Jaywing plc
Annual Report 2023

Plain-text annual report

Company number 05935923 Jaywing plc Annual Report and Accounts For the year ended 31 March 2023 1 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Contents Overview Financial highlights Chairman’s Statement Chief Executive's Report Strategic Report Corporate Governance Directors’ Report Directors’ Remuneration Report Corporate Governance Statement Directors’ Responsibilities Statement Financial Statements Independent Auditor’s Report to the Members of Jaywing plc Consolidated Financial Statements Company Financial Statements Additional Information Shareholder Information Company 3 4 5 6 8 12 17 20 22 23 37 72 91 92 2 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Overview Jaywing is a Data Science and Marketing business, with operations in the UK and Australia. Jaywing is home to nearly 300 of the best thinkers across creative and brand strategy, performance marketing, risk consulting and data science. Every day, handpicked teams collaborate to respond to diverse challenges across a range of sectors and businesses to connect powerful ideas, rich data and new technologies to provide winning solutions for our clients. With large, specialist technical and creative power and over 60 experienced data scientists, Jaywing is particularly skilled at turning data into value, fuelling brands, connecting on customers’ terms and reimagining businesses. Jaywing’s clients include a number of blue-chip companies such as first direct, Castrol, PepsiCo, Euro Car Parts, ADT, HSBC and Yorkshire Water.  Clients Jaywing helps its clients find smart solutions to deliver profit growth and build brand value. It uses its science-based expertise to create compelling insights from complex customer behaviour and builds these into effective digital marketing, customer engagement and portfolio management activities. Client concentration risk is low, with 170 active clients at the year end and with the largest client of the Group accounting for around 4% of annual revenue. Revenue from the Group’s operations in Australia accounted for 26% of revenue (2022: 22%), and we continue to benefit from close collaboration between Australia and the UK both on specific clients and development of new capabilities. People Our people comprise a diverse mix of specialists, many with scarce skill sets. They include: • Award-winning creative teams • Experts in brand strategy, client management, PR and performance marketing • PhD mathematicians • Marketing analysts and econometric modellers • Highly skilled AI practitioners These skills can be applied to a wide spectrum of challenges, ranging from credit risk modelling through to brand advertising and a key strength is our ability to harness cross-functional teams to collaborate on client solutions. 3 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Financial highlights Revenue Adjusted EBITDA(1) Operating Loss Loss before Tax Cash Generated from Operations Net Debt pre IFRS 16(2) Loss per share 2023 £’000 22,062 2,410 (11,340) (12,535) 1,293 (10,346) (13.73p) Restated* 2022 £’000 23,324 2,206 (6,086) (6,660)* 1,587 (8,293)* (7.01p)* Change % (5.4%) 9.2% Reconciliation of Operating Loss with Adjusted EBITDA 2023 £’000 2022 £’000 (11,340) (6,086) Operating Loss Add Back: Impairment of Goodwill Depreciation of property, plant & equipment Depreciation and impairment of right of use assets Amortisation of intangibles EBITDA Acquisition & related costs Restructuring costs Adjusted EBITDA(1) Adjusted EBITDA(1) margin 12,095 245 641 320 1,961 259 190 2,410 10.9% Revenue, Contribution and Adjusted EBITDA by operating segment Revenue United Kingdom Australia Group total Contribution(3) United Kingdom Australia Group total Contribution margin Adjusted EBITDA(1) United Kingdom Australia Group total 2023 £’000 16,380 5,682 22,062 4,886 2,142 7,028 31.9% 1,882 528 2,410 6,131 327 752 730 1,854 - 352 2,206 9.5% 2022 £’000 18,099 5,225 23,324 4,849 2,057 6,906 29.6% 1,680 526 2,206 Change % (9.5%) 8.8% (5.4%) 0.8% 4.1% 1.8% 12.0% 0.4% 9.2% (1) Adjusted EBITDA represents Earnings Before Interest Tax, Depreciation & Amortisation (‘EBITDA’) before restructuring costs and acquisition & related costs (2) Including accrued interest (3) Contribution is defined as Revenue less Direct Costs comprise staff and other costs directly attributable to the revenues of the respective operating segments. Operational Highlights • Group contribution margin increased by 2.3ppt driven by UK cost efficiencies. • Group Adjusted EBITDA for FY23 up by 9.2% at £2,410k against prior period, on 5.4% lower revenues. • • UK Adjusted EBITDA for FY23 up 12.0% at £1,882k, due to cost management and efficiency improvements. FY23 Australian adjusted EBITDA has increased by 0.4% to £528k and which reflects the impact of the cost of the integration activity at the start of 2023. New business pipeline remains strong in both territories. Decision PPC management IP acquisition successfully completed & encouraging new business growth. R&D function established during the year to help build increased Decision IP functionality. • • • 4 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Chairman’s Statement Results Revenues for the Group for FY23 of £22.1m (2022: £23.3 m), were 5.4% down on FY22, following FY22’s strong growth of 16% on FY21. The decrease in revenue in FY23 comprises a fall of 9.5% in UK revenues (2022: increase of 13.3%) and a rise of 8.8% in Australia revenues (2022: increase of 25%). The UK’s revenues were affected by weaker demand in FY23 whilst Australia continued to grow although at a slower rate than the previous year. Recent significant new business wins in Australia are expected to restore its return to strong growth in FY24. It is pleasing to note that the Group’s contribution margin increased in FY23 by 2.3ppt to 31.9% driven by cost efficiency improvements in the UK. The UK contribution margin was up by 3.0 % to 29.8%. Adjusted Group EBITDA for FY23, was £2.4m (2022: £2.2m), an increase of 9.2%, reflecting margin improvements on lower Group revenues. The adjusted EBITDA for the UK in FY23 was £1.9m, a 12% increase on FY22’s £1.7m. Australia remained flat at £0.5m due to business integration actions at the start of