Health & Safety) representative, and knowledge and best practice are shared across global teams • Material contracts are assessed by the Executive Directors and approved by the Board before they are entered into. If the outcome of a major contract differs from expectations, a Board report is prepared covering key learnings and local management may be invited to present the summary and take questions • Board approval is required for key matters such as any business acquisitions, material capital expenditure, property transactions, insurance renewals and amendments to banking facilities • A post acquisition review is performed on all acquisitions Further description of how the board identifies, assesses and manages risk is set out in the Principal Risks & Uncertainties section of this Report on Pages 47–50. 71 Annual Report & Accounts FY21 Arena Events Group plc 70 Directors’ Conflicts of Interest Any related party transactions are noted in the Group’s financial report. The Group adheres to MAR regulations and the AIM Rule of Directors’ Dealings. Time Commitments All Directors recognise the need to commit sufficient time to fulfil their role. This requirement is included in their letters of appointment. The Board is satisfied that the Chairman and Non-Executive Directors are able to devote sufficient time to the Group’s business. Anti-Bribery Policy The Group enforces an anti-bribery policy across all of its divisions. This is reviewed on an annual basis by the Audit Committee and refresher courses are provided on a regular basis. Relations with Stakeholders The Group engages with its various stakeholder groups on a frequent basis to make sure their needs are being served. Feedback from all stakeholders in the business allows the Board to monitor its corporate culture, ethical values and behaviours, ensuring that they are consistent with the Group’s business model. Employees Each division carries out periodic employee surveys to get feedback and identify areas that need improvement. The Group continues to focus on internal communication with regular employee updates by e-mail and local town-hall events wherever practicable. Customers We strive to continually improve the quality of our service for our customers, achieving this through our dedication to the Arena Standard. The Group places significant importance on maintaining long term relationships with its customers and this is a key strategy for the Group. Suppliers Each division takes responsibility for their supplier relationships, ensuring they comply with the Group policies. We aim to maintain long term relationships with our key suppliers. More detail is provided on Stakeholder Engagement in our s172 section on Pages 39–44. Relations with Shareholders The Group is committed to engaging with and listening to its shareholders, ensuring that there is transparency and understanding of the Group’s strategy, business model, and performance. The Group does this through investor roadshows, individual meetings and regular reporting. The Group maintains an investor section on its corporate website with up-to-date information for its shareholders, including financial reports, shareholder documents, corporate policies and Group announcements. Private shareholders The Group website is the primary resource for recent updates and information on the Group for private investors. The AGM serves as the main forum for dialogue with private investors. The Board attends the AGM and answers any questions posed by attendees. Institutional shareholders The Directors place importance on building a relationship with the Group’s institutional investors. These relations are managed primarily by the Group’s broker, financial PR firm and CEO. The Group communicates with all shareholders through the Annual Report & Accounts, the AGM, the interim accounts and RNS statements as required under the AIM rules. In addition, the CEO and CFO make presentations to institutional shareholders and analysts twice each year following the release of the full-year and half-year results. Annual General Meeting (AGM) The Annual General Meeting of the Group will be held on 10 September 2021. The Notice of Annual General Meeting and the resolutions to be put to the meeting are included in the Notice of AGM accompanying this Annual Report & Accounts. Ken Hanna Chairman 6 July 2021 73 Annual Report & Accounts FY21 Arena Events Group plc 72 Audit Process The external auditor prepares an audit plan that sets out the scope of the audit, key areas to be targeted, audit materiality and the audit timetable. This plan is reviewed and agreed in advance of the year-end by the Audit Committee. Following the audit, the auditor presented its findings to the Audit Committee for discussion. Significant issues considered this year, included revenue recognition, the valuation of goodwill, disclosures and judgments required in the light of the COVID-19 pandemic, IFRS16 accounting and the numerous post-balance sheet events. No major areas of concern were highlighted by the auditor during the period. Internal Audit At present, the Group does not have a formal independent internal audit function. However, a set of minimum control and reporting standards have been formally documented and distributed to each business to confirm compliance. These standards and compliance with them are regularly reviewed by a member of the Group finance team. The Committee believes that this allows management to derive sufficient assurance as to the adequacy and effectiveness of internal controls and risk management procedures. Despite the restrictions imposed in FY21 by COVID-19, monthly regional control declarations were maintained and reviewed. Remote audits were also undertaken of activities in the US and MEA regions, with a particular focus on rental asset and approval controls. Risk Management and Internal Controls As described in the corporate governance report, the Group has established a framework of internal control systems, policies and procedures. The Audit Committee is responsible for reviewing the risk management and internal control framework and ensuring that it operates effectively. The Committee is satisfied that the internal control systems in place are currently operating effectively. Whistle Blowing The Group has in place a whistleblowing policy which sets out the formal process by which an employee of the Group may, in confidence, raise concerns about possible improprieties in financial reporting or other matters. Whistleblowing is a standing item on the Committee’s agenda. The Committee is comfortable that the current policy is operating effectively. Anti-Bribery The Group has in place an anti-bribery and corruption policy which sets out its zero-tolerance position and provides information and guidance to those working for the Group on how to recognise and deal with bribery and corruption issues. The Committee is comfortable that the current policy is operating effectively, and a recent online refresher course has been undertaken by staff in the UK. Annual Report & Accounts Having taken all the matters considered by the Committee and brought to the attention of the Board during the year into account, we are satisfied that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable. The Board believes that the disclosures set out in the Annual Report provide the information necessary for shareholders to fairly assess the company's position and performance, business model and strategy. Ken Hanna Chairman 6 July 2021 Audit Committee Report FY21 I am pleased to present the Audit Committee Report for the year ended 31 March 2021. The Audit Committee is primarily responsible for the integrity of the financial statements and ensuring that the financial performance of the Group is properly reported and reviewed. Its role also includes reviewing internal control and risk management systems, reviewing key accounting policies and advising on the appointment of external auditors. Members of the Audit Committee The Committee consists of two independent Non-Executive Directors, Ken Hanna (as Chair) and Ian Metcalfe, whose details and qualifications are set out on Page 64. The Group CEO, CFO and the external auditor (Deloitte LLP) also attend committee meetings by invitation. There have been no changes to the composition of the Committee during the year and the Board believes that the Committee members have the required skills, qualifications and experience to properly discharge their duties. The Terms of Reference for the Committee are available from the Group’s registered office. The Committee met twice in the period, at which both members were present. Duties The main items of business considered by the Audit Committee include: • Review of the financial statements and Annual Report • Review of the audit plan • Consideration of key audit matters and how they are addressed • Review of suitability of the external auditor • Consideration of the external audit report • Going concern and viability statement review • Review of the risk management and internal control systems • Meeting with the external auditor Role of the External Auditor The Audit Committee monitors the relationship with the external auditor, Deloitte LLP, to ensure that auditor independence and objectivity are maintained. Deloitte LLP were appointed in 2013, following an audit tender process; and Jonathan Dodworth the current Audit Partner has held this role since the 2016 audit. Deloitte LLP have now completed the FY21 audit, as described in this Annual Report. In late 2020 Deloitte indicated to the Group that they did not wish to be put forward for reappointment at the conclusion of the FY21 audit and wanted to work with the Group to ensure a smooth transition to a successor audit firm. Therefore, over a number of months, the Audit Committee has undertaken a detailed review of alternative options in the market and, following detailed proposals and a series of presentations and workshops, have concluded that BDO LLP offer the most appropriate mix of experience, quality, geographic coverage and value for money. This assessment has been supported by verbal references given by other similar-sized companies in both the UK and US that have attested to a smooth transition from Deloitte to BDO. Based on the work undertaken by the Audit Committee, The Board recommends that BDO LLP be appointed as the Group’s auditor at the next AGM. Assuming that this is approved, BDO LLP will undertake an orderly handover with Deloitte through 2021 in readiness for the FY22 audit. Provision of Non-Audit Work by the External Auditor The Committee monitors the provision of non-audit services by the external auditor; however, no formal policy exists. The breakdown of fees between audit and non-audit services is provided in Note 4 of the Group’s financial statements. Back in 2018, the provision of tax compliance and related tax advisory work was moved to Smith & Williamson with the FY18 tax returns being the first completed under this new relationship. The proposed change of auditor detailed above therefore has no impact on this service. Annual Report & Accounts FY21 75 Arena Events Group plc 74 Remuneration Committee Report FY21 Arena Events Group plc is listed on the Alternative Investment Market (AIM) and is not required to prepare a Directors’ remuneration report. The following disclosures are prepared on a voluntary basis. Membership of the Remuneration Committee The Remuneration Committee is chaired by Ian Metcalfe and also includes Ken Hanna. The Terms of Reference for the Committee are available from the Group’s registered office. The Committee met six times in the period at which both members were present. The higher than usual number of meetings reflects the additional work required to design and implement the Arena 2020 Share Option Plan described in more detail below. The Remuneration Committee reviews the performance of the Executive Directors and makes recommendations to the Board on matters relating to remuneration, terms of service, granting of share options and other equity incentives. Remuneration Policy The Directors remuneration packages are designed to attract, retain and motivate Directors of the highest calibre, to ensure that their interests are aligned with the shareholders and to reward them for enhancing value to shareholders. The performance measurement of the Executive Directors and the determination of their annual remuneration package is determined by the Committee. Impact of COVID-19 As is discussed extensively in this annual report, COVID-19 had a major impact on the Group during FY21. From the outset of the pandemic in early 2020, all Executive and Non-Executive Directors acknowledged the challenges the business faced and volunteered a reduction in base salaries until there was a clear path to recovery. These reductions lasted the twelve months of FY21 and averaged 33% across the period. Both Executive Directors also waived their right to participate in any FY21 bonus plan. Non-Executive Directors The remuneration policy for the Chairman and Non- Executive Directors is to pay fees necessary to attract the individual of the calibre required, taking into consideration the size and complexity of the business and the time commitment of the role. Details are set out below: • The fees of the Non-Executive Directors are agreed by the Board as a whole, having taken advice from suitable advisers • Fees are set taking into account the level of responsibility, relevant experience and specialist knowledge of each Non-Executive Director and fees at companies of a similar size and complexity • Non-Executive Directors are paid a fee for membership of the Board with no additional fees being paid for chairmanship of Board Committees. Fees are paid monthly in cash • Neither the Chairman nor any of the Non-Executive Directors are eligible to participate in any of the Group’s annual bonus incentive arrangements. However, at IPO the Chairman was granted share options by way of a deed of gift outside of the Group’s share option scheme. These options were granted on the same terms as other grants made at the same time • The Non-Executive Directors have appointment letters with a notice period of three months if given by the Director and one month if given by the company During the year, Henry Turcan was appointed as a Non-Executive Director as a representative of the funds managed or sub-advised by Lombard Odier Investments Manager (LOIM) group entities, one of the Company's largest shareholders. It was agreed with Mr Turcan that neither he, nor LOIM, would be paid a fee for his services until such date that the Board determines it is appropriate. Executive Directors The main elements of the remuneration package for Executive Directors are as set out below: • A competitive base salary for the market in which we operate, to attract and retain Executive Directors of a suitable calibre. Base salaries are usually reviewed annually taking into account any changes in role or responsibilities, individual performance and comparable market benchmarks • Benefits are currently limited to the provision of private medical insurance and a company pension contribution. No company cars or car allowance are provided. The level of these benefits is determined by the Committee with reference to the experience and responsibilities of each individual • Each Executive Director has an agreed bonus plan for the financial year, with total bonus payment linked to a combination of Group financial performance targets and personal objectives. The Group financial targets are set each year by the Committee • A Group share option scheme is in place (Arena 2020 Share Option Plan) as described in further detail below. Share options are issued as determined by the Committee to align the Executive Directors medium- term interest with those of the shareholders. Any entitlement to grants awarded under the 2017 Share Option Plan were waived as part of the 2020 Share Option Plan grants • The Executive Directors have service contracts with a rolling notice period of twelve months to be given by either party Annual Report & Accounts FY21 77 Arena Events Group plc 76 Basic Salary1 £000 Bonus4 £000 Benefits5 £000 Pension5 £000 Total FY21 (12 mth) £000 Total FY20 (15 mth) £000 Executive Director Greg Lawless 155 - - - 155 282 Steve Trowbridge2 134 - 2 20 156 121 Piers Wilson3 43 - - - 43 130 Non-Executive Director Ken Hanna 67 - - - 67 124 Ian Metcalfe 27 - - - 27 49 Henry Turcan - - - - - - Notes: 1. Throughout 2020, in response to the COVID-19 pandemic, all Executive and Non-Executive Directors took a voluntary reduction in their basic salaries. These reductions were 50% in April and May 2020, 30% from June to August 2020, 25% in September 2020 and 30% from October 2020 to March 2021, giving an average reduction of 33% across the year. All Executive and Non-Executive base salaries returned to pre-pandemic (FY20) levels with effect from 1 April 2021 2. Steve Trowbridge joined Arena Events Group plc on 10 September 2019 (in FY20) as Chief Financial Officer (CFO) and became a Director of the Group on 15 October 2019 3. Piers Wilson resigned as CFO in September 2019 and stepped down as a Director of the Group on 15 October 2019. It was agreed with Mr Wilson that he would receive a payment in lieu of notice of £180,000 in accordance with his service agreement. The payment was to be made in instalments and would be reduced in the event that he commenced another role outside the Group prior to the expiry of his notice period in September 2020. In February 2020, Mr Wilson advised the Company that he had started a new role, and this would reduce the future amount payable. On 30 March 2020 Mr Wilson informed the Company that he had been made redundant by his new employer and would re-join the Company as an employee in April 2020 for the remainder of his notice period. Mr Wilson also agreed to follow the COVID-19 related % salary reductions taken by the Executive Directors. Mr Wilson did not receive any annual bonus payment in FY20 and, in accordance with the rules of the Arena 2017 Share Option Plan, all his share options lapsed. In FY20, the Company made a payment of £2,400 in respect of Mr Wilson’s legal fees relating to his resignation as a Director 4. Based on the Group’s COVID-19 affected financial performance for the year ended 31 March 2021, both Executive Directors waived their right to participate in any FY21 bonus plan 5. Greg Lawless does not receive any benefits or a pension. Steve Trowbridge is provided with private medical insurance and a company pension contribution of £20,000 per annum. Piers Wilson was provided with private medical insurance and a company pension contribution of 7.5% of base salary until he ceased to be an employee of the company in February 2020 Remuneration Committee Report FY21 Directors Remuneration The audited table below sets out the total remuneration earned by each Director who served during the year ended 31 March 2021 and their respective payments in FY20 for the fifteen-month period ended 31 March 2020: Long-Term Incentive Plan Arena 2017 Share Option Plan A Group share option scheme (the “2017 Scheme”) was set up on Admission to AIM