FY23 and increased staff costs. Cash Generated from Operations for FY23 amounted to £1.3m (2022: £1.6m). In the first quarter of FY24 the Group carried out a significant restructuring of the UK division to improve margin efficiency through cost reduction, and implemented a new organisational structure which is intended to help the Group rebalance its strengths on its higher margin services. Recent new business wins in data science led services, particularly in the Group’s risk, fraud and regulatory services, together with UK cost reductions are expected to help raise UK margins in FY24. Strategy The Group’s businesses in the UK and Australia plan to focus on organic growth on the back of recent new business wins and a strong new business pipeline. The Group will promote and further develop the recently acquired Decision software as well as exploring opportunities for further investment in advanced data analysis products as well as the application of technology to the marketing challenges of our clients. Creative services will remain a key component of our services mix, and the Group will continue to promote its award-winning creative services to its clients as part of its comprehensive marketing solution offerings. It is pleasing to report that Jaywing Australia, which is led by a successful and autonomous professional team, has continued to demonstrate a track record of strong performance during the year with sales up by 8.8% and with some significant business wins towards the end of FY23. The ongoing collaboration with the UK business on clients and services, where required, now includes the promotion of the Decision software in Australia, and we are continuing to work with the Australian team to explore opportunities to further accelerate scale and market reach. Funding The Company remains in discussions with each of the holders of the secured debt about a possible future restructuring of the debt. Details of this debt are contained in Note 18 and Note 30. Board and senior management In April 2022 we announced that Caroline Ackroyd, the Company’s Chief Financial Officer and a board director had resigned to pursue other interests. On 31 August 2022, the Company announced the appointment of Christopher Hughes as the Company’s Chief Financial Officer. People Our staff in the UK and Australia have continued to work closely with our customers to help serve their varied and challenging business needs and continued to win and welcome new customers to Jaywing. The Board would like to thank all our staff for their ongoing hard work and dedication. Outlook Whilst trading conditions in the UK remain challenging, the recent restructuring of the UK division and recent new business wins as well as a strong pipeline is expected to assist the UK division’s ability to withstand ongoing challenges in the macroeconomic environment as well as improving margin run rates. Recent significant new business wins in Australia are expected to provide strong revenue and profitability growth. Ian Robinson Non-Executive Chairman 5 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Chief Executive’s Report Overview The last year saw an increase in FY23 EBITDA of 9.2% at £2,410k against the prior period, on 5.4% lower revenues. This growth was achieved despite challenging economic conditions impacting clients’ own performance, and hence their budgets and spend, in both the UK and Australia. Australia’s revenue was up 8.8% on the previous year built on strong client wins. In the UK, revenue was down 9.5%. Our Group revenue was therefore down 5.4% year-on-year overall, but I am pleased to report that we have been able to manage our costs well in response to trading conditions, delivering adjusted EBITDA of £2.4m, just ahead of market expectations. Performance varied across our operating divisions. Australia had a strong end to the financial year, with a major contract win that will fully crystallise in the current financial year. The UK saw revenues slowing through the year, resulting in the 9.5% drop for the full year, but with a significant improvement in profitability due to tight cost control. Net cash from operating activities dropped to £1.3m (2022: £1.6m). The client base for Decision, our AI driven automated Pay-Per-Click advertising management tool, has started to build, and we now have 11 clients live or onboarding, with a good pipeline of further opportunities. We have also now signed our first client for Decision in Australia, which is already live. Higher interest rates, driven by the economic backdrop, has led to an increase in our WACC, which was a significant factor in the impairment charge of £12.1m to Goodwill in respect of the UK cash-generating-unit. Our outlook remains consistent and the Group remains well positioned to drive revenues and profitability in the future. Jaywing UK The dip in UK consumer confidence has put pressure on client budgets, and we have experienced clients slowing new spend through the back end of last year and the first 2 months of the current year. From June onwards we have started to see an upturn in client spend and therefore in our revenues, along with a growing pipeline of new client opportunities. Our focus on an integrated marketing proposition, enabled by data science, is resonating with existing and potential clients. The acceleration of the move towards digital since the pandemic started has reinforced the need to really understand marketing effectiveness, and we have been able to deliver both outstanding results and unprecedented insight to our clients. We have continued to win some great work from new clients, most recently including Subaru Europe and DUSK.com but the slowdown in existing client spend resulted in a reduction in UK revenue of 9.5% year-on-year. In anticipation of the tightening economic conditions, we took action to reduce our cost base, and were able to deliver increased year-on-year EBITDA. Although we have seen an encouraging revenue performance more recently, we continue to manage costs tightly to ensure we have the right cost base for our projected revenues. Amongst our existing marketing clients, the biggest increases in spend came from Castrol, Virgin Money, Rush Hair Group, and Verdant Leisure, and their spend on performance marketing, in particular, has increased significantly. Key new clients in the year to March 2023 included University of East Anglia, LHV UK, Fair4All Finance and ROC Technologies. Since the start of the new financial year in April 2023, in addition to Subaru Europe and DUSK.com (Retail), we have also added Virgin Media O2, AO World, Superbike Factory, The Entertainer, and Bettys And Taylors Group. We have recently overhauled our Business Development and Marketing functions, and are seeing an increase in the number and calibre of leads being generated. Jaywing Australia Our Australian business successfully completed the integration of Frank Digital into Jaywing Australia at the start of 2022, and the fully integrated business has resonated well in the market, with strong new client wins leading to an 8.8% increase in revenues against prior year. The new business wins have been particularly strong in Q4 FY23 and the full benefit of these will be realised in the current financial year (FY24). Of particular note is a contract with Online Education Services (OES) for creative services, which commenced in February 2023. Notable other wins include CROCS Australia & Singapore and CashRewards. The increase did not fully flow through to EBITDA, as a result of the wage inflation that began under the pandemic lockdowns. The annualization of this impact resulted in EBITDA growing by just 0.4% year-on-year. This wage inflation has now normalised, and FY24 has started strongly for both revenue and EBITDA in Australia. 6 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Decision and Research and Development On 26th August 2022, the Company completed the acquisition of Midisi Limited, a marketing software development business, which owns the intellectual property rights for the ‘Decision’ software (“the Acquisition”). Decision is an award-winning Artificial Intelligence solution for online marketing activity that Jaywing currently sells to clients which enables them to automate Pay-Per-Click advertising management. We have now started to deliver new client wins for Decision, with the benefits showing in FY24. These include Bettys, Superbikes, E-Buyer and the Entertainer. I am pleased with the level of expertise the team has quickly gained and conversations with clients remain ongoing with plenty of opportunities. The costs of running Decision are relatively fixed and the planned further growth of Decision sales to existing and new customers is expected to help improve Jaywing’s overall margins as well as increase its recurring revenues. The in-house Research & Development unit within Jaywing is working to deliver our technology road map. Focus has been on automation within reporting to drive greater efficiency as well as further building of Decision functionality to increase scope of delivery. Progress has been pleasing and we can already see the benefits from this work. Future focus will continue on increased automation to drive efficiency within delivery. Employees Given the pressure on revenues, we reduced our UK agency headcount both during FY23 and in the first quarter of FY24. This is never an easy decision, but our employees overall have been very supportive of the plan and the way we have approached it. We believe this will underpin a significant uplift in UK profitability in the current financial year. We opened our new office in Leeds, located in the city centre, and which is ideally suited to collaborative, integrated working. Our employees have continued to adapt to working and collaborating in a hybrid model, and so we have been able to reduce the required office footprint in Leeds, saving £0.2m of costs per annum against the previous office. We recognise that our people are our most important asset. We have embedded our vision of making brands grow and talent thrive and have engaged with our employees to get their input into how to further develop a great place to work, increasing training expenditure and regularly tracking employee satisfaction. Our most recent survey showed an overall employee satisfaction score of 85%. We are also continuing to invest in a combination of experienced hires and talented but less experienced recruits, who represent the Company’s future management. Group revenue per employee remained broadly flat at £77.4k in the year (2022: £78.8k). I would like to thank all our colleagues in both the Australian and UK businesses for their continuing outstanding contribution over the last 12 months. Future Outlook Although the UK environment remains tough, we are confident that we can build profitability further in FY24. Australia has the benefit of a full year of the new OES contracts, and has continued to win new business, with a strong first quarter of FY24. In the UK, we have continued to win new clients for Decision, delivering higher margin business. Our Risk & Data Consulting arm has won significant new business and is close to full capacity. Our UK agency (marketing) business had a tougher start to the new financial year in April and May, but is now recovering and we are continuing to win new business. Having reduced our UK headcount and cost base, we expect to finish the first half with strong run rate profitability that is expected to provide a step up in full year performance. We remain optimistic that the Company will achieve revenue and adjusted EBITDA for FY24 in line with market expectations. Andrew Fryatt Chief Executive Officer Jaywing plc 6 September 2023 7 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Strategic Report Business review Jaywing is a Data Science and Marketing business, with operations in the UK and Australia. Our focus is providing an integrated marketing proposition, enabled by data science, to our existing and potential clients. The parent company acts as a holding company providing management services to its subsidiaries. On a Group basis the business review and future prospects for the business are contained within the Chief Executive’s Report. Non-IFRS measures The financial statements contain all the information and disclosures required by the relevant accounting standards and regulatory obligations that apply to the Group. The annual report and financial statements also include