in July 2017. The 2017 Scheme allows for options to be issued over ordinary shares, up to a maximum of 10% of the Company’s ordinary shares in issue at the time of grant, over a ten-year period. The option exercise price will usually be the mid-market price of the shares on the day before the date of grant. Total options were awarded at Admission equal to approximately 4.6% of the number of ordinary shares in issue at that time, with an exercise price of 55 pence per share. The initial option awards have no performance conditions and vest equally after two, three and four years from the date of grant. In October 2018, a total of a further 2.3m share option awards were granted, of which 825,000 were awarded to the Executive Directors. These awards have an exercise price of 68 pence per share and vest equally over 3 years, commencing on the third anniversary of grant and have performance conditions as set out below. The share options granted in October 2018 have the following performance criteria: • 75% of the total award is subject to the Adjusted Earnings per share for the Group (“Adjusted EPS”) having increased by a total amount over the period in excess of 12.5% per annum. If the compound growth is in excess of 12.5% per annum the award will vest in full. If the compound growth is in below 10% per annum the award will be fall away. In between these two levels an adjusted number of options awarded will vest on a straight-line pro rata basis. • 25% of the Award will vest at the discretion of the Remuneration Committee by reference to the success of the Group in integrating acquisitions (i) completed in the twelve months prior to the date of Award, and (ii) subsequently completed, during the period between the date of the Award and the test date. In April 2019, an additional 1.8m share option awards were granted at an exercise price of 40 pence and in October 2019, a further 0.1m were granted at 18.5 pence. None were allocated to the Executive Directors. In September 2019, a total of 2,162,162 share option awards were granted to Steve Trowbridge at an exercise price of 18.5 pence. The Awards vest on the third, fourth and fifth anniversary of the date of grant and only to the extent that the conditions set by the Remuneration Committee are satisfied and subject to the rules of the plan. In October 2020, participants in the Arena 2020 Share Option Plan (detailed below) waived any entitlement to historic awards under the 2017 Scheme. Annual Report & Accounts FY21 79 Arena Events Group plc 78 Directors’ Shareholdings and Share Interests: Notes: 1. As part of the Subscription and Placing announced by the Group on 26 March 2020, Greg Lawless subscribed for 2,500,000 shares. These shares were issued on 15 April 2020 2. During the year Greg Lawless, Steve Trowbridge and Ken Hanna all purchased shares in the Company. The number of shares acquired were 400,000, 185,185 and 800,000 respectively 3. As part of the Subscription and Placing announced by the Group on 29 March 2021, Greg Lawless, Steve Trowbridge and Ken Hanna subscribed for shares. Mr Lawless subscribed for 250,000 shares, 78,817 of which were issued on 31 March 2021 as part of the First Placing, and the remainder on 15 April 2021. Mr Trowbridge subscribed for 71,428 shares, of which 22,519 were issued on 31 March 2021 and the remainder on 15 April 2021. Mr Hanna subscribed for 178,571 with 56,298 issued on 31 March 2021 and 122,273 on 15 April 2021 Ian Metcalfe Director 6 July 2021 Number at 1 April 2020 Issued in the period Lapsed in the period Number at 31 Mar 2020 Exercise price (p) Vesting period / date Executive Director Greg Lawless 1,280,000 450,000 - - - 6,000,000 (1,280,000) (450,000) - - - 6,000,000 55.0 68.0 1.0 July 2019 to July 2021 Oct 2021 to Oct 2023 On 1 October 2023 Steve Trowbridge 2,162,162 - - 5,000,000 (2,162,162) - - 5,000,000 18.5 1.0 Sept 2022 to Sept 2024 On 1 October 2023 Non-Executive Director Ken Hanna 181,818 - - 181,818 55.0 July 2019 to July 2021 Ian Metcalfe - - - - - n/a Henry Turcan - - - - - n/a Number at 31 Mar 2020 Number at 31 Mar 2021 Unvested share options at 31 Mar 2021 Vested, unexercised share options Executive Director Greg Lawless1, 2, 3 7,024,088 10,002,905 6,000,000 - Steve Trowbridge2, 3 - 207,704 5,000,000 - Non-Executive Director Ken Hanna2, 3 173,334 1,029,632 60,606 121,212 Ian Metcalfe 110,800 110,800 - - Henry Turcan - - - - Share Options Held by the Directors: Remuneration Committee Report FY21 Arena 2020 Share Option Plan In October 2020, with more than three years having elapsed since the 2017 Scheme was put in place and following consultation with major shareholders, a new scheme called the 2020 Share Option Plan (the “2020 Scheme”) was designed and implemented. The 2020 Scheme has been designed to retain and incentivise the management team, aligning awards to the creation of substantial shareholder value over a three-year period. Under the 2020 Scheme, options were granted over a total of 21,250,000 new ordinary shares with a nominal value of 1 pence each. Subject to the Performance Condition set out below, these options will vest on the third anniversary of the date of grant (the “Vesting Date”), or earlier on a change of control and options will only vest to the extent that the Performance Condition is met. The price payable upon exercise of any option is 1 pence per ordinary Share. The Performance Condition sets out that options will only begin to vest if the share price on the Vesting Date exceeds 5 pence (the prevailing share price at the date of grant). Initially 0.25% of the award vests for each 0.1 pence increment above 5 pence so that 25% of the options will vest if the share price increases to 15 pence. The options will vest in full if the share price is at or above 30 pence, with straight- line vesting from 25% to 100% taking place between 15 pence and 30 pence. As such, in order to achieve full vesting, the management team will need to increase the share price by a compound annual growth rate of 82%. Satisfaction of the Performance Condition will be measured by reference to the volume-weighted average share price in the 30-day period preceding the Vesting Date. All recipients of grants under the 2020 Scheme have waived any entitlement to historic awards and hence those options have lapsed. Customary malus and clawback provisions also apply to all awards. 11,000,000 of the options granted under the 2020 Scheme were to the Executive Directors, as set out in the table below alongside their historic awards which lapsed on the same date. No options were granted under the 2020 Scheme to any of the Non-Executive Directors. Following these grants, the Company has a total of 22,436,727 unvested options in issue pursuant to Share Option plans, 1,186,727 pursuant to the Arena 2017 Share Option Plan and 21,250,000 pursuant to the Arena 2020 Share Option Plan, equating to approximately 8.2% of the issued share capital at of the Company as at 31 March 2021. 81 Annual Report & Accounts FY21 Arena Events Group plc 80 Directors’ Report FY21 Review of Business and Future Developments The Chief Executive Officer’s report on Pages 28–31 provides a review of the business, the Group’s trading for the year ended 31 March 2021 and an indication of future developments. Results & Dividends The results for the year ended 31 March 2021 are set out in the consolidated income statement on Page 102. Considering the current trading backdrop, no interim dividend was declared during the year and the Directors have not recommended a final dividend for the year ended 31 March 2021. Directors The Directors of the company who were in office during the year and up to the date of signing the financial statements were as follows: • K Hanna • G Lawless • I Metcalfe • S Trowbridge • H Turcan (appointed on 8 June 2020) Details of each Director’s interest in the company and remuneration details are provided in the Remuneration Committee Report on Pages 76–81. Financial Risk Management and Financial Instruments The Group adopts a prudent approach to financial risk management, with an appropriate level of debt facilities and prepares detailed weekly cash forecasts by region to provide visibility of cash and facility usage. The Group does not enter into any financial derivative transactions, nor trade in financial instruments. The two main financial risks are considered to be: Credit Risk The Group sets credit limits for all new customers granted credit and generally contracts with clients with a strong financial strength. Credit risk is also mitigated by ensuring that a significant proportion of a contract’s value is collected before the handover of the project to the client. Interest Rate Risk Bank interest is charged at a fixed margin to LIBOR which has been agreed as part of the current financing arrangements. This margin is between 1.65% and 2.4% dependent on the net debt leverage at each quarter end. Changes in LIBOR will therefore have an effect on interest expense and cash flows however this is not considered to be material. In FY22 the Group has elected to move to SONIA as the replacement for LIBOR and the Group is currently planning for the transition. Branches Outside the UK The Group has overseas subsidiaries as listed in Note 12 and a branch in South Korea. Directors’ Qualifying Third Party Indemnity Provision (Insurance) Arena Events Group plc has indemnified, by means of Directors and Officers liability insurance, the Directors of the Company against liability in respect of proceedings brought by third parties, subject to the conditions set out in the Companies Act 2006. Such qualifying third-party indemnity provisions were in force during the year and are in force as at the date of approving the Directors’ Report. Annual Report & Accounts FY21 83 Arena Events Group plc 82 confirmed as successful on 6 April 2021 and was approved at the sale hearing at the United States Bankruptcy Court for the Southern District of Texas on 16 April 2021. The total value of the bid to the secured lender (AIG) and including amounts payable to the parties that provided interim funding through the bankruptcy process was $25.6m. This purchase price was funded by an equity contribution of $3.35m by Arena Events Group plc (via its subsidiary, AES Arena Event Services Holdings Limited) in return for a 50% equity stake in AAS Opco LLC (with management control) alongside a $18.25m debt financing package provided by Arena’s Co-Bidders. On 12 October 2020, supported by HSBC, Arena Events Group plc secured an extra £15.6m of funding under the UK Government-backed Coronavirus Large Business Interruption Loan Scheme (CLBILS). This facility provides additional liquidity headroom to Arena Events Group plc in the UK to manage any uncertainty around the pace of opening up of events to mass participation as COVID-19 restrictions are eased. The terms of the facility require an initial draw to be made within the first six months and a second (final) draw to be made before the first anniversary of the facility. Failure to make the first draw would see the entire facility forfeited and, in line with this requirement, on 1 April 2021 Arena Events Group plc drew down £4m. Drawn amounts bear interest at LIBOR plus a 2.4% margin whilst the remaining unutilised facility bears interest at 1% per annum. On the 15 April 2021, the Group underwent a restructure of its UK owned subsidiaries to reduce complexity, better align the corporate structure with the management of the trading divisions and to simplify entity balance sheets. As part of this restructuring, investments in WB Co (1403) Ltd, WB Co (1402) Ltd and AES Arena Event Services Holdings Ltd were transferred to be direct investments of Arena Events Group plc. The restructuring is not expected to have any material financial impact on the Group. Following the completion of an extensive selection process, on 20 May 2021, the Board approved the appointment of BDO LLP as its new external auditor for the year ending 31 March 2022. The Company’s current auditor, Deloitte LLP, has completed the audit for the current financial year ending 31 March 2021 and shareholder approval to confirm the appointment of BDO LLP will be sought at the 2021 Annual General Meeting. Details of events that have occurred after the balance sheet date can also be found at Note 34 to the Consolidated Financial Statements. Employee Involvement The Group places considerable value on the involvement of its employees and keeps them informed on all aspects of the business and its progress, which the Directors consider to be relevant. Communication is affected through regular internal emails, newsletters and formal town hall meetings. Feedback is also actively sought to better understand any employee concerns or suggestions to improve our employment practices. The Group is committed to employment policies which follow best practice, based on equal opportunities for all employees, irrespective of age, gender, ethnic origin, colour, religion, disability, sexual orientation or marital status. The Group gives full and fair consideration to applications for employment from disabled persons, having regard to their particular aptitudes and abilities. Appropriate arrangements are made for the continued employment and training, career development and promotion of disabled persons employed by the Group. If members of staff become disabled, the Group continues employment, either in the same or an alternative position, with appropriate retraining being given if necessary. Directors’ Report FY21 Material Interests So far as the Board is aware, no Director had any material interest in a contract of significance (other than their service contract) with the Company or any of its subsidiary companies during the period. Political Donations The Group did not make any political donations in the financial period. Capital Structure Details of the issued share capital, together with details of the movements during the year, are shown in Note 21 to the Consolidated Financial Statements. The Company has one class of ordinary share and each ordinary share carries the right to one vote at general meetings of the Company. Additional shares were issued post year-end as part of the subscription and placing described in the Subsequent Events section below. Substantial Shareholdings As at the most recent practicable date, the Company had been notified of the following shareholders with a beneficial interest of over 3%. Subsequent Events On 29 March 2021, the Group announced the conditional raising of £11m (before fees and expenses) by way of a subscription for 10,714,285 new Ordinary Shares and a placing of 67,857,143 new Ordinary Shares, in each case at a price of 14 pence per share. As well as strengthening the Group’s balance sheet, the net proceeds of the capital raise will be used to take advantage of the opportunities presented by the COVID-19 affected market to acquire attractive assets on favourable terms, including the acquisition of the business and assets of Aztec Shaffer. The capital raising was conducted in two separate tranches: 1. The First Placing Shares and the First Subscription Shares issued pursuant to the Company's existing authorities to allot equity securities and disapply pre-emption rights granted at its Annual General Meeting held on 1 September 2020 and consisted of a subscription for 3,377,875 new Ordinary Shares and a placing of 21,393,208 new Ordinary Shares, in each case at a price of 14 pence per share. The First Placing Shares and the First Subscription Shares were admitted to trading on AIM on 31 March 2021. 2. Following the passing by Shareholders of certain Resolutions at the General Meeting held on 14 April 2021 the second tranche consisting of the Second Placing Shares and the Second Subscription Shares were admitted to trading on AIM on 15 April 2021. The second tranche consisted of a subscription for 7,336,410 new Ordinary Shares and a placing of 46,463,935 new Ordinary Shares, in each case at a price of 14 pence per share. On 2 April 2021, AAS Opco LLC made a bid for Aztec Shaffer as part of a court-led auction process pursuant to Section 363 of the United States Bankruptcy Code. This bid was No. of shares held % of issued share capital TasHeel Holding Group LLC 77,979,235 23.9 Lombard Odier Asset Management (Europe) Limited 58,472,090 17.9 Premier Miton Group plc 19,000,000 5.8 Oryx International Growth Fund Limited 12,000,000 3.7 GAM Holding AG 11,000,000 3.4 Killik & Co LLP 10,371,791 3.2 Greg Lawless 10,174,088 3.1 Total in issue 326,282,261 100.0 85 Annual Report & Accounts FY21 Arena Events Group plc 84 the Group is likely to meet. The viability assessment also assumes the refinancing of the Group's Term A Loan prior to its expiry in October 2022 and any amounts outstanding on the Group’s Term B (CLBILS) Loan prior to its expiry in October 2023. The Group has prepared three views of future performance — a low; a mid; and an upside case. Each of these is built on bottom-up forecasts for the FY22 period. In light of the COVID-19 pandemic and the impact on the Group’s visibility of trading in subsequent years, the Directors have used high-level assumptions for these periods based around the pace of recovery relative to 2019 levels of activity adjusted for a differing list of major global events. The Group’s mid-case scenario is modelled on the assumption that the UK and US markets begin to return to normal from July 2021, with the Middle East & Asia markets lagging by three months, and that there are no further significant lockdowns. The mid-case also forms the basis for all goodwill impairment reviews and work to support the going concern review, with the low and upside cases representing downside and high sensitivities respectively. Trading for the Group in the first two months of FY22 has been ahead of the mid-case scenario. The Board has reviewed management’s “low case” scenario and which assumes further COVID-19 related disruption to events and a 40% reduction in EBITDA from the mid-case. Management have also run further aggressive downside revenue sensitivities taking the outturn for both revenue and profit significantly below that of FY21. All of these scenarios show that the Group still has sufficient liquidity for the reasonably foreseeable future, with opportunities to reduce capex and operating costs helping preserve cash balances. As outlined above the Group has retained a positive dialogue with its main lending bank throughout the pandemic and the Directors have no reason to believe that continuing support and appropriate future covenant tests under the various scenarios will not be forthcoming. Going Concern Statement Based on the assessment outlined above which has been considered and reviewed by the Board, the Board has a reasonable expectation that the Group has access to sufficient liquidity for the foreseeable future. While the Group is in a net current liabilities position much of the current liability balance is deferred income, which will not require a cash repayment. Therefore, the Directors have a reasonable expectation that the Group has adequate resources to meet liabilities as they fall due and continue in operational existence for the foreseeable