measures which are not defined by generally accepted accounting principles such as IFRS. We believe this information, along with comparable IFRS measures, is useful as it provides investors with a basis for measuring the underlying performance of the Group on a comparable basis. The Board and its executive management use these financial measures to evaluate the Group’s underlying operating performance. Non-IFRS financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with IFRS. Similarly, non-IFRS measures as reported by us may not be comparable with similar measures reported by other companies. Key performance indicators used by the Board and executive managers include: Revenue Adjusted EBITDA(1) Adjusted EBITDA % Operating Loss Loss before Tax Net Debt pre IFRS16(2) Loss per share Average headcount Revenue per head Cash generated from operations 2023 £’000 22,062 2,410 10.9% (11,340) (12,535) (10,346) (13.73p) 285 77.4 1,293 Restated 2022* £’000 23,324 2,206 9.5% (6,086) (6,660)* (8,293)* (7.01p)* 296 78.8 1,587 (1) Adjusted EBITDA represents Earnings Before Interest Tax, Depreciation & Amortisation (‘EBITDA’) before restructuring costs and acquisition & related costs (2) Including accrued interest Revenue for FY23 was £22.1m (2022: £23.3m), a drop of 5% on FY22, following FY22’s strong growth of 16% on FY21. Adjusted EBITDA was £2,410k (2022: £2,206k), a £204k improvement in the underlying Adjusted EBITDA. The result was achieved through strong cost control. The statutory operating loss was £11,340k (2022: loss of £6,086k) and the statutory loss before taxation was £12,535k (2022: loss of £6,660k) following an impairment to Goodwill of £12.1m (2022: £6.1m). This non-cash charge has been recognised against the UK Cash Generating Unit (“CGU”) largely due to the increase in WACC in light of the current economic environment in the UK. The acquisition goodwill relating to the Australia CGU remains unimpaired. Further details of this impairment are shown in Note 14 to the Consolidated Financial Statements. Net cash from operations are £1,293k (2022: £1,587k) due to tight cost control across the group. The Cash Flow statement shows the movement in the cash position of the business. Net Debt At 31 March 2023, Net Debt including accrued interest (pre IFRS16) was £10.3m (2022: £8.3m), representing gross debt of £11.4m (2022: £9.0m) net of cash of £1.1m (2022: £0.7m). The Company’s gross debt is represented by an amount of £9.2m (2022: £7.7m) drawn down from the secured debt funding provided by the “Jaywing Facility” together with £1.8m (2022: £1.0m) of accrued and unpaid interest on the Jaywing Facility and £0.4m of withholding tax on the interest expense (2022: £0.3m). The Jaywing Facility is fully described in Note 18 and Note 30 to the Financial Statements. On 11 August 2022 the Jaywing Facility was increased by £1.0m to £9.2m. The Jaywing Facility has continued to be provided to the Company on the same terms as the original secured loan facility acquired on 2 October 2019, see Going Concern in Principal Accounting Policies. 8 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Impairment As required by IAS 36, the Group has carried out an impairment review of the carrying value of our intangible assets and goodwill. The weighted average cost of capital (“WACC”) was calculated with reference to long-term market costs of debt and equity and the Company’s own cost of debt and equity, adjusted for the size of the business and risk premiums. The calculated WACC rate used for the impairment review was 16.4% for Australia and 16.6% in the UK (2022: 11.5% for Australia and 11.8% in the UK). This was applied to cash flows for each of the cash generating units using estimated growth rates in each business unit. The impairment review was based on two cash generating units being the UK and Australia. As part of the review, a number of scenarios were calculated using the impairment model. These looked at what effect changes in the WACC rates and movements in Revenue and Costs would have to the outcome. The Group has impaired former acquisition goodwill by £12.1m (2022: £6.1m). This non-cash charge has been recognised against the UK Cash Generating Unit (“CGU”) largely due to the increase in WACC in light of the current economic environment in the UK. The acquisition goodwill relating to the Australia CGU remains unimpaired. Going Concern The Group financial statements have been prepared on a going concern basis in accordance with UK Adopted International accounting standards. In coming to their conclusion, the Directors have considered the Group’s profit and cash flow forecasts for period to 31 March 2025. In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. In addition to the normal process of preparing forecasts for the Group, the Board has also considered downside risks and the potential impact of the economic environment on the cash flows of the Group for a period to 31 March 2025. This has been done by looking at various scenarios within the forecasts for the potential effect of changes in the market during the forecast period. In considering their position the Directors have also had regard to letters of support in respect of the secured debt which they have received from each of the holders of that debt. Details of this debt are contained in Note 18 and Note 30. The Group financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. The Directors have a reasonable expectation that the Group has adequate resources to continue in existence for the foreseeable future and have concluded it is appropriate to adopt the going concern basis of accounting in the preparation of the financial statements. 9 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Principal Risks and Uncertainties The evaluation of the Company’s risk management process is the responsibility of the Board. Jaywing has developed its risk reporting framework in conjunction with the business leadership team who take an active and responsible role in this process. Below is a summary of the current key risks. Risk 1. Economic Environment From the start of March 2020 Jaywing has been impacted by the Covid-19 pandemic, with disruption to client and staff. The long-term effects of this on the UK economy are still being felt now with high inflation, interest rates and economic uncertainty. The situation in Ukraine is also having an impact on the world economy, yet the impact on Jaywing directly has been negligible. 2. Loss of key staff Jaywing is dependent on its ability to recruit and retain staff with adequate experience and technical expertise to service its clients. 3. Loss of business from clients / adverse economic environment Loss of business from clients, whether due to the adverse economic environment or other, could lead to a reduction in overall revenue and profitability. Adverse economic environment 4. Changes in technology The digital marketing industry is characterised by constant developments in technology, online media and data science. In this environment, it is vital to be at the forefront of this change, to ensure Jaywing can provide the benefits of these changes in technology to its clients and remain competitive. 5. Liquidity Poor trading and cash flow performance could lead to a lack of ongoing support from its lenders and an inability to raise equity to meet the needs of the business. 6. Compliance with regulations and changes in legislation Failure to comply with regulations such as GDPR and changes in legislation could lead to reputational damage for Jaywing and its clients as well as fines and loss of business. Mitigation The directors monitor emerging news and trends and remain alert to any potential impact on the trading of the Company. Regular forecasting and review of pricing are undertaken to ensure we are responding to changes in the economic environment. The directors also maintain a close control on costs, reducing these to meet revenue where appropriate. The expertise of Jaywing’s people is a key source of competitive advantage and the Company’s remuneration and incentive packages are reviewed regularly to retain and incentivise key staff. The Company also provides an attractive, diverse, inclusive and collaborative working environment and culture. The Company aims to minimise such losses by continuing to focus on providing a high quality service to its clients at all times as well as offering a wide range of services to existing clients and adding new clients through its new business activities. Jaywing has restructured its main business sectors based on clients and markets with the aim of getting closer to each client with Jaywing’s full range of services tailored to their needs and the markets they operate in. This has strengthened our ability to use our full range of services to offer them relevant and effective solutions. Jaywing’s client concentration risk is low. The impact of revenue losses due to an adverse economic environment, on profitability, is mitigated by ensuring that the Company’s cost base is efficiently aligned with its revenues. Inflation is monitored closely by the directors. Jaywing is committed to innovation in data science led products and services and has dedicated resources to this. The Company has close relationships with online media owners (e.g. Google) and has early access to new product developments as a consequence of the significant online media budgets that it manages on behalf of its clients. Artificial intelligence continues to grow and the directors monitor the opportunities that this creates as well as any potential changes required to our business model. Jaywing also has a specialist team focused on the use of technology whose brief is to keep themselves abreast of new developments through their own research and through their relationships with technology providers. Jaywing’s key financial measures are focussed on cash generation and net debt. The Company monitors its trading and cash flow performance closely and takes prompt action to mitigate any adverse trends. See commentary included in the Strategic Report. Jaywing engages advisers in relevant specialisations to assist with compliance in areas such as GDPR. Experts in Jaywing’s business areas can ensure client initiatives are all compliant, alongside external input where appropriate. 10 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Section 172 statement In making decisions over the year, the Directors have considered what would be most likely to promote the success of the Company for the benefit of all stakeholders and have had regard for the following: • • • • • • the likely long-term consequences of any decision; the interests of the Group’s employees; the need to foster the Group’s business relationships with suppliers, customers and others; the impact of the Company’s operations on the community and the environment; the desirability of the Company maintaining a reputation for high standards of business conduct; and the need to act fairly as between shareholders of the Company. the needs to act fairly as between members of the Group. In 2019 the Company adopted the Corporate Governance Code for Small and Mid-Size Quoted Companies from the Quoted Companies Alliance (the “QCA Code”). The Board considers the QCA Code is an appropriate code of conduct for the Company. There are details of how the Company applies the ten principles of the QCA Code on the Company’s investor website; https://www.jaywing.com/investors/governance/. The Corporate Governance Statement forms part of this report. The Chairman’s Statement and Chief Executive’s Report describe the Group’s activities, strategy and future prospects, including the considerations for long term decision making. The Company considers that its major stakeholders are its employees, clients, lenders and shareholders. When making decisions, the interests of these stakeholders are considered informally as part of the Board’s group discussions. The Company is committed to being a responsible employer and strives to create a working environment where its employees are actively engaged and can contribute to its success. The Company understands the value of maintaining and developing relationships with its clients and suppliers, to support its potential for future growth. The Board does not believe that the Group has a significant impact on the environments within which it operates. The Board recognises that the Group has a duty to be responsible and is conscious that its business