future and therefore have determined that the financial statements for the year ended 31 March 2021 should be prepared on a going concern basis. Viability Statement The Directors have assessed the viability of the Group over a three-year period, taking account of the Group’s current position and prospects, its strategic plan and the principal risks and how these are managed. Despite the current COVID-19 pandemic and the pausing of many events around the world in 2020 and into 2021, the Directors have assumed a gradual recovery in activity from mid-2021, broadly returning to 2019 levels by 2024. The Directors believe that three years is an appropriate period for this assessment, reflecting the average length of the Group’s contract base; key markets; and the nature of its businesses and products. The Group is considered viable if there is available debt headroom and cash to fund operations and the Group remains compliant with any required financial covenants under the terms of its external debt facilities. Based on this assessment and other matters considered and reviewed by the Board during the year, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over this period. Disclosure of Information to the 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 Group’s auditor is unaware and each Director has taken all reasonable steps that they ought to have taken in order to make themselves aware of any relevant audit information and to establish that the Group’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. A resolution to appoint BDO LLP as auditor will be proposed at the forthcoming Annual General Meeting. By order of the Board S Trowbridge Director / Company Secretary 6 July 2021 Directors’ Report FY21 UK Greenhouse Gas Emissions & Energy Use Data FY21 is the first year we are required to report under the Streamlined Energy & Carbon Reporting (SECR) framework. Our SECR, in the table below, covers the energy consumption and associated Greenhouse Gas (GHG) emissions relating to gas, electricity and transport for the period 1 April 2020 to 31 March 2021 for the UK entities. We have selected an intensity metric based on the energy consumption per £1,000 of revenue. This is 27.03kg of CO2e per £1,000 of revenue. We will use this ratio to monitor our energy efficiency performance over time. We have used the SECR methodology as specified in the March 2019 “HM Government Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance”, data gathered from our own operations and HM Government’s GHG reporting conversion factors. Energy efficiency actions We are committed to responsible energy management and will practise energy efficiency throughout our organisation, wherever feasible. We recognise that climate change is one of the most serious environmental challenges currently threatening the global community and we understand we have a role to play in reducing greenhouse gas emissions. By providing a service based on the re-use of product (rental of equipment) we also believe that we are positively assisting others in also making these changes. Against the backdrop of navigating the extreme impact of COVID-19 on our business, we implemented the actions below which also increased our businesses energy efficiency during FY21: • Moved to remote home working for all office-based staff, as lockdowns are lifted we expect many of our colleagues to continue this practice for part of their working week • Implemented and encouraged the use of video conferencing. In the future it is unlikely that we will revert to pre-pandemic levels of international business travel • Overall reduction in business-related travel • Consolidated operations into a smaller property footprint reducing lighting, heating and cooling requirements Going Concern and Viability Statements In considering going concern and the viability of the Group, the Directors have reviewed the cash requirements of the Group reflecting the impact of COVID-19 and the expectation that the global events market will continue its recovery through 2021. Through 2020 and early 2021, the Group has taken actions in order to enhance liquidity including increasing available debt facilities and reducing costs. The Board also notes the recent successful equity raising and the significant cash balance now within the Group. In May 2021 the Group agreed the tests for covenants in June and September 2021 and is forecast to meet those covenants. The covenant tests for December 2021 and beyond have not currently been set by the bank and so the Group is dependent on meeting those covenants once set. However, dialogue with our bank is regular and the Board is confident that the covenants will be set at a level which Year ended 31 March 2021 Scope 1: emissions in metric tonnes CO2e 432.1 Scope 2: emissions in metric tonnes CO2e 98.7 Total gross Scope 1 & Scope 2 emissions — tonnes CO2e 530.8 Energy consumption used to calculate above emissions — kWh 2,310,013 Intensity ratio (kg CO2e /£1,000 turnover) 27.03 87 Annual Report & Accounts FY21 Arena Events Group plc 86 Directors’ Responsibilities Statement The Directors are responsible for preparing the Annual Report and the financial statements in accordance with 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 Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. Under company law the Directors must not approve the accounts 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 of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors: • properly select and apply accounting policies; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and • make an assessment of the Company's ability to continue as a going concern. 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 the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility Statement We confirm that to the best of our knowledge: • the financial statements, prepared in accordance with applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and • the strategic report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. This responsibility statement was approved by the Board of Directors on 6 July 2021 and is signed on its behalf by: Greg Lawless Chief Executive Officer 6 July 2021 Steve Trowbridge Chief Financial Officer 6 July 2021 89 Annual Report & Accounts FY21 Arena Events Group plc 88 Independent Auditor’s Report to the Members of Arena Events Group plc 92 Financial Statements & Notes 102 Financial Statements 91 Annual Report & Accounts FY21 Arena Events Group plc 90 “Arena Group are a proven leader within their industry with an excellent reputation. We’re really excited to work with them as they help develop a fantastic project for Scottish Rugby as well as the new home of Edinburgh Rugby.” Dominic McKay (Former) CEO Scottish Rugby Edinburgh Rugby Independent Auditor’s Report to the Members of Arena Events Group plc Report on the Audit of the Financial Statements 1. Opinion In our opinion the financial statements of Arena Events Group plc (the ‘company’) and its subsidiaries (together, the ‘group’): • 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 loss for the year then ended; • have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; and • have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements which comprise: • the consolidated income statement; • the consolidated statement of comprehensive income; • the consolidated and company balance sheets; • the consolidated and company statements of changes in equity; • the consolidated and company cash flow statement; • the related Notes 1 to 34. 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. 2. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (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 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 Financial Reporting Council’s (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. 4. 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 is discussed in section 5.3. 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 and parent 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. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Key audit matters The key audit matters that we identified in the current year were: • Revenue cut-off • Goodwill valuation of UKE CGU • Going concern Within this report, key audit matters are identified as follows: Newly identified Increased level of risk Similar level of risk Decreased level of risk Materiality The materiality that we used for the group financial statements was £1.0m which was determined by considering three key metrics: total assets, net assets and tangible fixed assets. Scoping Our full scope audit procedures resulted in coverage of 100% (2020: 91%) of the group’s revenue and 100% (2020: 94%) of net assets. Significant changes in our approach In previous year we have determined the materiality based on 0.85% of revenue. Given the impact of Covid-19 on the group this year, we reassessed the materiality benchmark by considering three key metrics: net assets, total assets and tangible fixed assets. Based on our risk assessment, we identified the UKE (“United Kingdom & Europe”) CGU (“Cash Generating Unit”) as the CGU with associated goodwill being at most risk of impairment due to its assumption of high short-term revenue growth and EBITDA. Therefore, in the current year our goodwill valuation key audit matter has been focused on those assumptions for the UKE CGU. 3. Summary of Our Audit Approach 93 Annual Report & Accounts FY21 Arena Events Group plc 92 Key audit matter description The group generates revenue through the provision of event management and turnkey event services, and the leasing of equipment and temporary structures. The application of the revenue recognition standard IFRS 15 “Revenue from contract with customers” requires judgement to identify performance obligations under the existing contracts, even if this obligation is not explicitly stated, determine the transaction price under the contract and allocate this to each performance obligation. Judgement is involved in identifying the lease element of the contract and if revenue is appropriately recognised in accordance with IFRS 16 “Leases”. Judgement is also required to determine if revenue should be recognised over time or at a point in time depending on the terms of the contract entered into, and the underlying details of delivering the performance obligation. Refer to the significant accounting policies (Page 113) and Note 2 “Revenue” of the Consolidated Financial Statements (Page 119). How the scope of our audit responded to the key audit matter The procedures performed to address the key audit matter were: • Obtained an understanding of the relevant controls around revenue recognition; • Inquired of management to obtain information about the projects that span the financial year end to evaluate whether revenue is recognised in the appropriate period; • Assessed the performance obligations identified by management with respect to a sample of the relevant sales contracts; • Tested a sample of revenue contracts by agreeing to source documentation to assess whether revenue around period-end and post period-end is properly recognised in accordance with group policy, relevant accounting standards and appropriately reflects both lease and non-lease elements of the contract; and • Tested a sample of deferred revenue and accrued income to assess whether the related transactions were appropriately recognised and in line with group policy, including the appropriate consideration under IFRS 15 and IFRS 16 where a lease element can be identified on the contract. Key observations Based on our procedures, we concluded that revenue recognised in the period is appropriate. Key audit matter description Management has performed an impairment review to determine if any impairment of goodwill under IFRS is required in line with IAS 36 “Impairment of Assets”. We have focused our key audit matter on the UKE CGU as it has historically been underperforming and it is the CGU with goodwill at most risk of being impaired due to historical low headroom. The goodwill balance as at 31 March 2021 for the UKE CGU is £16.7m (2020: 16.7m) out of a total of £30.9m goodwill across the group, so the UKE CGU represents 54% of the group’s goodwill. No impairment was recognised in the UKE CGU in the current year. There is a high level of judgement involved in determining the value in use (“VIU”) of the UKE CGU, which is a key determinant of assessing whether a CGU is impaired. The key judgements in the VIU calculation include: • The future cash flow forecasts, which incorporate assumptions on future revenue growth up to 2026, and increase in EBITDA margin; • The long-term growth rate; and • The discount rate. Refer to the significant accounting policies (Page 114) and Note 9 “Goodwill” of the Consolidated Financial Statements (Page 128). How the scope of our audit responded to the key audit matter Our audit procedures focused on challenging the inputs to the discounted cash flow model used to determine the VIU of the UKE CGU. The procedures performed were: • Obtained an understanding of the relevant controls surrounding the impairment assessment; • Involved our internal specialists to assess the appropriateness of the discount rate and long-term growth rate used in the model by comparing to market evidence; • Assessed the reasonableness of the key judgments around the cash flow projections made in the value in use calculation and compared to industry expectations and historical performance; • Tested management’s ability to accurately forecast future revenues, EBITDA and growth rates by comparing actual results to management’s historical forecasts; and • Performed a sensitivity analysis on the inputs into the value in use calculation to determine the circumstances that would lead to an impairment charge. Key observations Based on our procedures, we concluded that the valuation of goodwill is appropriate and no impairment is required. Independent Auditor’s Report 5.1. Revenue Cut-Off 5.2. Goodwill Valuation 5. Key Audit Matters 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 (whether or not due to fraud) 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 forming our opinion thereon, and we do not provide a separate opinion on these matters. 95 Annual Report & Accounts FY21 Arena Events Group plc 94 Key audit matter description Covid-19 has had a significant impact on the performance of the group in the year. Revenue has declined significantly to £71.6m as at year end of 31 March 2021 (15month to 31 March 2020: £183.2m). As at 31 March 2021, the group has an external loan of £34.6m, drawn down from the £35.0m revolving credit facility (“RCF”) and an undrawn loan under the Coronavirus Large Business Interruption Loan Scheme (“CLBILS”) of £15.6m, both with HSBC. The RCFs and the CLBILS will be subject to review in October 2022 and October 2023, respectively. Our risk level of going concern has decreased from prior year as the group changed its operations in the current year in response to the almost total cessation of largescale events across the globe as a result of the pandemic and in the beginning of 2021 has recommenced activity linked to events. However, there remains an uncertainty identified in relation to going concern due to the potential impact of future waves of Covid-19 on the business. There are also uncertainties regarding the group’s ability to meet the covenants on its financing agreements beyond December 2021 and whether the group will be able to obtain an agreement from the group’s banker on the level of covenants. Management prepared forecasts for the period to June 2022 and considered their position beyond the forecasted period up to the signing date, to support their conclusion that the group is a going concern. As forecasts are forward looking there are a number of assumptions and judgements made in making these forecasts. These include: • Assumptions made around when lockdown conditions will be lifted and events will be able to take place and the impact on the scale of events which are held; • Future cash flow forecasts; and • Compliance with the covenants on the existing debt facilities; • Working capital cycle changes. Refer to the Note 1 “Going Concern” of the Consolidated Financial Statements (Page 112). How the scope of our audit responded to the key audit matter Our evaluation of the directors’ assessment of the company’s ability to continue to adopt the going concern basis of accounting included: • Understanding of the relevant controls that are in place in order to allow management to determine the appropriateness of the going concern basis of accounting made, • Assessing management’s forecast and the appropriateness of the key assumptions made in the model; • Evaluating the mechanics of the base model to assess whether all formulas flow through the model as expected; • Assessing the appropriateness of the assumptions made in the base model and comparing to the most recent board approved budgets; • Challenging and understanding sensitivities that management have identified and their impact on the model, including assessment of whether any further sensitivities should be applied, the likelihood of them being achieved and whether they are within management’s control; • Having discussion with the group’s bankers around the ongoing availability of the group’s financing facilities; • Assessing share price movements and data reports to assess whether it provided supportive evidence in relation to management’s assumptions; and • Assessing the sufficiency of the disclosures in the financial statements. Key observations Based on our procedures, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Independent Auditor’s Report 5.3. Going Concern Group financial statements Parent company financial statements Materiality £1.0m (2020: £1.5m) £0.7m (2020: £0.8m) Basis for determining materiality The materiality that we used for the group financial statements was determined considering total assets, net assets and tangible fixed assets. This materiality level equates to 0.8% of total assets, 2.3% of net assets and 2.2% of tangible fixed assets. This is a revised approach from the prior year, when materiality was determined based on 0.85% of group revenue. 1% of net assets (2020: 1% of net assets) Rationale for the benchmark applied As a result of Covid-19 and the significant impact it had on the group’s business we consider the use of assets-based metrics to be appropriate recognising the asset rich nature of the group’s balance sheet and reflecting the additional focus of users of the financial statements on the balance sheet during periods of increased economic uncertainty. The parent company is a holding company, which does not trade. It has therefore been considered that a materiality determined on net assets is the most appropriate basis for a holding entity. 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: 97 Annual Report & Accounts FY21 Arena Events Group plc 96 Independent Auditor’s Report 6.3. Error Reporting Threshold We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £50,000 (2020: £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 group audit was scoped by obtaining an understanding of the group and its environment, including groupwide controls, and assessing the risks of material misstatement at the group level. The component materiality levels are determined based on the component’s contribution to both group revenue and group total assets. We have capped component materiality levels at £0.6m (2020: £0.9m), giving a range of £0.1m to £0.6m (2020: £0.2m to £0.9m). The components scoped for a full audit are located in the following areas: • United Kingdom & Europe (UKE) • United States of America (US) • Middle East (ME) Our full scope audit has resulted in 100% (2020: 91%) of the group’s revenue, 96% of total assets (2020:94%). At the group level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement on the aggregated financial information of the remaining components not subject to full scope audit procedures. 7.2. Working with Other Auditors The work on the US and Middle East components was performed by the component auditors based in each location under the direction and supervision of the group engagement partner and the UKE component has been audited by the group team. The emergence of Covid-19 prevented visits being made to the component auditors, in order to review their files. Instead remote file reviews were performed. In the course of the audit we held frequent calls to discuss and challenge the audit approach adopted, and discuss areas of importance in line with our instructions. In addition, we reviewed their detailed clearance memos, covering the procedures performed and results of these procedures. 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. 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 our 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. 11. 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. 11.1. Identifying and Assessing Potential Risks Related to Irregularities In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and noncompliance 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 and the audit committee about their own identification and assessment of the risks of irregularities; Group financial statements Parent company financial statements Materiality 70% (2020: 70%) of group materiality 70% (2020: 70%) of parent company materiality Basis and rationale for determining performance materiality In determining performance materiality, we considered factors including: • our assessment of the group’s overall control environment; and • the low number of corrected and uncorrected misstatements in the previous audit. 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. 99 Annual Report & Accounts FY21 Arena Events Group plc 98 • 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; – 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 including significant component audit teams and relevant internal specialists, including tax and valuation specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. 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 cut-off, goodwill valuation and going concern. In common with all audits under ISAs (UK), 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 UK Companies Act and relevant 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. 11.2. Audit Response to Risks Identified As a result of performing the above, we identified revenue cut off, goodwill valuation and going concern 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 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, reviewing internal audit reports and reviewing correspondence with HMRC; 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 significant component audit teams, 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 12. 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. 13. Matters on which we are Required to Report by Exception 13.1. 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. 13.2. 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 this matter. 14. 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. Jonathan Dodworth Senior statutory auditor For and on behalf of Deloitte LLP Statutory Auditor London, UK 6 July 2021 Independent Auditor’s Report 101 Annual Report & Accounts FY21 Arena Events Group plc 100 Note Year ended 31 March 2021 15 months to 31 March 2020 £m £m REVENUE 2 71.6 183.2 Cost of sales 3, 4 (44.6) (127.8) GROSS PROFIT 27.0 55.4 Administrative expenses 3, 4 (36.8) (75.0) OPERATING LOSS (9.8) (19.6) Analysed as: Adjusted EBITDA 5.7 13.2 Depreciation property, plant and equipment 4 (7.8) (9.5) Depreciation right of use assets 4 (4.7) (4.7) Exceptional expenses 4 (2.7) (17.5) Acquisition costs 4 (0.1) - Share option costs 24 0.4 (0.3) Intangible amortisation 4,10 (0.6) (0.8) (9.8) (19.6) Finance costs 7 (3.0) (3.4) LOSS BEFORE TAXATION (12.8) (23.0) Tax on loss on ordinary activities 8 0.1 0.1 LOSS AFTER TAXATION (12.7) (22.9) LOSS PER SHARE Basic pence per share 6 (5.2) (15.0) Diluted pence per share (5.2) (15.0) Year ended 31 March 2021 15 months to 31 March 2020 £m £m LOSS FOR THE YEAR/PERIOD (12.7) (22.9) ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS Exchange differences on translation of foreign subsidiaries (1.5) (1.3) OTHER COMPREHENSIVE LOSS FOR THE YEAR/PERIOD (1.5) (1.3) TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL YEAR/PERIOD (14.2) (24.2) (14.2) (24.2) Consolidated Statement of Comprehensive Income for the Year Ended 31 March 2021 Consolidated Income Statement for the Year Ended 31 March 2021 103 Annual Report & Accounts FY21 Arena Events Group plc 102 Group Note 31 March 2021 31 March 2020 £m £m NON-CURRENT ASSETS Goodwill and other intangibles 9, 10 37.8 39.4 Property, plant and equipment 11 45.0 48.3 Right-of-use assets 17 18.5 23.6 Trade and other receivables due after one year 14 0.7 0.9 102.0 112.2 CURRENT ASSETS Inventories 13 2.3 7.8 Trade and other receivables 14 8.2 31.9 Cash and cash equivalents 18.4 5.8 28.9 45.5 CURRENT LIABILITIES Trade and other payables 16 (16.0) (24.8) Bank overdraft (0.4) (0.3) Borrowings 19 (4.5) (4.4) Lease liabilities 17 (3.3) (4.1) Accruals (8.7) (13.9) Deferred revenue (3.2) (9.0) Deferred consideration (0.1) (0.9) (36.2) (57.4) NET CURRENT LIABILITIES (7.3) (11.9) TOTAL ASSETS LESS CURRENT LIABILITIES 94.7 100.3 NON-CURRENT LIABILITIES Borrowings 19 (34.0) (34.4) Lease liabilities 17 (15.6) (16.7) Other creditors - (1.4) Deferred tax liabilities 18 (0.8) (1.3) (50.4) (53.8) NET ASSETS 44.3 46.5 Group Note 31 March 2021 31 March 2020 £m £m EQUITY Share capital 21 2.7 1.5 Share premium account 22 89.7 78.5 Merger reserve 23 10.9 10.9 Share option reserve 24 0.2 0.6 Retranslation reserve (3.8) (2.3) Retained loss (55.4) (42.7) TOTAL EQUITY 44.3 46.5 S Trowbridge Director Signed on behalf of the Board of Directors The financial statements of Arena Events Group plc, (company registration number 10799086), were approved by the Board of Directors and authorised for issue on 6 July 2021. Consolidated Balance Sheet as at 31 March 2021 105 Annual Report & Accounts FY21 Arena Events Group plc 104 Company Note 31 March 2021 31 March 2020 £m £m NON-CURRENT ASSETS Investments 12 1.0 1.0 Trade and other receivables due after one year 14 11.5 11.2 12.5 12.2 CURRENT ASSETS Trade and other receivables 14 84.1 83.0 Cash and cash equivalents 10.9 1.2 95.0 84.2 CURRENT LIABILITIES Trade and other payables 16 (2.3) (3.1) Borrowings 19 (2.4) (2.1) Accruals (0.5) (0.3) (5.2) (5.5) NET CURRENT ASSETS 89.8 78.7 TOTAL ASSETS LESS CURRENT LIABILITIES 102.3 90.9 NON-CURRENT LIABILITIES Borrowings 19 (23.8) (23.2) Intercompany loan 19 (4.5) (4.9) NET ASSETS 74.0 62.8 EQUITY Share capital 21 2.7 1.5 Share premium account 22 89.7 78.5 Merger reserve 23 1.1 1.1 Share option reserve 24 0.2 0.6 Retained loss (19.7) (18.9) TOTAL EQUITY 74.0 62.8 S Trowbridge Director Signed on behalf of the Board of Directors As permitted by Section 408 of the Companies Act 2006, the parent company’s income statement has not been presented in these financial statements. The parent company’s result for the financial year was a loss of £0.8m (2020: loss of £21.8m). The financial statements of Arena Events Group plc, (company registration number 10799086), were approved by the Board of Directors and authorised for issue on 6 July 2021. Group Share capital Share premium Merger reserve Share option reserve Retranslation reserve Retained loss Total equity £m £m £m £m £m £m £m Balance at 31 December 2018 1.5 78.2 10.9 0.3 (1.0) (17.9) 72.0 Loss for the period - - - - - (22.9) (22.9) OTHER COMPREHENSIVE LOSS Translation of foreign Subsidiaries - - - - (1.3) - (1.3) Total comprehensive loss for the 15 months to 31 March 2020 - - - - (1.3) (22.9) (24.2) TRANSACTIONS WITH OWNERS Dividends paid - - - - - (1.9) (1.9) Issue of share capital - 0.3 - - - - 0.3 Share option reserve - - - 0.3 - - 0.3 Total transactions with Owners - 0.3 - 0.3 - (1.9) (1.3) Balance at 31 March 2020 1.5 78.5 10.9 0.6 (2.3) (42.7) 46.5 Loss for the year - - - - - (12.7) (12.7) OTHER COMPREHENSIVE LOSS Translation of foreign Subsidiaries - - - - (1.5) - (1.5) Total comprehensive loss for the year ended 31 March 2021 - - - - (1.5) (12.7) (14.2) TRANSACTIONS WITH OWNERS Issue of share capital 1.2 11.2 - - - - 12.4 Share option reserve - - - (0.4) - - (0.4) Total transactions with Owners 1.2 11.2 - (0.4) - - 12.0 Balance at 31 March 2021 2.7 89.7 10.9 0.2 (3.8) (55.4) 44.3 Consolidated Statement of Changes in Equity for the Year Ended 31 March 2021 Company Balance Sheet as at 31 March 2021 107 Annual Report & Accounts FY21 Arena Events Group plc 106 Company Share capital Share premium Merger reserve Share option reserve Retained loss Total equity £m £m £m £m £m £m Balance at 31 December 2018 1.5 78.2 1.1 0.3 4.8 85.9 Loss for the period - - - - (21.8) (21.8) Total comprehensive loss for 15 months to 31 March 2020 - - - - (21.8) (21.8) TRANSACTIONS WITH OWNERS Dividends paid - - - - (1.9) (1.9) Issue of share capital - 0.3 - - - 0.3 Share option reserve - - - 0.3 - 0.3 Total transactions with owners - 0.3 - 0.3 (1.9) (1.3) Balance at 31 March 2020 1.5 78.2 1.1 0.6 (18.9) 62.8 Loss for the year - - - - (0.8) (0.8) Total comprehensive loss for the year ended 31 March 2021 - - - - (0.8) (0.8) TRANSACTIONS WITH OWNERS Issue of share capital 1.2 11.2 - - - 12.4 Share option reserve - - - (0.4) - (0.4) Total transactions with owners 1.2 11.2 - (0.4) - 12.0 Balance at 31 March 2021 2.7 89.7 1.1 0.2 (19.7) 74.0 Note Year ended 31 March 2021 15 months to 31 March 2020 £m £m NET CASH FROM OPERATING ACTIVITIES 29 10.1 10.6 CASH FLOW FROM INVESTING ACTIVITIES Proceeds on disposal of property, plant and equipment 1.4 0.4 Purchases of property, plant and equipment (5.2) (15.5) NET CASH USED IN INVESTING ACTIVITIES (3.8) (15.1) CASH FLOW FROM FINANCING ACTIVITIES Increase in borrowings 0.5 10.8 Repayment of borrowings (0.2) (0.5) Lease payments (5.4) (5.1) Proceeds on issue of shares net of costs 12.4 0.3 Proceeds on issue of shareholder loan notes - 2.0 Payment of loan note interest 0.1 - Deferred consideration paid (0.8) (2.7) Dividend paid 33 - (1.9) NET CASH GENERATED FROM FINANCING ACTIVITIES 6.6 2.9 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 12.9 (1.6) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR 5.8 7.5 Effect of foreign exchange rate changes (0.3) (0.1) CASH AND CASH EQUIVALENTS AT END OF YEAR 18.4 5.8 Consolidated Statement of Cash Flows for the Year Ended 31 March 2021 Company Statement of Changes in Equity for the Year Ended 31 March 2021 109 Annual Report & Accounts FY21 Arena Events Group plc 108 1. Principal Accounting Policies Basis of Preparation The principal accounting policies of the Company are set out below. The accounting policies have all been applied consistently in the consolidated financial statements in the current year. The financial statements presented cover the year ended 31 March 2021 and the fifteen-month period ended 31 March 2020. Arena Events Group plc (the Company) is a public company limited by shares incorporated in the United Kingdom under the Companies Act 2006 and is registered in England and Wales. The consolidated financial statements of Arena Events Group plc are available from the registered office at 4 Deer Park Road, London SW19 3GY. The principal activities of the Company and its subsidiaries (the Group) and the nature of the Group’s operations are set out in the strategic report. These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in Note 1. The financial statements have been prepared for Arena Events Group plc and its subsidiaries (referred to as “the Group”). The financial reporting framework that has been applied in preparation of the financial statements is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements have been prepared using the historical cost convention except that as disclosed in the accounting policies. The preparation of the financial statements requires estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. If, in the future, such estimates and assumptions which are based on management’s best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change. Basis of Consolidation The consolidated financial statements include the results of the Company and all its subsidiary undertakings made up to the same accounting date. All intra-Group balances, transactions, income and expenses are eliminated in full on consolidation. The results of subsidiary undertakings acquired or disposed of during the year are included or excluded from the consolidated income statement from the effective date of acquisition or disposal. Going Concern In considering going concern and the viability of the Group, the Directors have reviewed the cash requirements of the Group reflecting the impact of COVID-19 and the expectation that the global events market will continue its recovery through 2021. Through 2020 and early 2021, the Group has taken actions in order to enhance liquidity including increasing available debt facilities and reducing costs. The Board also notes the recent successful equity raising and the significant cash balance now within the Group. In May 2021 the Group agreed the tests for covenants in June and September 2021 and beyond have not currently been set by the bank and so the Group is dependent on meeting those covenants once set. However, dialogue with our bank is regular and the Board is confident that the covenants will be set at a level which the Group is likely to meet. The viability assessment also assumes the refinancing of the Group's Term A Loan prior to its expiry in October 2022 and any amounts outstanding on the Group’s Term B (CLBILS) Loan prior to its expiry in October 2023. Notes to the Financial Statements for the Year Ended 31 March 2021 Note Year ended 31 March 2021 15 months to 31 March 2020 £m £m NET CASH USED IN OPERATING ACTIVITIES 32 (1.9) (0.1) CASH FLOW FROM INVESTING ACTIVITIES Lending to subsidiaries (1.3) (8.5) NET CASH USED IN INVESTING ACTIVITIES (1.3) (8.5) CASH FLOW FROM FINANCING ACTIVITIES Increase in borrowings 0.5 9.4 Proceeds on issue of shares 12.4 0.3 Proceeds on issue of shareholder loan notes - 2.0 Dividend paid 33 - (1.9) NET CASH GENERATED FROM FINANCING ACTIVITIES 12.9 9.8 NET INCREASE IN CASH AND CASH EQUIVALENTS 9.7 1.2 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR 1.2 - CASH AND CASH EQUIVALENTS AT END OF YEAR 10.9 1.2 Company Statement of Cash Flows for the Year Ended 31 March 2021 111 Annual Report & Accounts FY21 Arena Events Group plc 110 The Group has prepared three views of future performance — a low; a mid; and an upside case. Each of these is built on bottom-up forecasts for the FY22 period. In light of the COVID-19 pandemic and the impact on the Group’s visibility of trading in subsequent years, the Directors have used high-level assumptions for these periods based around the pace of recovery relative to 2019 levels of activity adjusted for a differing list of major global events. The Group’s mid-case scenario is modelled on the assumption that the UK and US markets begin to return to normal from July 2021, with the Middle East & Asia markets lagging by three months, and that there are no further significant lockdowns. The mid-case also forms the basis for all goodwill impairment reviews and work to support the going concern review, with the low and upside cases representing downside and high sensitivities respectively. Trading for the Group in the first two months of FY22 has been ahead of the mid-case scenario. The Board has reviewed management’s “low case” scenario and which assumes further COVID-19 related disruption to events and a 40% reduction in EBITDA from the mid-case. Management have also run further aggressive downside revenue sensitivities taking the outturn for both revenue and profit significantly below that of FY21. All of these scenarios show that the Group still has sufficient liquidity for the reasonably foreseeable future, with opportunities to reduce capex and operating costs helping preserve cash balances. As outlined above the Group has retained a positive dialogue with its main lending bank throughout the pandemic and the Directors have no reason to believe that continuing support and appropriate future covenant tests under the various scenarios will not be forthcoming. Based on the assessment outlined above which has been considered and reviewed by the Board, the Board has a reasonable expectation that the Group has access to sufficient liquidity for the foreseeable future. While the Group is in a net current liabilities position much of the current liability balance is deferred income, which will not require a cash repayment. Therefore, the Directors have a reasonable expectation that the Group has adequate resources to meet liabilities as they fall due and continue in operational existence for the foreseeable future and therefore have determined that the financial statements for the year ended 31 March 2021 should be prepared on a going concern basis. Application of New & Revised Standards New and amended IFRS standards that are effective for the current year Amendment to IFRS 16 COVID-19 Related Rent Concessions New and amended IFRS standards that are in issue but are not effective yet. At the date of authorisation of these financial statements, The Group has not applied the following new and revised IFRS Standards that have been issued but are not yet effective: IFRS17 Insurance Contracts IFRS 10 and IAS 28 (amendments) Sale of Contribution of Assets bewteen Investor and its Associate or Joint Venture Amendments to IAS 1 Classification of Liabilities as Current or Non-current Amendments to IFRS 3 Reference to the Conceptual Framework Amendments to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use Amendments to IAS 37 Onerous Contracts — Cost of Fulfilling a Contract Annual Improvements to IFRS Standards 2018 — 2020 Cycle Financial Reporting Standards, IFRS 9 Financial Instruments, IFRS 16 Leases and IAS 41 Agriculture The Directors do not expect that the adoption of the Standards listed will have a material impact on the financial statements of the Group in future years. Revenue Recognition The Group recognises revenue from the following major sources: 1. Hire revenue from the supply of temporary seating, structures, interiors and other related