processes minimise harm to the environment, and that it contributes as far as is practicable to the local communities in which it operates. The Group’s Corporate and Social Responsibility Policy is available on the Group’s investor website and the SECR report for the Group is included in the Directors Report. The Board recognises the importance of maintaining high standards of business conduct. The Group operates appropriate policies on business ethics and provides mechanisms for whistle blowing and complaints which all employees are aware of. These are maintained by the Policy Steering Committee. The Board aims to maintain good relationships with its shareholders and treats them equally. By Order of the Board Andrew Fryatt Chief Executive Officer Jaywing plc 6 September 2023 11 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Directors’ Report The Directors submit their Annual Report on the affairs of the Group and the Company and the audited Financial Statements for the year ended 31 March 2023. Board of Directors Ian Robinson, Non-Executive Chairman Chair of Audit & Risk Committee and member of Remuneration and Nomination Committees Ian is a Non-Executive Director and Chairman of the Audit Committee of Gusbourne plc, an AIM listed English sparkling-wine business. He is also a nonexecutive Director of a number of other privately-owned businesses. He is a Fellow of the Institute of Chartered Accountants in England & Wales and holds an honours degree in Economics from the University of Nottingham. Andrew Fryatt, Chief Executive Andrew has more than 30 years’ experience in technology-dependent businesses, primarily in the Retail and Telecoms sectors. Following an honours degree in Economics from the University of Cambridge, he began his career in the Mars Group, progressing through various marketing roles before joining Kingfisher Group in a senior marketing role. His experience included senior marketing and commercial roles before moving into general management, and he has run major divisions of Daisy and Zen Internet, as well as gaining experience as CEO of Ideal Shopping Direct plc. He has a particular focus on customer excellence and has received several awards on behalf of his businesses for delivering outstanding service. Mark Carrington, Non-Executive Director Member of Audit & Risk, Remuneration and Nomination Committees Mark is a Fellow of the Association of Chartered Certified Accountants. He is a Non-Executive Director of a number of privately- owned businesses both in the UK and Overseas. He is also involved in the provision of management services to a number of other privately-owned and AIM listed businesses. Philip Hanson, Non-Executive Director Chair of Remuneration and Nomination Committees and member of Audit & Risk Committees Philip is a fellow of the Chartered Institute of Marketing and has extensive experience in marketing and ecommerce both in the UK and internationally, having held a number of senior roles in the FMCG and retail financial services sectors – latterly as Global Marketing & ecommerce Director for Travelex. He is also Non-Executive Director of the Bettys & Taylors Group. He was a Director of the French and Australian entities of the Goelet family wine business (SCEA Domaine de Nizas and Red Earth Nominees Pty Ltd respectively) until December 2020. He is a Non-Executive Director of Silver Blue LLC which oversees the worldwide agriculture assets of the Goelet family. Philip was a Director of Travelex Card Services Ltd until December 2015. 12 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Principal activity The principal activity of the Group during the year under review is providing agency and consulting services in the areas of creative and brand strategy, performance marketing, data science and risk. The Company is a holding entity for the Group. Results and dividend The Group’s loss after taxation for the year ended 31 March 2023 was £12.8m (2022: loss of £6.5m). The Directors do not propose to pay a dividend. Net liabilities at 31 March 2023 were £1.2m (2022 Net assets £12.0m). Future developments The future developments of the Group are referred to in the Chief Executive’s Report. Political and charitable donations The Group made charitable donations of £3k (2022: £1k) and no political donations during the current or prior year. Directors’ interests The present membership of the Board, together with biographies on each, is set out on page 12. All those Directors served throughout the year or from appointment. The Directors’ interests in shares in the Company are set out in the Directors’ remuneration report. Directors’ third-party indemnity provisions The Group maintains appropriate insurance to cover Directors’ and Officers’ liability. The Group provides an indemnity in respect of all the Group’s Directors. Neither the insurance nor the indemnity provides cover where the Director has acted fraudulently or dishonestly. Employees The Group is an Equal Opportunities Employer and no job applicant or employee receives more or less favourable treatment on the grounds of age, gender, marital status, sexual orientation, race, colour, religion or belief. It is the policy of the Group that individuals with disabilities, whether registered or not, should receive full and fair consideration for all job vacancies for which they are suitable applicants. Employees who become disabled during their working life will be retained in employment wherever possible and will be given help with any necessary rehabilitation and retraining. Employees of the Group are regularly consulted by local managers and kept informed of matters affecting them and the overall development of the Group. The Group is committed to maintaining high standards of Health and Safety for its employees, customers, visitors, contractors and anyone affected by its business activities. Health and Safety is on the agenda for all regularly scheduled Board meetings. Financial instruments Details of the financial risk management objectives and policies of the Group, including hedging policies, are given in Note 32 to the Consolidated Financial Statements. Share Capital Details of the Company’s Share Capital, including rights and obligations attaching to each class of share, are set out in Note 22 of the Consolidated Financial Statements. There are no restrictions on the transfer of ordinary shares in the capital of the Company, other than customary restrictions contained within the Company’s Articles of Association and certain restrictions which may be required from time-to-time by law, for example, insider trading law. In accordance with the Model Code, which forms part of the Listing Rules of the Financial Conduct Authority, certain Directors and employees are required to seek the prior approval of the Company to deal in its shares. The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and/or voting rights. The Company’s Articles of Association contain limited restrictions on the exercise of voting rights. The Company’s Articles of Association may only be amended by special resolution at a General Meeting of shareholders. Stakeholder engagement Jaywing’s stakeholders are an integral part of the business, they consist of customers, suppliers, employees, shareholders and advisors. Details of how the Directors have engaged with these stakeholders are included within the Corporate Governance Statement. 13 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Streamlined Energy and Carbon Reporting (SECR) We choose to disclose our UK energy use and associated greenhouse gas (GHG) emissions. Specifically, and as a minimum, we are required to report those GHG emissions relating to natural gas, electricity and transport fuel, as well as an intensity ratio, under the Streamlined Energy and Carbon Reporting (SECR) Regulations. To ensure we achieve the transparency required, and deliver effective emissions management, we implement and utilise robust and accepted methods. Accordingly, whilst the Regulations provide no prescribed methodology, we collate our GHG data annually and complete the calculation of our carbon footprint using the latest Defra (Department for Environment, Food and Rural Affairs)/BEIS (Department for Business, Energy & Industrial Strategy) emissions factors. The period covered for the purposes of the SECR section is 1 April 2022 to 31 March 2023 and our calculations are for the following scope: - - Buildings- related energy – natural gas (Scope 1) and electricity (Scope 2) and Employee owned vehicles (grey fleet) (Scope 3) Calculation Methodology The Jaywing GHG emissions were assessed in accordance with Defra’s ‘Environmental reporting guidelines: including Streamlined Energy and Carbon Reporting Requirements’ and use the 2019 emission factors developed by Defra and BEIS. Results Element Direct emissions (Scope 1) – natural gas and LPG Indirect emissions (Scope 2) – from purchases electricity Total tCO2e (Scope 1 & 2) Other indirect emissions (Scope 3) – grey fleet travel Gross Total Emissions 2022/23 (tCO2e) 36,333 41,739 78,072 17,645 95,717 2021/22 (tCO2e) 59,126 63,396 122,522 20,964 143,486 Intensity metric (Gross Emissions): Tonnes of CO2e per employee 336 586 Total energy consumption (kWh) 394,941 621,382 Energy Efficiency As an office-based business, our environmental impact is low and our Corporate Social Responsibility policy is available on https://investors.jaywing.com, which covers our approach to the environment and sustainability. At Jaywing, we • • • • • • • encourage the use of remote working facilities to avoid travelling where possible encourage the use of public transport wherever possible, both through our environmental policy and expenses policy, and where not possible, encourage car sharing or environmentally friendly alternatives. We discourage, where possible, the use of domestic flights operate a cycle to work scheme designed our head office to be as energy efficient as possible, with measures such as passive-stack ventilation and a large amount of secure cycle storage plus showering facilities to encourage cycling have switch off policies, including PIR activated lighting in some buildings, as well as trying to use energy as efficiently as possible have a clear policy on the use of plastics, with particular attention paid to single use plastics aim to recycle all waste material that can be recycled and use local facilities to reduce the transportation of waste materials aim to purchase energy efficient, environmentally and ecologically friendly products • • monitor our energy usage within our buildings. All policies, including our environmental policy, are reviewed annually. 14 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Going Concern The Group financial statements have been prepared on a going concern basis in accordance with UK Adopted International accounting standards. In coming to their conclusion, the Directors have considered the Group’s profit and cash flow forecasts for period to 31 March 2025. In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. In addition to the normal process of preparing forecasts for the Group, the Board has also considered downside risks and the potential impact of the economic environment on the cash flows of the Group for a period to 31 March 2025. This has been done by looking at various scenarios within the forecasts for the potential effect of changes in the market during the forecast period. In considering their position the Directors have also had regard to letters of support in respect of the secured debt which they have received from each of the holders of that debt. Details of this debt are contained in Note 18 and Note 30. The Group financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. The Directors have a reasonable expectation that the Group has adequate resources to continue in existence for the foreseeable future and have concluded it is appropriate to adopt the going concern basis of accounting in the preparation of the financial statements. Major interests in shares As at 31 March 2023, the Company had been notified, in accordance with chapter 5 of the Disclosure and Transparency Rules, of the following voting rights as shareholder of the Company: Lord Michael Ashcroft Lombard Odier Investment Managers Group J & K Riddell A Gardner Bailey Family Canaccord Genuity Group Inc H & J Spinks M Boddy Miton UK Microcap Trust plc Number of voting rights 27,919,737 17,600,709 5,372,638 5,037,470 4,687,500 3,805,000 3,508,772 