products 2. Sales revenue from the design and/or sale of made to order seating and structures Hire Revenue Hire revenue is split into two elements: 1. Services 2. Rental Services revenue is recognised in line with IFRS 15, based on when obligations have been met and is calculated based on an estimate of cost plus a margin. Rental revenue is recognised in line with IFRS 16, based over time from the point at which the customer has use of the asset. Where there is no specific rental revenue detailed in the contract an implied amount is calculated along with an estimated margin. Sales Revenue Revenue and profit is recognised on handover at which point control is transferred to the customer. Impact of COVID-19 The global outbreak of COVID-19 led to many events being either cancelled or postponed. Where the Group was contracted to provide temporary seating, structures and interiors (Rental Hire), it has taken the follow approach to revenue recognition on such events: • When an event was confirmed as cancelled the Group recognised revenue on the basis that all contractual obligations had been completed to the point of cancellation, unless otherwise specified within the original contract. The amount of revenue recognised was based on cash collected at the date of cancellation plus any further amounts agreed with the customer as recoverable • When an event was postponed and the contract extended the Group recognised revenue based on work completed at the time of postponement. The residual contract value will be recognised in line with IFRS 15 and IFRS 16 on recommencement of the contract UK Government Grants and Support During the year the UK Division of the Group complied with the requirements and specified conditions of the Coronavirus Job Retention Scheme (CJRS). The CJRS grant related to staff who had been furloughed due to COVID-19. Initially the Chancellor announced that the scheme would run until October 2020 but this was subsequently extended to the end of September 2021. From October 2020 – Jul 2021 employers are able to claim 80% of a furloughed employee’s wages/salaries up to a maximum of £2,500 plus associated employer’s costs (eg employer’s national insurance contributions). From October Jul 2021 employers are able to claim 70% of a furloughed employee’s wages/salaries up to a maximum of £2,188 plus associated employer’s costs (eg employer’s national insurance contributions). This grant is paid to the employer by HMRC. The total amount received in the year from HMRC was £3.4m (FY20: nil). Amounts received have been offset against payroll related expenses in the year. The UK Division also agreed extended terms for repayment of VAT and PAYE liabilities under HMRC’s ‘Time to Pay’scheme. At the year end the liabilities outstanding were VAT £0.3m and PAYE £0.9m. Notes to the Financial Statements 113 Annual Report & Accounts FY21 Arena Events Group plc 112 Foreign Currency Translation During the year foreign currency transactions are translated using the exchange rate in operation on the date on which the transaction occurred. Any exchange gain or loss occurring as a result of a business transaction being settled at an exchange rate that differs from that used when the transaction was originally recorded is credited or charged to the income statement account. On consolidation, foreign entities balance sheets are recorded using the closing rate method with income statements recorded at average rate. The functional currency for the Group’s financial statements is GBP. Goodwill Goodwill is measured in line with IFRS 3 Business Combinations, being the excess of the sum of consideration transferred over the amounts of the acquired net assets. Goodwill is not amortised but is reviewed for impairment on an annual basis. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Any impairment loss recognised for goodwill is not reversed in a subsequent year. On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit and loss on disposal. Customer Relationship Costs Customer relationship costs are an estimated value attributed to key current customers acquired. The intangible assets arising are being amortised on a straight line basis over five to eight years from the date the new business assets went into service. This is based on the expected beneficial life of the key customers. The Directors consider this represents the useful economic benefit of the key customers acquired. Development Costs Development costs are calculated as those costs incurred to develop a new product to add to the businesses offering. The intangible asset arising on development is being amortised on a straight line basis over fifteen years from the date the new product went into service. The Directors consider fifteen years to represent the useful economic benefit of the product. Licence Costs Licence costs are those costs incurred on overseas properties in the MEA region. The intangible asset arising on licences is being amortised on a straight line basis over eighteen years from the date of the new licence in line with the term of the licence. The Directors consider the term of the licence to represent the useful economic benefit of the licence. Property, Plant & Equipment Property, plant and equipment, which include assets acquired for hire, are capitalised at their purchase cost, together with any incidental costs of acquisition. Depreciation is provided by the company to write off the cost less the estimated residual value of property, plant and equipment on a straight line basis over their estimated useful economic lives as follows: Hire equipment (metal) Between 15 and 25 years Hire equipment (non-metal) Between 3 and 10 years Plant and equipment Between 2 and 7 years Motor vehicles Between 3 and 5 years Fixtures and fittings Between 3 and 6 years Buildings and leasehold improvements In line with the remaining term of the lease Notes to the Financial Statements Investments Investments in subsidiary undertakings are stated at purchase cost of acquisition (including any incidental cost of acquisition). Where, in the opinion of the Directors, there has been an impairment of the investments, appropriate provisions are made and charged to the income statement. Inventories Raw materials are stated at the lower of cost and net realisable value. Raw material cost is determined on a first in first out basis. Provision is made where necessary for obsolete, slow moving and defective stocks. Work in progress has been valued at the lower of cost and net realisable value and includes costs incurred on long term contracts. Costs include direct materials and direct labour only. Provided that the outcome of any material long-term contracts ongoing at the year-end can be assessed with reasonable certainty, attributable profit earned to date is recognised in the income statement and work in progress is stated net of amounts transferred to cost of sales, net of payments received on account. Exceptional Items During the year the Group reviews costs that are deemed to be one-off and non-recurring in nature. In order to provide an indication of the Group’s underlying business these items are classed as exceptional and presented separately on the face of the income statement and detailed in Note 4. Leases The Group applies the definition of a lease and related guidance set out in IFRS 16 to all contracts entered into or changed on or after 1 January 2019. The Group assessed whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration and where applicable has applied exemptions in relation to short-term leases (< 12 mths) and low-value items (<$5,000). For short-term leases (lease term of twelve months or less) and leases of low-value assets, the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Rates were calculated on a regional basis to be in line with CGUs but also to reflect access to bank borrowing at a Regional level. The IBR was based on asset class, type of lease, and length of term to provide a representative rate. IBRs applied were UKE 2.8%, MEA 3.8% and US 4.3%. Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36. Right-of-Use-Assets The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. 115 Annual Report & Accounts FY21 Arena Events Group plc 114 Related party disclosures Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. Where applicable transactions between the Group, its Directors, senior management and associates are disclosed. Brexit The main impact on the Group following the UK leaving the EU have been on staffing and duty on temporary goods. As expected, this has been limited to the UK division. Management believes the following to be the main effects upon the Group results: • Staffing: whilst there has been wage inflation pressure as a direct result of Brexit, this has been compounded by the effects of COVID-19. There has been a demand on un-skilled labour where employees returned home pre-Brexit but have been unable to return due to COVID-19. There has also been a shortage of the more skilled labour pool that remained in the UK as a result of either retraining or leaving for other roles as a result of the pandemic. Whilst the Group has sought to maintain as much flexibility in the employment market as possible, identifying key roles and personnel and working to retain those individuals wherever possible, this has been challenging under COVID-19. • Temporary goods: whilst the Group has both costs and revenues arising in local currencies providing a natural hedge, certain rental goods coming from EU suppliers have incurred duty under ‘temporary goods’ regulations. This has added management complexity to utilising these goods, and has also had an impact on short term working capital as duty is paid and then subsequently reclaimed. Critical Accounting Judgements The preparation of the Group financial statements requires the use of certain judgements that affect the reported amounts of assets, liabilities, income and expenses. Judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Changes in accounting judgements may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information or more experience. IFRS 16 Leases One of the major revenue sources for the Group is Hire revenue identified as the supply of temporary seating, structures, interiors and other related products. An element of this Hire revenue relates to a rental period of the product and is treated under IFRS 16 spreading the revenue over time from the point at which the customer has use of the asset. Where there is no specific rental revenue detailed in the contract judgement is applied to calculate a rental amount along with an estimated margin. Exceptional Items During the year the Group reviews costs that are deemed to be one-off and non-recurring in nature. In order to provide an indication of the Group’s underlying business these items are classed as exceptional and presented separately on the face of the income statement and detailed in Note 4. Key Sources of Estimation Uncertainty The preparation of the Group financial statements requires the use of certain estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Taxation Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of underlying timing differences can be deducted. Deferred tax is measured at the average tax rates that are expected to apply in the years in which the timing differences are expected to reserve, based on tax rates and laws that have been enacted, or substantively enacted, by the balance sheet date. Deferred tax is measured on a non-discounted basis. Pension Costs The Group contributes to various defined contribution pension schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. Contributions to the schemes are charged to the income statement in the year in which they are incurred. Share-Based Payment Transactions Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date (Note 24). 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 the value of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in the income statement such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share option reserve. All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs. Financial Assets Trade receivables Trade receivables do not carry interest and are stated at face value as reduced by appropriate loss allowances for estimated irrecoverable amounts using an expected credit loss model. This approach requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date so as to reflect changes in credit risk since initial recognition of the trade receivable. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short-term bank deposits with maturity of three months or less, which are used by the Group in the management of its short-term commitments. Financial Liabilities Trade payables Trade payables are not interest bearing and are stated at fair value and subsequently measured at amortised cost. Borrowings Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct transaction costs where these are integral to the total cost of the borrowing. Where this is not the case, direct transaction costs are recognised separately from the financial liability as a loan commitment asset. Finance charges, including amortisation of direct transaction costs, are charged to the income statement. Tranches of borrowings and overdrafts which mature on a regular basis are classified as current or non-current liabilities based on the maturity of the facility. Notes to the Financial Statements 117 Annual Report & Accounts FY21 Arena Events Group plc 116 Year ended 31 March 2021 UKE MEA US Total £m £m £m £m REVENUE Hire 13.0 17.6 27.9 58.5 Sales 6.6 0.2 6.3 13.1 TOTAL REVENUE 19.6 17.8 34.2 71.6 GROSS PROFIT Hire 5.8 1.9 13.5 21.2 Sales 0.4 0.2 5.2 5.8 TOTAL GROSS PROFIT 6.2 2.1 18.7 27.0 Administration expenses (5.0) (6.6) (8.5) (20.1) SEGMENT RESULT 1.2 (4.5) 10.2 6.9 RECONCILIATION OF SEGMENT RESULT TO LOSS BEFORE TAX Central administrative expenses (1.2) ADJUSTED EBITDA 5.7 Property, plant and equipment depreciation and amortisation (8.4) Right-of-use assets depreciation (4.7) Exceptional costs (2.7) Share option credit 0.4 Acquisition costs (0.1) Net finance expense (3.0) LOSS BEFORE TAX (12.8) 2. Segment Reporting The Group has three reportable segments; UK & Europe (UKE), Middle East & Asia (MEA) and Americas (US). For each of the three segments, the Group’s chief operating decision maker (the “Board”) reviews internal management reports on a monthly basis. Information regarding the results of each reportable segment is included below. Any intercompany trading is recorded at arm’s length and is eliminated on consolidation. Segment results before exceptional items are used to measure performance as management believes that such information is the most relevant in evaluating the performance of certain segments relative to other entities that operate within these industries. Notes to the Financial Statements Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information or more experience. Share Options & Other Equity Instruments A Group share option scheme allows for options to be issued over ordinary shares, up to a maximum of 10% of the Company’s ordinary shares in issue at the time of grant, over a ten-year period. The option exercise price will usually be the mid-market price of the shares on the date of grant. Full details of the share options can be seen in Note 24. The Group uses the Black Scholes model to value its share option awards where there is a set option price. Certain judgement is required in terms of selecting the risk-free interest rate and standard deviation rate used. The Group uses the Monte Carlo model to value its share option awards where there are variable outcomes based on multiple potential scenarios. Risk free rates are based upon government bonds in issue at the time of option award. There is a reduction in the Share Option Reserve of £0.4m which may increase or decrease with changes to these rates. As at the 31 March 2021 the Share Option Reserve was £0.2m. If the risk free rate increased or decreased by 10% there would be no material impact on the reserve. Goodwill Impairment When testing for goodwill impairment the Group uses a discounted cash flow methodology. This requires judgement around forecast in revenue growth for each Cash Generating Unit (CGU) and in particular the recovery rate of the UK CGU following the impact of COVID-19. Incremental Borrowing Rate (IBR) A key factor in the lease calculation is the discount rate used. Where there is an implicit rate in the lease this is used but where there is no clear rate defined judgement is used to calculate an IBR. Rates are calculated by region based on Group banking facilities. Useful Economic Life & Residual Value of Assets The assessment of the useful economic life and residual value of the Group’s fixed assets involves a significant amount of judgement based on historical experience with similar assets as well as anticipation of future events which may impact their useful life and residual value. Depreciation and amortisation for the year is £7.8m and £0.6m respectively (fifteen months to 31 March 2020: £9.5m and £0.8m) These amounts may increase/decrease based on the useful life. Other estimates are applied by the Group which are evaluated on a continual basis but are not significant. 119 Annual Report & Accounts FY21 Arena Events Group plc 118 Fifteen-month period ended 31 March 2020 UKE MEA US Total £m £m £m £m REVENUE Rental 56.7 57.0 61.2 174.9 Capital sales 3.4 1.2 3.7 8.3 TOTAL REVENUE 60.1 58.2 64.9 183.2 GROSS PROFIT Rental 14.2 18.8 18.7 51.7 Capital sales 0.8 0.3 2.6 3.7 TOTAL GROSS PROFIT 15.0 19.1 21.3 55.4 Administration expenses (11.7) (13.2) (15.9) (40.8) SEGMENT RESULT 3.3 5.9 5.4 14.6 RECONCILIATION OF SEGMENT RESULT TO LOSS BEFORE TAX Central administrative expenses (1.4) ADJUSTED EBITDA 13.2 Property, plant and equipment depreciation and amortisation (10.3) Right-of-use assets depreciation (4.7) Exceptional costs (17.5) Share option costs (0.3) Net finance expense (3.4) LOSS BEFORE TAX (23.0) Segmental assets and/or liabilities are not presented as this information is not regularly provided to the chief operating decision maker. Geographical Information The Group’s revenue from external customers by geographical location are as detailed below. Non-current assets (excluding, deferred tax assets and other financial assets) are situated: 34.6% UKE, 18.4% MEA and 47.0% US (2020: 34.2% UKE, 20.9% MEA and 44.9% US) 3. Expenses by Nature Analysis of revenue by geographical destination Year ended 31 March 2021 15 months to 31 March 2020 £m £m United Kingdom 17.2 56.1 Europe (excluding the United Kingdom) 0.2 1.1 North America 34.2 65.0 Middle East 17.7 42.9 Asia 2.3 18.1 71.6 183.2 Analysis of revenue by type Year ended 31 March 2021 15 months to 31 March 2020 £m £m Hire 58.5 174.8 Sales 13.1 8.4 71.6 183.2 Year ended 31 March 2021 15 months to 31 March 2020 £m £m Employees remuneration and benefits 21.8 53.6 Changes in inventories of finished goods and work in progress 23.3 2.2 Transportation, carriage and packing 3.3 11.6 Depreciation and amortisation expenses 13.1 15.0 Expected credit loss write-off 0.6 1.1 Other expenses 19.3 119.3 81.4 202.8 Notes to the Financial Statements 121 Annual Report & Accounts FY21 Arena Events Group plc 120 Other expenses include £2.7m (2020: £17.5m) of items exceptional in nature which have been disclosed separately on the face of the income statement in order to disclose underlying results. Neither ‘adjusted EBITDA’ nor ‘exceptional items’ are defined by IFRS however the Directors believe that the disclosures presented in this manner provide clear presentation of the financial performance of the Group. The current year exceptional items are detailed in Note 4. 4. Operating Profit Group operating profit is stated after charging/(crediting): Note Year ended 31 March 2021 15 months to 31 March 2020 £m £m AMORTISATION OF INTANGIBLE ASSETS 10 0.6 0.8 DEPRECIATION Property, plant and equipment 11 7.8 9.5 Right of use assets 17 4.7 4.7 LOSS/(PROFIT) ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT 0.2 (0.3) CORONAVIRUS JOB RETENTION SCHEME (3.4) - SHARE OPTION (CREDIT)/COST (0.4) 0.3 ITEMS OF AN EXCEPTIONAL NATURE Restructuring costs 2.7 4.2 US legal costs and insurance recovery - (1.9) Reduction of deferred consideration - (0.9) Impairment of goodwill - 16.1 ACQUISITION RELATED COSTS 0.1 - 12.3 32.5 As a direct result of COVID-19 there was a requirement to further reduce costs across all cash-generating units (CGUs). This was driven by reduction headcount, the closure of business units, reduction in warehouse space and rationalising key support functions: UKE £0.9m, MEA £1.7m and US £0.1m. For the fifteen months to 31 March 2020 there were restructuring costs across all Divisions, offset by an adjustment of deferred consideration in the UKE and an insurance recovery in the US relating to the settlement of the legacy DOJ case. There was also an impairment of goodwill relating to the UKE CGU). All costs shown as exceptional are considered to be one-off and are presented as exceptional items so as to provide an indication of the Group’s underlying business. Auditor’s Remuneration Year ended 31 March 2021 15 months to 31 March 2020 £m £m FEES PAYABLE TO COMPANY’S AUDITOR FOR THE AUDIT OF THE COMPANY’S ANNUAL ACCOUNTS 0.1 0.1 FEES PAYABLE TO THE COMPANY’S AUDITOR FOR OTHER SERVICES TO THE GROUP The audit of the company’s subsidiaries 0.3 0.3 TOTAL AUDIT FEES 0.4 0.4 TOTAL NON-AUDIT FEES - - Notes to the Financial Statements 123 Annual Report & Accounts FY21 Arena Events Group plc 122 5. Employee Information The average annual number of persons (including executive directors) employed by the Group during the year ended 31 March 2021 was: Group — By activity Year ended 31 March 2021 15 months to 31 March 2020 Number Number Administration and finance 121 181 Sales and marketing 63 147 Technical support and maintenance 40 104 Warehouse, site, transport and distribution 460 924 684 1,356 Company — By activity Year ended 31 March 2021 15 months to 31 March 2020 Number Number Administration and finance 4 6 Sales and marketing - 1 4 7 Staff costs (for the above persons) Note Year ended 31 March 2021 15 months to 31 March 2020 £m £m Wages and salaries 18.8 49.1 Social security costs 1.4 3.8 Other pension costs 27 0.4 0.7 20.6 53.6 Staff costs (for the above persons) Year ended 31 March 2021 15 months to 31 March 2020 £m £m Wages and salaries 0.4 0.7 Social security costs - 0.1 0.4 0.8 CJRS received (for the above persons) Year ended 31 March 2021 15 months to 31 March 2020 £m £m Wages and salaries 3.2 - Social security costs 0.2 - Other pension costs - - 3.4 - CJRS for the Group — By activity Year ended 31 March 2021 15 months to 31 March 2020 Number Number Administration and finance 57 - Sales and marketing 10 - Technical support and maintenance 9 - Warehouse, site, transport and distribution 189 - 265 - 6. Loss Per Share Year ended 31 March 2021 15 months to 31 March 2020 pence per share pence per share BASIC EARNINGS PER SHARE Basic earnings per share from continuing operations (5.2) (15.0) DILUTED EARNINGS PER SHARE Diluted earnings per share from continuing operations (5.2) (15.0) Basic and diluted earnings per share are calculated by dividing profit or loss attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the year. As dilution would improve the loss on earnings per share reported, the table above only includes the figure for basic earnings per share being the lowest result. Notes to the Financial Statements 125 Annual Report & Accounts FY21 Arena Events Group plc 124 7. Finance Costs Group Year ended 31 March 2021 15 months to 31 March 2020 £m £m Interest payable on bank loans and overdrafts 1.3 1.8 Interest payable on shareholder loans 0.3 - Finance charges payable under lease liabilities 1.2 1.1 Amortisation of bank refinance costs 0.2 0.5 3.0 3.4 8. Tax on Loss on Ordinary Activities The tax assessed for the year is lower (2020: lower) than the standard rate of corporation tax in the UK of 19% (2020: 19%). The differences are explained below: Note Year ended 31 March 2021 15 months to 31 March 2020 £m £m CURRENT TAX UK corporation tax on loss of the year - - - - Overseas tax 0.2 0.2 TOTAL CURRENT TAX CHARGE 0.2 0.2 DEFERRED TAXATION Origination and reversal of timing differences (0.3) (0.4) Adjustments in respect of prior year - 0.1 TOTAL DEFERRED TAXATION CREDIT 18 (0.3) (0.3) TAX CREDIT ON ORDINARY ACTIVITIES (0.1) (0.1) Year ended 31 March 2021 15 months to 31 March 2020 £m £m Loss on ordinary activities before taxation (12.8) (23.0) Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2020: 19%) (2.4) (4.4) EFFECTS OF: Expenses not deductible for tax purposes: 0.1 3.2 Differences in overseas tax rates 1.7 0.3 Transfer pricing adjustments 0.1 - Capital gains - 0.3 Amounts not recognised 0.4 0.4 Adjustment in respect of prior year - 0.1 INCOME TAX CREDIT REPORTED IN THE INCOME STATEMENT (0.1) (0.1) The UK corporation tax expense within these financial statements has been provided for at the rate of 19% (2020: 19%). On 3 March 2021 the Government announced that the main rate of Corporation Tax would remain at 19% (effective 6 April 2021) increasing to 25% in 2023. Deferred tax assets and liabilities are measured at tax rates that are enacted or substantively enacted at the balance sheet date and accordingly deferred tax has been recognised within these financial statements at 19% (2020: 19%). Notes to the Financial Statements Weighted average number of ordinary shares in issue: 2021 2020 Number Number Basic 244,134,863 152,673,573 Adjustment for share options 10,068,864 169,250 Diluted 254,203,727 152,842,823 The calculations of basic and diluted loss per share are: Year ended 31 March 2021 15 months to 31 March 2020 £m £m Loss for the period attributable to shareholders (12.7) (22.9) 127 Annual Report & Accounts FY21 Arena Events Group plc 126 9. Goodwill There were no additions in the year (for the period ended 31 March 2020 £0.3m relate to a fair value adjustment of the TGP Holdings assets during the year following acquisition). Adjustments in the year relate to foreign exchange movement in the US (for the period ended 31 March 2020 adjustments relate to a revised view on the level of deferred consideration payable on 2018 acquisitions in light of the outlook driven by COVID-19. The £1.9m adjustment is split: TGP Holdings £1.6m and Arena Stuart £0.3m). Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. The carrying amount of goodwill had been allocated as follows: £m COST At 1 January 2019 49.4 Additions in the period 0.3 Adjustments in the period (1.9) At 31 March 2020 47.8 At 1 April 2020 47.8 Disposals in the year (0.2) Foreign exchange (0.6) At 31 March 2021 47.0 ACCUMULATED IMPAIRMENT LOSSES At 1 January 2019 - Charge in the period (16.1) At 31 March 2020 (16.1) At 1 April 2020 (16.1) Charge in the year - At 31 March 2021 (16.1) CARRYING AMOUNT At 31 March 2021 30.9 At 31 March 2020 31.7 CGU 31 March 2021 31 March 2020 £m £m UKE 16.7 16.7 MEA 5.7 5.9 US 8.5 9.1 30.9 31.7 The recoverable amounts of the CGUs are determined from the value in use calculations. The value in use calculations are based on a five-year forecast with a terminal value applied based on a long-term growth rate of 2% (2020: 2%). The key assumptions are those regarding discount rates, forecast revenue growth and terminal growth rate. The analysis has been prepared against the ongoing backdrop of the COVID-19 pandemic. Revenue has been forecast on the assumption that activity within the UK and US markets will begin to return to normal from July 2021, with the MEA markets lagging by three months, on the basis of no further significant lockdowns. Pre-COVID-19 levels of revenue are expected to have returned by FY24. By FY26 adjusted EBITDA % margins are expected to settle at 10.1% UKE, 12.5% MEA and 11.6% US (FY20 by FY24: UKE 7%, MEA 8%, US 8%). Whilst the US CGU adjusted EBITDA % for FY21 was 24.1% this was driven by a high margin capital sale which has been assumed to be one-off within the impairment review. Capex has been allowed at a rate of 4.5% to 6.5% of revenue (FY20: 3% to 6%). The rates used to discount the CGU cash flows are a pre-tax discount rate derived from the WACC and a terminal value based on a 2% long term growth rate. The WACC rates used are: UKE 9.4%, MEA 9.5% and US 9.6% (2020: UKE 9.5%, MEA 11.0% and US 9.0%). The WACC calculation used the cost of equity based on the CAPM model using available market information in relation to the risk free rate, beta coefficient and equity risk premium. The main driver of the difference increased debt to equity proportions within the Business. There was no impairment following the review (FY20: £16.1 million impairment in the UKE CGU). The review demonstrates there to be headroom of: £18.9m UKE, £33.1m MEA and £21.7m US. The Group has conducted a sensitivity analysis on the impairment test of the UKE, MEA and US CGUs. An increase in the applied discount rates (WACC) of 8% would not leave the carrying value of goodwill in excess of the recoverable amounts. In addition, adjusting the long term growth rate % from 2% to 0% would also not trigger any impairment and would leave headroom of: £18.4m UKE, £27.1m MEA and £15.5m US. If EBITDA percentages remained at FY23 forecast levels for the UKE and MEA, 7.7% and 10.5% respectively, it would not trigger any impairment and would leave headroom of: £6.2m UKE and £25.3m. The US CGU reflects a reduction in EBITDA % within the analysis. Notes to the Financial Statements 129 Annual Report & Accounts FY21 Arena Events Group plc 128 10. Other Intangible Assets Customer relationships is the amount attributed to the value of key current customer relationships. These are amortised on a straight-line basis between 5 and 8 years from the date of acquisition. The licence relates to the TGP property in Dubai and is amortised on a straight-line basis over 18 years in line with term of the licence. Development costs are the amounts incurred by Arena Seating in respect of the Clearview seating system. The company had no intangible assets (2020: nil). Included within property, plant and equipment reported at 31 March 2020 were £4.3m of assets held under IFRS16 leases. These assets have now been presented as Right of Use assets in the 31 March 2021 balance sheet (and comparatives adjusted accordingly) with no impact on reported net assets. Group Customer relationships Licence Development costs Total £m £m £m £m COST At 1 January 2019 5.4 3.4 0.3 9.1 Additions in the period - - - - At 31 March 2020 5.4 3.4 0.3 9.1 Adjustments in the year (0.2) - - (0.2) At 31 March 2021 5.2 3.4 0.3 8.9 ACCUMULATED AMORTISATION At 1 January 2019 0.3 0.1 0.2 0.6 Amount charged to admin expense for the period 0.5 0.2 0.1 0.8 At 31 March 2020 0.8 0.3 0.3 1.4 At 1 April 2020 0.8 0.3 0.3 1.4 Amount charged to admin expense during the year 0.3 0.3 - 0.6 At 31 March 2021 1.1 0.6 0.3 2.0 NET BOOK VALUE At 31 March 2021 4.1 2.8 - 6.9 At 31 March 2020 4.6 3.1 - 7.7 11. Property, Plant & Equipment Group Buildings and leasehold improvements Plant and equipment and hire equipment Motor vehicles Fixtures and fittings Total £m £m £m £m £m COST At 1 January 2019 3.8 67.6 1.2 2.4 75.0 Foreign exchange - (0.8) - (0.1) (0.9) Additions 0.9 12.8 0.1 0.6 14.4 Disposals (0.1) (1.8) (0.1) - (2.0) Transfer ROU assets - 0.7 - - 0.7 At 31 March 2020 4.6 78.5 1.2 2.9 87.2 Foreign exchange (0.3) (4.1) (0.2) (0.1) (4.7) Additions 0.2 3.8 - - 4.0 Transfers - 0.2 - (0.2) - Disposals (0.3) (4.2) (0.5) (0.1) (5.1) Transfer ROU assets - 4.3 - - 4.3 At 31 March 2021 4.2 78.5 0.5 2.5 85.7 ACCUMULATED DEPRECIATION At 1 January 2019 0.6 28.7 0.5 1.3 31.1 Foreign exchange - (0.3) - - (0.3) Charge for the period 0.4 8.0 0.3 0.6 9.3 Disposals (0.1) (1.7) (0.1) - (1.9) Transfer ROU assets - 0.7 - - 0.7 At 31 March 2020 0.9 35.4 0.7 1.9 38.9 Foreign exchange - (2.2) (0.1) (0.2) (2.5) Charge for the financial year 0.4 6.8 0.2 0.4 7.8 Disposals (0.2) (2.8) (0.5) (0.1) (3.6) Transfer ROU assets - 0.1 - - 0.1 At 31 March 2021 1.1 37.3 0.3 2.0 40.7 NET BOOK VALUE At 31 March 2021 3.1 41.2 0.2 0.5 45.0 At 31 March 2020 3.7 43.1 0.5 1.0 48.3 Notes to the Financial Statements 131 Annual Report & Accounts FY21 Arena Events Group plc 130 12. Investments Company Shares in subsidiary undertakings £m COST AND NET BOOK VALUE At 1 April 2020 and 31 March 2021 1.0 The following information relates to the subsidiary undertakings of the Company as at 31 March 2021, all of which are incorporated in England except for: • AMEA Gulf Limited and TGP Holdings Limited incorporated in the British Virgin Islands • Arena Saudi Company for Industry LLC incorporated in the Kingdom of Saudi Arabia • Asia Tents Arena Sdn. Bhd. incorporated in Malaysia • Arena Event Services Inc., AAS Bidco, AAS Opco LLC and Arena Stuart Rentals Inc. incorporated in the USA • Arena Hong Kong Limited and Ironmonger Limited incorporated in Hong Kong • Arena Event Services PTE incorporated in Singapore The Group had no fixed asset investments. Name of Company Percentage of ordinary shares held, % Nature of business Registered address WB Co (1402) Limited 100** Holding company 4 Deer Park Road, London, SW19 3GY, UK WB Co (1403) Limited 100*** Holding company 4 Deer Park Road, London, SW19 3GY, UK Arena Event Services Group Limited 100**** Temporary seating and structures Needingworth Industrial Estate, Needingworth Road, St. Ives, England, PE27 4NB Arena Event Services PTE Limited 100***** Temporary structures 35 Selegie Road, 09–14/15 Parklane Shopping Mall Singapore 188307 Arena AMEA Limited 100***** Temporary structures Al Quoz, PO Box 114384 Dubai TGP Holdings 100***** Exhibitions and Graphics Al Barsha South, Office No, 1304, Level 13, PO Box: 65588, Dubai Arena Saudi Company for Industry LLC 100++ Temporary structures PO Box 10000, Riyadh, KSA Arena Gulf Events LLC 100***** Temporary structures Office # 110, Level 1, B1 Cubes Park ICT Mussafah, Abu Dhabi, United Arab Emirates Asia Tents Arena SDN. BHD 100***** Temporary structures Lot 863, Jalan Subang 8, Taman Perindustrian Subang, 47500 Subang Jaya, Selangor Darul Ehsan, Malaysia Arena Hong Kong Limited 100***** Temporary structures Room 902, Double Building, 22 Stanley Street, Central Hong Kong Ironmonger Limited 100***** Event services Room 902, Double Building, 22 Stanley Street, Central Hong Kong Name of Company Percentage of ordinary shares held, % Nature of business Registered address AES Arena Event Services Group Holdings Limited 100 Holding company 4 Deer Park Road, London, SW19 3GY, UK AES Arena Event Services Holdings Limited 100* Holding company 4 Deer Park Road, London, SW19 3GY, UK Arena Event Services Inc. 100** Temporary structures c/o Corporations Service Company, 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808 Arena Stuart Rentals Inc. 100** Temporary structures c/o Corporations Service Company, 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808 AAS Bidco LLC 50** Holding company c/o Corporations Service Company, 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808 AAS Opco LLC 100+ Temporary structures c/o Corporations Service Company, 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808 Notes to the Financial Statements * indirect holding, owned by AES Arena Event Services Group Holdings Limited ** indirect holding, owned by AES Arena Event Services Holdings Limited ***indirect holding, owned by WB Co (1402) Limited **** indirect holding, owned by WB Co (1403) Limited *****indirect holding, owned by Arena Event Services Group Limited +indirect holding, owned by AAS Bidco LLC ++indirect holding, owned by TGP Holdings All subsidiaries of the Group are included within the Group accounts. 133 Annual Report & Accounts FY21 Arena Events Group plc 132 Company Registered number AES Arena Event Services Group Holdings Limited 07889154 AES Arena Event Services Holdings Limited (renamed AES Americas Limited 13 May 2021) 07889158 WB Co (1402) Limited 06048687 WB Co (1403) Limited (renamed AES EMEA Limited 13 May 2021) 06048693 Arena Event Services Group Limited 04069053 The following subsidiary companies are exempt from audit of their accounts under section 479A of the Companies Act 2006: Parent Undertaking Declaration of Guarantee. 13. Inventories Group 31 March 2021 Company 31 March 2021 Group 31 March 2020 Company 31 March 2020 £m £m £m £m Consumables 1.0 - 1.7 - Work in progress 1.3 - 6.1 - 2.3 - 7.8 - 14. Trade & Other Receivables Group 31 March 2021 Company 31 March 2021 Group 31 March 2020 Company 31 March 2020 £m £m £m £m AMOUNTS DUE IN LESS THAN ONE YEAR Trade receivables — gross 4.4 - 24.6 - Loss allowance (1.2) - (1.4) - Trade receivables — net 3.2 - 23.2 - Amounts due from other Group undertakings - 84.1 - 83.0 Prepayments and accrued income 5.0 - 8.7 - 8.2 84.1 31.9 83.0 AMOUNTS DUE IN MORE THAN ONE YEAR Trade receivables 0.5 - 0.5 - Amounts due from other Group undertakings - 11.5 - 11.2 Prepayments and accrued income 0.2 - 0.4 - 0.7 11.5 0.9 11.2 TOTAL TRADE AND OTHER RECEIVABLES 8.9 95.6 32.8 94.2 All of the other receivables and prepayment balances above are deemed to be not past due normal payment terms; the disclosures below relate only to the trade receivables balance. The Directors review the recoverability of trade receivables and in line with IFRS 9 Financial Instruments, the Group applies the following provisions in line with the aging profile: current 1%, 60–90 days 2% and 90 days 4%. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. There is no one customer that accounts for more than 10% of the remaining trade receivables balance. Accordingly the Directors believe that there is no further credit provision risk required in excess of the allowance for doubtful debts. Notes to the Financial Statements 135 Annual Report & Accounts FY21 Arena Events Group plc 134 15. Ageing of Past Due Trade Receivables The Directors do not consider any of the trade receivables’ balances to be fully impaired, rather they are either in dispute or are only expected to be partially settled. Accordingly no ageing of impaired trade receivables is presented. Gross trade receivables are presented in the table above. 16. Trade & other Payables Falling Due within One Year Group 31 March 2021 Company 31 March 2021 Group 31 March 2020 Company 31 March 2020 £m £m £m £m Trade creditors 5.9 0.1 16.1 0.4 Amounts due to other Group undertakings - 2.0 - 2.5 Taxation and social security 1.4 - 0.8 - Loan interest 0.2 0.2 0.4 0.2 Other creditors 8.5 - 7.5 - 16.0 2.3 24.8 3.1 Trade Creditors Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 48 days (2020: 58 days). For most suppliers, no interest is charged on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. The Directors consider that the carrying amount of trade payables approximates to their fair value. Included within property, plant and equipment reported at 31 March 2020 were £4.3m of assets held under IFRS16 leases. These assets have now been presented as Right of Use assets in the table above and in the 31 March 2021 balance sheet (and comparatives adjusted accordingly) with no impact on reported net assets. 17. Leases Notes to the Financial Statements Group 31 March 2021 31 March 2020 £m £m 60–90 days 0.6 0.9 90+ days 1.6 6.0 Total past due trade receivables 2.2 6.9 Current 2.7 18.2 Total trade receivables 4.9 25.1 MOVEMENT IN THE ALLOWANCE FOR DOUBTFUL DEBTS Balance at start of the period 1.4 0.3 Expected credit losses written off (0.6) (0.2) Increase in expected credit loss estimate 0.4 1.3 Balance at end of period 1.2 1.4 Group Land and buildings Plant and Machinery Other Total £m £m £m £m 01 January 2019 14.1 4.8 2.1 21.0 Additions 7.1 1.1 0.3 8.5 Disposals (0.6) - - (0.6) Transfer to PPE - (0.7) - (0.7) 31 March 2020 20.6 5.2 2.4 28.2 Additions 2.4 1.2 0.3 3.9 Disposals (0.8) (0.1) (0.5) (1.4) Remeasurement (0.3) - (0.3) (0.6) Foreign exchange - (0.1) - (0.1) Transfer to PPE - (4.3) - (4.3) 31 March 2021 21.9 1.9 1.9 25.7 DEPRECIATION 01 January 2019 - 0.6 - 0.6 Charge for the period 3.6 0.5 0.8 4.9 Disposals (0.6) - - (0.6) Foreign exchange 0.3 - 0.1 0.4 Transfer to PPE - (0.7) - (0.7) 31 March 2020 3.3 0.4 0.9 4.6 Charge for the year 3.6 0.4 0.7 4.7 Disposals (0.8) (0.1) (0.5) (1.4) Foreign exchange (0.7) - 0.1 (0.6) Transfer to PPE - (0.1) - (0.1) 31 March 2021 5.4 0.6 1.2 7.2 Net book value 31 March 2021 16.5 1.3 0.7 18.5 Net book value 31 March 2020 17.3 4.8 1.5 23.6 137 Annual Report & Accounts FY21 Arena Events Group plc 136 The following table shows the breakdown of the lease expense between amounts charged to operating profit and amounts charged to finance costs: The maturity of lease liabilities at 31 March 2021 were as follows: The maturity of lease liabilities at 31 March 2020 were as follows: Year ended 31 March 2021 15 months to 31 March 2020 £m £m CONTINUING OPERATIONS Depreciation of right of use assets: Land & Buildings 3.6 3.6 Plant & Equipment 0.4 0.5 Other 0.7 0.8 Short-term lease expense 0.1 0.2 Low-value lease expense - 0.1 Charge to operating profit 4.8 5.2 Interest expense related to lease liabilities 1.2 1.1 Charge to profit before tax on loss 6.0 6.3 £m FINANCIAL YEAR: 2022 3.3 2023 3.1 2024 2.5 2025 2.3 2026 1.4 Later years 10.0 Effect on discounting (3.7) Total discounted lease liability 18.9 AGED AS: Short-term lease liability 3.3 Long-term lease liability 15.6 18.9 £m FINANCIAL YEAR: 2021 4.1 2022 3.4 2023 2.3 2024 1.6 2025 1.6 Later years 11.0 Effect on discounting (3.2) Total discounted lease liability 20.8 AGED AS: Short-term lease liability 4.1 Long-term lease liability 16.7 20.8 Lease Liabilities Land and buildings Plant and equipment Other Total £m £m £m £m 01 January 2019 14.1 1.4 2.1 17.6 Additions 7.1 1.2 0.3 8.6 Interest expense 0.8 0.2 0.1 1.1 Disposal (0.6) (0.8) - (1.4) Repayment of lease liabilities (3.8) (0.5) (0.8) (5.1) 31 March 2020 17.6 1.5 1.7 20.8 Additions 2.4 1.2 0.3 3.9 Interest expense 0.8 0.3 0.1 1.2 Remeasurement 0.5 (0.2) (0.7) (0.4) Repayment of lease liabilities (3.7) (2.2) (0.7) (6.6) 31 March 2021 17.6 0.6 0.7 18.9 Notes to the Financial Statements 139 Annual Report & Accounts FY21 Arena Events Group plc 138 18. Deferred Tax 19. Bank and Other Borrowings Accelerated capital allowances Short term timing differences Total £m £m £m At 1 January 2019 (0.5) (1.0) (1.5) Credited to the income statement 0.2 - 0.2 At 1 March 2020 (0.3) (1.0) (1.3) Credited to the income statement - 0.3 0.3 At 31 March 2021 (0.3) (0.7) (1.0) The Company has a deferred tax asset of £33,000 (2020: £0.1m), in respect of short term timing differences. The Group has an unrecognised deferred tax asset of £2.4m (2020: £1.7m) in respect of UK tax losses carried forward, due to uncertainty over the level of future profitability across each UK company and therefore the usability of those losses. A deferred tax asset of £0.3m (2020: £0.3m) has been recognised on a Group level in respect of those losses. On 12 October 2020, the HSBC facility (entered into in October 2018) was increased from £35.0m to £50.6m with the additional £15.6m facility backed by the Coronavirus Large Business Interruption Loan Scheme (CLBILS) as part of the UK Government Coronavirus business support package (Note 34). On 25 March 2021, the HSBC facility (entered into in October 2018) was amended to allow for the potential acquisition of Aztec Shaffer in the US (Note 34). Group 31 March 2021 Company 31 March 2021 Group 31 March 2020 Company 31 March 2020 £m £m £m £m Revolving credit facility (Arena Events Group Plc) 24.3 24.3 23.7 23.7 Revolving credit facility (AES Inc) 10.2 - 11.2 - Revolving demand note (AES Inc) 2.1 - 2.3 - Shareholder loan 2.0 2.0 2.0 2.0 Shareholder loan note interest 0.4 0.4 0.1 0.1 Intercompany loan - 4.5 - 4.9 39.0 31.2 39.3 30.7 Less unamortised issue costs (0.5) (0.5) (0.5) (0.5) 38.5 30.7 38.8 30.2 The HSBC facility includes senior term debt of £50.6m split into a revolving credit facility (RCF) of £30.0m (2020: £30.0m), an accordion loan of £5.0m (2020: £5.0m) and CLBILS of £15.6m. At 31 March 2021 the Group had drawn £34.5m of the total facility (31 March 2020: £34.9m). Of the total £34.5m, £24.3m was drawn in GBP by Arena Events Group Plc (2020: £23.7m) and £10.2m was drawn in USD by AES Inc (2020: £11.2m). This debt was secured by fixed and floating charges over the assets of each of the entities within Group. Facility A of £35.0m is available until October 2022 whilst Facility B (CLBILS) of £15.6m is available until October 2023. Arena Event Services Inc have a $3.0m Revolving Demand Note with HSBC USA with a parent guarantee from Arena Events Group plc. Interest rates were 1.2% above Prime or 2.45% above LIBOR for the applicable interest period. At 31 March 2021 $2.9m (2020: $2.9m) of the demand note had been drawn. On 25 March 2021 Arena Events Group plc agreed an extension to the £2.0m Loan Note Instrument from Lombard Odier Asset Management (being one of its shareholders). The loan notes were extended to 25 September 2021 carrying an interest rate of 15% capitalised each quarter. The issuance and extension of the loan notes fully comply with the HSBC facility agreement. As at 31 March 2021 the Group’s main banking facilities were with HSBC (2020: HSBC). Total bank facility arrangement fees of £0.2m (2020: £0.4m) were amortised in the year. The analysis of the borrowings is as follows: The above table does not include the capitalised shareholder loan note interest. Maturity of financial liabilities Group 31 March 2021 Company 31 March 2021 Group 31 March 2020 Company 31 March 2020 £m £m £m £m Less than one year 4.5 2.4 4.4 2.1 Between one and five years 34.5 28.8 34.9 28.6 Greater than five years - - - - 39.0 31.2 39.3 30.7 Less unamortised issue costs (0.5) (0.5) (0.5) (0.5) 38.5 30.7 38.8 30.2 Weighted average interest rate 31 March 2021 Weighted average interest rate 31 March 2020 % £m % £m Revolving credit facility (Arena Events Group Plc) 2.4% 24.3 3.1% 23.7 Revolving credit facility (AES Inc) 2.4% 10.2 4.2% 11.2 Revolving demand note (AES Inc) 3.55% 2.1 4.3% 2.3 Shareholder loan 15.0% 2.0 5.0% 2.0 Unamortised bank amendment fees - (0.5) - (0.5) Total borrowings 3.2% 38.1 3.6% 38.7 Borrowings Interest Rates Notes to the Financial Statements 141 Annual Report & Accounts FY21 Arena Events Group plc 140 20. Financial Instruments Financial instruments detailed above are recorded on an amortised cost basis. Group Reconciliation of liabilities arising from financing activities As at 31 March 2020 Financing Cash flow Other movements Exchange movements As at 31 March 2021 £m £m £m £m £m Revolving credit facility (AEG Plc) 23.7 0.6 - - 24.3 Revolving credit facility (AES Inc.) 11.2 - - (1.0) 10.2 Revolving demand note (AES Inc) 2.3 - - (0.2) 2.1 Shareholder loan notes 2.1 - 0.3 - 2.4 Liabilities from financing activities before lease liabilities 39.3 0.6 0.3 (1.2) 39.0 Lease liabilities 20.8 (5.4) 3.5 - 18.9 Total liabilities from financing activities 60.1 (5.0) 3.8 (1.0) 57.9 Group Reconciliation of liabilities arising from financing activities As at 31 December 2018 Financing Cash flow Other movements Exchange movements As at 31 March 2020 £m £m £m £m £m Revolving credit facility (AEG Plc) 14.4 9.3 - - 23.7 Revolving credit facility (AES Inc.) 12.5 (1.7) - 0.4 11.2 Revolving demand note (AES Inc) - 2.3 - - 2.3 Shareholder loan notes - 2.0 0.1 - 2.1 Other loans 0.5 (0.5) - - - Liabilities from financing activities before lease liabilities 27.4 11.4 0.1 0.4 39.3 Lease liabilities 0.8 (5.1) 25.1 - 20.8 Total liabilities from financing activities 28.2 6.3 25.2 0.4 60.1 Company Reconciliation of liabilities arising from financing activities As at 31 March 2020 Financing Cash flow Other movements Exchange movements As at 31 March 2021 £m £m £m £m £m Revolving credit facility (AEG Plc) 23.7 0.6 - - 24.3 Shareholder loan notes 2.1 - 0.3 - 2.4 Loans from group undertakings 4.9 (0.4) - - 4.5 Total liabilities from financing activities 30.7 0.2 0.3 - 31.2 The tables above shows changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated statement of cash flows from financing activities. Carrying value of financial assets As noted in Note 15 the Directors do not believe any of the trade receivables to be impaired. A significant decrease in the net assets and trade of the owing company or a decline in the financial position of customers would trigger an impairment review. Interest rate sensitivity analysis If interest rates on all borrowings had been 0.5% (2020: 0.5%) higher/lower and all other variables were held constant, the Group’s profit for the year ended 31 March 2021 would decrease/increase by £0.1m (2020: £0.2m). This has been calculated by applying the amended interest rate to the weighted average rate of borrowings for the year ended to 31 March 2021, other than borrowings which are held at a fixed interest rate as those borrowings are not sensitive to external variables, such as movement in interest rates. Maturity of financial liabilities The maturity of borrowings is included in Note 19. Intercompany balances have no fixed repayment date. All other financial liabilities are expected to mature within six months of the year end. The Directors consider that the carrying amount of the other financial liabilities is approximate to their fair value. Group 31 March 2021 Group 31 March 20210 £m £m CATEGORIES OF FINANCIAL INSTRUMENTS Cash and short-term deposits 18.4 5.8 Trade and other receivables 8.9 32.8 Trade and other payables (14.6) (24.0) Fixed rate loans (38.5) (39.2) Lease liabilities (18.9) (20.8) (44.7) (45.4) Notes to the Financial Statements 143 Annual Report & Accounts FY21 Arena Events Group plc 142 21. Share Capital Credit Risk In the opinion of the Directors, the only financial instrument that is subject to credit risk is the trade receivables. The Directors believe that the bad debt provision as disclosed in Note 15 represents the Directors’ best estimate of the maximum expected exposure to credit risk at year-end. In order to minimise credit risk all new customers to whom credit is granted are checked through a credit rating company. Trade receivables aging is reviewed as part of the overall cash management process. Any potential risks are highlighted and sanctions taken where appropriate. Fair value of financial instruments In the opinion of the Directors, the fair value of the financial assets and liabilities are equal to their book values. Liquidity risk management The Directors believe that the receivables are not impaired and that the customers with outstanding balances have sufficient net assets to repay the balances. Any potential liquidity risk is kept to a minimum by the use of continual cash flow forecasting and evaluation. Capital risk management As stated in the Directors’ report, the Directors believe that the Group is cash generative and self-sufficient and does not require additional external finance. The borrowings were taken out for acquisition purposes, not working capital funding. The Directors maintain detailed cash forecasts which are frequently revised to actuals to ensure that the Group has sufficient liquid resources to meet its requirements. The capital structure of the Group consist of debt as described in Note 19, cash and cash equivalents and equity attributable to equity holders of the parent. Foreign currency financial assets and liabilities Included within the above table are £19.4m (2020: £46.7m) of assets and £19.0m (2020: £27.4m) of liabilities relating to the overseas subsidiaries which have been translated in the consolidation at the year-end rate. These balances are subject to movements in exchange rates, as shown in the statement of changes in equity. The Directors do not believe the risk is significant enough to warrant hedging against the investments in overseas companies. Also included within the above table are foreign currency denominated external trade payables and receivables of £3.7m (2020: £11.1m) and £4.3m (2020: £18.7m) respectively. The table below shows the Group’s sensitivity to changes in foreign exchange rates on its financial instruments denominated in foreign currencies. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the year/period. The analysis assumes that all other variables remain constant. Foreign Currency Financial Assets and Liabilities As at 31 March 2021 As at 31 March 2020 £m £m 10% appreciation of the above foreign currencies 0.1 1.8 10% depreciation of the above foreign currencies (0.1) (2.1) Group 31 March 2021 Company 31 March 2021 Group 31 March 2020 Company 31 March 2020 £m £m £m £m AUTHORISED, ALLOTTED AND ISSUED 272,481,916 fully paid ordinary shares of £0.01 each (2020: 152,710,833) 2.7 2.7 1.5 1.5 As at 31 March 2021 Consolidated Group Less than 1 year 1–5 years More than 5 years £m £m £m Inventories 2.3 - - Trade and other receivables 8.2 0.7 - Trade and other payables (14.6) - - Bank overdraft (0.4) - - Borrowings (4.5) (34.0) - Lease liabilities (3.3) (5.6) (10.0) Accruals (8.7) - - Deferred revenue (3.2) - - Deferred consideration (0.1) - - As at 31 March 2020 Consolidated Group Less than 1 year 1–5 years More than 5 years £m £m £m Inventories 7.8 - - Trade and other receivables 31.9 0.9 - Trade and other payables (24.8) (1.4) - Bank overdraft (0.3) - - Borrowings (4.4) 34.9 - Lease liabilities (4.1) (7.5) (9.2) Accruals (13.9) - - Deferred revenue (9.0) - - Deferred consideration (0.9) - - Notes to the Financial Statements 145 Annual Report & Accounts FY21 Arena Events Group plc 144 24. Share Option Reserve The share option reserve represents the expected cost to the Group to satisfy the Group’s share option scheme. Both the Black Scholes and Monte Carlo methods were used to determine the value of the charge to the share option reserve. A Group share option scheme allows for options to be issued over ordinary shares, up to a maximum of 10% of the Company’s ordinary shares in issue at the time of grant, over a ten-year period. The option exercise price will usually be the mid-market price of the shares on the date of grant. FY21: One option award was made during the year. The award had an exercise price of 1 pence per share with a performance condition based on the Company's average share price during the 30-day period ending on the third anniversary of the date of grant (30 September). Based on this average share price the percentage of awards that will vest are: Company Share Price Percentage of the awards that will vest Under 5 pence 0% Between 5 pence and 15 pence (in 0.1 pence steps) Straight line basis between 0% and 25% Between 15 pence and 30 pence (in 0.1 pence steps) Straight line basis between 25% and 100% 30 pence and above 100% The total number of shares under this option award as at 31 March 2021 were 21,250,000. FY20: Three option awards were made during the period. The first option awards had an exercise price of 40 pence per share, no performance conditions and vest equally after two, three and four years from the date of grant subject to the following conditions: award is subject to the Adjusted Earnings per share for the Group (“Adjusted EPS”) as calculated on a consistent basis by the Group’s primary broker having increased by a total amount over the period in excess of 10% per annum. The base figure for this calculation being the FY18 Adjusted EPS of 3.7 pence; and the figure on the testing date will be the figure for FY22 (the year to 31 March 2022). If the compound growth is in excess of 10% per annum the award will vest in full. If the compound growth is below 8% per annum the award will be fall away. In between these two levels an adjusted number of options awarded will vest on a straight-line pro rata basis. During the year 613,000 option awards lapsed due to being replaced by a new award and 851,000 option awards lapsed due to holders leaving the Group. The total number of shares under this option award as at 31 March 2021 were 324,000 (31 March 2020: 1,788,000). These options are vesting in three equal amounts of 108,000 on 01 July 2022, 2023 and 2024. The second option awards had an exercise price of 18.5 pence per share, during the year 100,000 option awards lapsed due to holders leaving the Group. The total number of shares under this option award as at 30 March 2021 was nil (31 March 2020: 100,000). The third option awards had an exercise price of 18.5 pence per share, no performance conditions and shall vest equally after three, four and five years from the date of grant. During the year 2,162,162 option awards lapsed due to being replaced by a new award. The total number of shares under this option award as at 31 March 2021 were nil (31 March 2020: 2,162,162). Group Company £m £m At 1 April 2020 0.6 0.6 Share option provision (0.4) (0.4) At 31 March 2021 0.2 0.2 22. Share Premium Account The share premium reserve movement in the year is a result of the premium arising on the issue of the equity shares detailed in Note 21 net of expenses incurred by the company of £1.5m, (2020: detailed in Note 22 net of issue expenses incurred by the company of £1.0m). Group 31 March 2021 Company 31 March 2021 Group 31 March 2020 Company 31 March 2020 £m £m £m £m Balance 89.7 89.7 78.5 78.5 Authorised share capital is unlimited. As at the end of 31 March 2021 there were 272,481,916 (31 March 2020: 152,710,833) ordinary shares at £0.01 in issue resulting in £2.7m share capital and £89.7m of share premium. All shares carry equal rights. In the year ended 31 March 2021 the following issues of £0.01 ordinary shares were made: On the 15 April 2020, the Company raised £9.5m (before fees and expenses) by way of a subscription for 60,000,000 new Ordinary Shares and a placing of 35,000,000 new Ordinary Shares, in each case at a price of 10 pence per share. The net proceeds of the Capital Raising were to fund working capital requirements. On the 29 March 2021, the Group announced the conditional raising of £11.0m (before fees and expenses) by way of a subscription for 10,714,285 new Ordinary Shares and a placing of 67,857,143 new Ordinary Shares, in each case at a price of 14 pence per share. As well as strengthening the Group’s balance sheet, the net proceeds of the capital raise will be used to take advantage of the opportunities presented by the COVID-19 affected market to acquire attractive assets on favourable terms, including the acquisition of the business and assets of Aztec Shaffer. The issue price of 14 pence per new Ordinary Share, represented a 3.4 percent discount to the closing middle market price of 14.5 pence per Existing Ordinary Share on 26 March 2021, the last Business Day before the announcement of the Placing and Subscription. The First Placing Shares and the First Subscription Shares issued pursuant to the Company's existing authorities to allot equity securities and disapply pre-emption rights granted at its Annual General Meeting held on 1 September 2020 and consisted of a subscription for 3,377,875 new Ordinary Shares and a placing of 21,393,208 new Ordinary Shares, in each case at a price of 14 pence per share. The First Placing Shares and the First Subscription Shares were admitted to trading on AIM on 31 March 2021. The Second Placing Shares and the Second Subscription Shares were admitted to trading on AIM post 31 March 2021 and are detailed in Note 34. In the fifteen months ended 31 March 2020 the following issues of £0.01 ordinary shares were made: 18 April 2019, 800,000 shares at £0.385 were issue as 25% settlement of the deferred consideration that arose on the acquisition of assets from Stuart Rentals in 2018. 23. Merger Reserve The movement on the merger reserve is as set out in the consolidated statement of changes in equity. There was no movement in the year ended 31 March 2021 (for the fifteen-month period ended 31 March 2020: nil). The merger reserve was created as an effect of reverse acquisition accounting on creation of Arena Events Group plc in July 2017. Notes to the Financial Statements 147 Annual Report & Accounts FY21 Arena Events Group plc 146 2018: Two option awards were made during the year. The first option awards had an exercise price of 60 pence per share, no performance conditions and vest equally after two, three and four years from the date of grant. The total number of shares under this option award as at 31 March 2021 were 45,000 (31 March 2020: 135,000). These options are vesting in three equal amounts of 15,000 on 1 December 2020, 2021 and 2022. During the year 90,000,000 option awards lapsed due to being replaced by a new award The second option awards had an exercise price of 68 pence per share and shall vest equally after three, four and five years subject to the following conditions: 75% of the Awards are subject to EPS performance conditions, measured over a three year performance period; with the balance of 25% being at the discretion of the Remuneration Committee, based on its judgement of the successful integration of acquisitions closed during the period. To the extent that the performance conditions are not satisfied, the relevant part of the awards shall lapse. During the year 885,000 option awards lapsed due to being replaced by a new award and 375,000 option awards lapsed due to holders leaving the Group. The total number of shares under this option award as at 31 March 2021 were 245,000 (31 March 2020: 1,505,000). These options are vesting in three equal amounts of 81,667 on 05 October 2022, 2022 and 2023. 2017: Option awards were made in July 2017 with an exercise price of 55 pence per share. These initial option awards have no performance conditions and vest equally after two, three and four years from the date of grant. During the year 2,530,909 option awards lapsed due to being replaced by a new award and 454,545 option awards lapsed due to holders leaving the Group. The total number of shares under this option award as at 31 March 2021 were 572,727 (31 March 2020: 3,558,182). 25. Capital Commitments There are no amounts contracted for but not provided in the financial statements for the Group and for the Company (2020: nil). 26. Contingent Liabilities The Group has contingent liabilities in relation to its US division (2020: in relation to its US division). AES Inc agreed a settlement with the United States' Attorney's Office for the Southern District of Georgia to resolve the US government's investigation of AES Inc (the “Settlement”). The Settlement includes the payment by AES Inc of $4.8 million in equal instalments over five years (being $960,000 per annum), the third payment made in 2020 (second payment in 2019). In addition, there is the potential for additional contingent payments of $600,000 per year in any of the five years, 2018 to 2022, if certain financial hurdles are exceeded. These hurdles are AES Inc achieving revenue greater than $150 million or net profits greater than $2.5 million based on calendar year results to 31 December. The contingent payment was not triggered in the twelve months to December 2020 (twelve months to December 2019: none). Given the uncertainty of future financial performance of AES Inc, no provision has been made for future potential contingent payments. 27. Pension Commitments Group The Group operates various defined contribution pension schemes, the assets of which are held separately from those of the Group in independently administered funds. The Group incurs further costs in contributions to employees’ own schemes. The cost of contributions to the defined contribution schemes amounts to £0.4m (2020: £0.7m) in the year. All unpaid contributions were paid within 1 month of the year end. Company The Company operated a pension scheme in 2021 and the cost of contributions to the defined contribution scheme amounted to £29,000 (2020: £35,000). 28. Related Party Transactions Group Remuneration of key management personnel The remuneration of key management personnel of the Group, is set out below in aggregate for each of the relevant categories specified in IAS24 Related Party Disclosures. Key management are identified as Group Board members and those senior managers who are key decision makers at a regional level: Notes to the Financial Statements Year ended 31 March 2021 15 months to 31 March 2020 £m £m Short-term employee benefits 0.9 1.6 Share options - - 0.9 1.6 Of the key management personnel, four have retirement benefits accruing under money purchase pension schemes (2020: four). Included in the numbers above short term employee benefits of £0.4m (2020: £0.7m) relate to the company. The Group does not have any post-employment benefit accruing in relation to the key management personnel. Company Lombard Odier Asset Management (Europe) Limited (LOIM) and TasHeel Holding Group (THG) both owned more than 20% of the issued share capital of the Company as at 31 March 2021. As part of the placing and subscritption completed in April 2021 (see Note 34) the LOIM ownership was diluted to 18%. The company holds loan notes with LOIM of £2.4m including capitalised interest as at 31 March 2021. The loan notes carry a 15% interest rate and have a final redemption date of September 2021. Henry Turcan, a representative of LOIM, joined the main board as a Non-Executive Director on 8 June 2020. Amounts due to Company from related parties Year ended 31 March 2021 15 months to 31 March 2020 £m £m AES Arena Event Services Group Holdings 79.4 79.3 WB Co (1403) 17.7 17.7 Arena Event Services Group Ltd 17.3 17.0 Arena Stuart Rentals 0.8 0.5 115.2 114.5 149 Annual Report & Accounts FY21 Arena Events Group plc 148 29. Net Cash Flow from Operating Activities 30. Cash and Cash Equivalents Group Note Year ended 31 March 2021 15 months to 31 March 2020 £m £m Operating loss for the year (9.8) (19.6) ADJUSTMENTS FOR: Depreciation of property, plant and equipment 11 7.8 9.5 Depreciation of right-of-use assets 17 4.7 4.7 Impairment of goodwill - 16.1 Amortisation of intangible assets 10 0.6 0.9 Deferred consideration - (1.2) Gain on disposal of property, plant and equipment 4 0.2 (0.3) Share option (credit)/costs (0.4) 0.3 Operating cashflows before changes in working capital 3.1 10.4 Decrease/(increase) in inventories 5.4 (2.0) Decrease/(increase) in receivables 23.3 (5.3) (Decrease)/increase in payables (19.4) 9.8 Cash generated by operations 12.4 12.9 Bank and lease interest paid (1.3) (1.7) Loan note interest paid (0.3) (0.1) Other finance charges (0.1) (0.2) Corporation tax (0.6) (0.3) Net cash inflow from operating activities 10.1 10.6 31 March 2021 31 March 2020 £m £m Cash and bank balances 18.4 5.8 Bank overdrafts (0.4) (0.3) 18.0 5.5 Notes to the Financial Statements 31. Analysis of Changes of Net Debt Group As at 31 March 2020 Cash flow Exchange movements Other non-cash changes As at 31 March 2021 £m £m £m £m £m Cash in hand and at bank 5.8 12.9 (0.3) - 18.4 Bank overdraft (0.3) (0.1) - - (0.4) Debt due within one year (4.4) - 0.2 (0.3) (4.5) Debt due after one year (34.4) (0.7) 1.2 (0.1) (34.0) Leases due within one year (0.6) 0.6 (0.1) (0.2) (0.3) Leases due after one year (0.3) - 0.1 0.2 - Net debt (34.2) 12.7 1.1 (0.4) (20.8) Balances at 31 March 2021 Comprise Non-current assets Current assets Current liabilities Non-current liabilities Total £m £m £m £m £m Cash and bank balances - 18.4 - - 18.4 Bank overdraft - - (0.4) - (0.4) Leases - - (0.3) - (0.3) Borrowings - - (4.5) (34.0) (38.5) Net debt - 18.4 (5.2) (34.0) (20.8) Non-cash changes comprise movement in repayment due date. The above tables are used by Group to support banking requirements and are pre-IFRS 16. Amounts due from the Company to related parties Year ended 31 March 2021 15 months to 31 March 2020 £m £m LOIM 2.4 2.1 AES Arena Event Services Holdings 2.2 2.2 Arena Event Services 4.4 4.7 AMEA Gulf - 0.3 9.0 9.3 151 Annual Report & Accounts FY21 Arena Events Group plc 150 32. Net Cash Flow from Operating Activities 33. Dividends Company Year ended 31 March 2021 15 months to 31 March 2020 £m £m Operating loss for the year 0.1 (21.0) ADJUSTMENTS FOR: Share option (credit)/costs (0.4) 0.3 Operating cashflows before changes in working capital (0.3) (20.7) (Increase)/decrease in receivables (0.5) 0.6 Increase in payables (0.1) (0.2) Increase in provisions 0.1 20.7 Cash generated by operations (0.8) 0.4 Bank interest paid (0.6) (0.8) Loan issue costs (0.1) (0.2) Loan note interest (paid)/received (0.4) 0.5 Net cash flow from operating activities (1.9) (0.1) Year ended 31 March 2021 15 months to 31 March 2020 £m £m Interim dividend for the year ended 31 March 2021 of nil pence per share (2020: 0.25 pence per share) - 0.4 Proposed final dividend for the year ended 31 March 2021 of nil pence per share (2020: nil pence per share) - - There was no interim dividend paid or final dividend recommended in the year ended 31 March 2021. (A total dividend of 0.25 pence per share was paid for the fifteen-month period ended 31 March 2020. Dividend payments were based on the net assets of the Company in line with the Companies Act 2006 (Part 23)). Received The Company did not receive any dividends during the year ended 31 March 2021 (2020: none). Paid or to be Paid Notes to the Financial Statements 34. Post Balance Sheet Events Placing & subscription On the 29 March 2021, the Group announced the conditional raising of £11m (before fees and expenses) by way of a subscription for 10,714,285 new Ordinary Shares and a placing of 67,857,143 new Ordinary Shares, in each case at a price of 14 pence per share. As well as strengthening the Group’s balance sheet, the net proceeds of the capital raise will be used to take advantage of the opportunities presented by the COVID-19 affected market to acquire attractive assets on favourable terms, including the acquisition of the business and assets of Aztec Shaffer. The issue price of 14 pence per new Ordinary Share, represented a 3.4 percent discount to the closing middle market price of 14.5 pence per Existing Ordinary Share on 26 March 2021, the last Business Day before the announcement of the Placing and Subscription. The capital raising was conducted in two separate tranches: Tranche One The First Placing Shares and the First Subscription Shares issued pursuant to the Company's existing authorities to allot equity securities and disapply pre-emption rights granted at its Annual General Meeting held on 1 September 2020 and consisted of a subscription for 3,377,875 new Ordinary Shares and a placing of 21,393,208 new Ordinary Shares, in each case at a price of 14 pence per share. The First Placing Shares and the First Subscription Shares were admitted to trading on AIM on 31 March 2021. Tranche Two Following the passing by Shareholders of certain Resolutions at the General Meeting held on 14 April 2021, the second tranche consisting of the Second Placing Shares and the Second Subscription Shares were admitted to trading on AIM on 15 April 2021. The second tranche consisted of a subscription for 7,336,410 new Ordinary Shares and a placing of 46,463,935 new Ordinary Shares, in each case at a price of 14 pence per share. 153 Annual Report & Accounts FY21 Arena Events Group plc 152 Notes to the Financial Statements Non-Statutory Financial Information Year ended 31 March 2021 Year ended 31 March 2020 15 months to 31 March 2020 (audited) £m (unaudited) £m (audited) £m REVENUE 71.6 160.6 183.2 Cost of sales (44.6) (110.2) (127.8) GROSS PROFIT 27.0 50.4 55.4 Administrative expenses (36.8) (63.5) (75.0) OPERATING LOSS (9.8) (13.1) (19.6) Analysed as: Adjusted EBITDA 5.7 16.5 13.2 Depreciation property, plant and equipment (7.8) (7.7) (9.5) Depreciation right of use assets (4.7) (3.7) (4.7) Exceptional expenses (2.7) (17.2) (17.5) Acquisition costs (0.1) - - Share option credit/(costs) 0.4 (0.3) (0.3) Intangible amortisation (0.6) (0.7) (0.8) (9.8) (13.1) (19.6) Finance costs (3.0) (2.8) (3.4) LOSS BEFORE TAXATION (12.8) (15.9) (23.0) Tax on loss on ordinary activities 0.1 0.1 0.1 LOSS AFTER TAXATION (12.8) (15.8) (22.9) The Group changed its accounting reference date from 31 December to 31 March to better match the seasonality of the Business. In the fifteen-month period ended 31 March 2020 the Group delivered adjusted EBITDA of £13.2m and an operating loss of £19.6m. For the twelve months ended 31 March 2020 the Group delivered adjusted EBITDA of £16.5m and an operating loss of £13.1m. Acquisition of Aztec Shaffer On 2 April 2021, AAS Opco LLC made a bid for Aztec Shaffer as part of a Court-led auction process pursuant to Section 363 of the United States Bankruptcy Code. This bid was confirmed as successful on 6 April 2021 and was approved at the sale hearing at the United States Bankruptcy Court for the Southern District of Texas on 16 April 2021. The total value of the bid to the secured lender (AIG) and including amounts payable to the parties that provided interim funding through the bankruptcy process was $25.6m. This purchase price was funded by an equity contribution of $3.35 million by the Company (via its subsidiary, AES Arena Event Services Holdings Limited) in return for a 50% equity stake in AAS Opco LLC (with management control) alongside an $18.25m debt financing package provided by the Company’s Co-Bidders. Aztec Shaffer comprises two businesses, Aztec Events & Tents (“Aztec”) and Shaffer Sports & Events (“Shaffer”). Aztec is a very similar business to Arena’s existing subsidiary based in California: Arena Stuart Rentals. Aztec is based in Houston, the fourth largest city in the US, and has a diversified customer base with its products including party/wedding tents as well as tables, chairs, linens, table-top items, dance floors and decorative items. By contrast, Shaffer operates across North America from its Houston base, with the majority of its historical revenues coming from golf, supporting in excess of fifteen tournaments a year including the Players Championship and the Presidents Cup. Other sports served by Shaffer include motorsports and horse racing. Shaffer's focus on sports is well aligned with the Group’s other US subsidiary, Arena Events Services Inc. which has a similar product focus but a broader customer mix, also serving many events and projects outside of the sporting world. Coronavirus Large Business Interruption Loan Scheme (CLBILS) On 12 October 2020, supported by HSBC, the Company secured an extra £15.6m of funding under the UK Government-backed CLBILS. This facility provides additional liquidity headroom to the Group in the UK to manage any uncertainty around the pace of opening up of events to mass participation as COVID-19 restrictions are eased. The terms of the facility require an initial draw to be made within the first six months and a second (final) draw to be made before the first anniversary of the facility. Failure to make the first draw would see the entire facility forfeited and, in line with this requirement, on 1 April 2021, the Company drew down £4m. Drawn amounts bear interest at LIBOR plus a 2.4% margin whilst the remaining unutilised facility bears interest at 1% per annum. Restructure On the 15 April 2021, the Group underwent a restructure of its UK owned subsidiaries to reduce complexity, better align the corporate structure with the management of the trading divisions and to simplify entity balance sheets. As part of this restructuring, investments in WB Co (1403) Limited, WB Co (1402) Limited and AES Arena Event Services Holdings Ltd were transferred to be direct investments of the Company. The restructuring is not expected to have any material financial impact on the Group. 155 Annual Report & Accounts FY21 Arena Events Group plc 154 Nominated Advisor and Broker Cenkos Securities plc 6.7.8 Tokenhouse Yard London EC2R 7AS United Kingdom +44 (0) 20 7397 8900 US Investor Relations tkdyAdvisors LLC 880 Third Avenue, 16th Floor New York NY 10022 United States of America +1 646 574 3171 Solicitors to the Company Pinsent Masons LLP 30 Crown Place London EC2A 4ES United Kingdom Accountants to the Company Deloitte LLP Hill House 1 Little New Street London EC4A 3TR United Kingdom Registrars Computershare Investor Services (Ireland) Limited 3100 Lake Drive Citywest Business Campus Dublin 24, D24 AK82 Ireland Financial PR Alma PR 71–73 Carter Lane London EC4V 5EQ United Kingdom +44 (0) 20 3405 0205 Group Head Office 4 Deer Park Road Wimbledon London SW19 3GY United Kingdom +44(0)203 770 3838 www.arenagroup.com/investors UK & Europe Regional Head Office Needingworth Industrial Estate St Ives Cambridgeshire PE27 4NB United Kingdom +44 (0)1480 468 888 www.arenagroup.com Middle East & Asia Regional Head Office Warehouse TP010306 National Industries Park Jebel Ali PO Box 65588 United Arab Emirates +971 (0)4 332 2333 www.arenamea.com Americas Regional Head Office 10861 S. Howell Ave. Oak Creek Wisconsin WI 53154 United States of America +1 800 3836332 www.arenaamericas.com Shareholder Information Company Offices Annual Report & Accounts FY21 157 Arena Events Group plc 156 Arena Events Group plc www.arenagroup.com