3,366,667 2,771,035 2023 % 29.9 18.9 5.8 5.4 5.0 4.1 3.8 3.6 3.0 2022 % 25.6 23.6 5.8 5.4 5.0 4.1 3.8 3.6 3.1 Corporate Social Responsibility The Board recognises the importance of social, environmental and ethical matters and it endeavours to take account of the interests of the Group’s stakeholders, including its investors, employees, clients, suppliers and business partners when operating the business. General Meeting Your attention is drawn to the Notice of Meeting either enclosed with this Annual Report or online at https://investors.jaywing.com, which sets out the resolutions to be proposed at the forthcoming General Meeting. Post Balance Sheet Events On 13 April 2023, post period end, the Company granted 1,152,000 LTIP (Long Term Incentive Plan) share options to Andrew Fryatt (CEO) and 4,640,000 CSOP (Company Share Option Plan) options to certain senior employees of the Group. The total number of Shares that can be acquired pursuant to options granted under the LTIP and CSOP amounts to 5,782,000 Shares. The LTIP Options granted to Andrew Fryatt are subject to a minimum vesting price of 10.0 pence per Share and an exercise price of 5.0 pence per Share. The performance period for LTIP Options granted under the LTIP will typically be four years commencing from the date of grant of the relevant LTIP Option. However, in the case of Andrew Fryatt, in recognition of his service to the Company since March 2020, 50% of the LTIP Options will vest and be exercisable on or after the second anniversary of the date of grant, subject to and to the extent that the performance conditions are met. Except in the event of a change of control of the Company and in certain 'good leaver' scenarios, LTIP Options may only be exercised after the expiry of the performance period and to the extent that the relevant performance criterion is met. Shares acquired on exercise of LTIP Options shall be subject to a two-year holding period, during which time they cannot be sold, except in certain circumstances including, but not limited to, the sale of Shares to meet any tax liabilities arising upon exercise of the LTIP Options. The market value CSOP Options were granted over a total of 4,640,000 Shares with an exercise price of 5.0 pence per Share. This total includes the 1,200,000 CSOP Options granted to each of Andrew Fryatt (CEO) and Christopher Hughes (CFO) , and 2,240,000 CSOP Options granted to certain senior employees of the Company. The vesting period of the CSOP Options shall be three years from the date of grant. Except in the event of a change of control of the Company and in certain 'good leaver' 15 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F scenarios, no CSOP Options may be exercised prior to the expiry of the vesting period. Shares acquired on exercise of the CSOP Options shall be subject to a holding period of one year, during which time they cannot be sold, except in certain circumstances including, but not limited to, the sale of Shares to cover the exercise price payable upon exercise of the CSOP Options. No performance conditions attach to the exercise of the CSOP Options. Auditor The Directors confirm that: • • so far as each Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and the Directors have taken all the steps that they ought to have taken as Directors, in order to make themselves aware of any relevant audit information and to establish that the Company’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. The auditor, Grant Thornton UK LLP, has indicated its willingness to remain in office, and a resolution that it be re-appointed will be proposed at the General Meeting. By Order of the Board Andrew Fryatt Director Dated: 6 September 2023 16 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Directors’ Remuneration Report In preparing this report, we have followed the QCA’s Corporate Code of Governance and drawn on best practice available. The Remuneration Committee During the year the Remuneration Committee comprised: Philip Hanson (Chairman) Ian Robinson Mark Carrington The Committee met six times during the year. The Committee seeks input from the Company Secretary. The Committee makes reference to external evidence of pay and employment conditions in other companies and is free to seek advice from external advisers. Remuneration policy The Group’s policy on remuneration for the current year and, so far as is practicable, for subsequent years, is set out below. However, the Remuneration Committee believes that it should retain the flexibility to adjust the remuneration policy in accordance with the changing needs of the business. Any changes in policy in subsequent years will be detailed in future reports on remuneration. The Group must ensure that its remuneration arrangements attract and retain people of the right calibre in order to ensure corporate success and to enhance shareholder value. Its overall approach is to attract, develop, motivate and retain talented people at all levels, by paying competitive salaries and benefits to all its staff. Pay levels are set to take account of contribution and individual performance, wage levels elsewhere in the Group, and with reference to relevant market information. The Group seeks to reward its employees fairly and give them the opportunity to increase their earnings by linking pay to achieving business and individual performance targets. Executive Directors are rewarded on the basis of individual responsibility, competence and contribution, and salary increases also consider pay awards made elsewhere in the Group as well as external market benchmarking. During the year to 31 March 2023 there was one Executive Director on the Board as follows: Andrew Fryatt (Chief Executive) – Appointed 21 April 2020 On 14 March 2022 we announced that Caroline Ackroyd, the Company’s Chief Financial Officer and a board director had resigned to pursue other interests. Interim CFO support was then provided by Ajay Handa (who did not join the Board) until 31 August 2022, when the Company announced the appointment of Christopher Hughes as the Company’s Chief Financial Officer. Christopher is expected to join the Board in due course. The Executive Directors participate in a pension scheme but do not participate in any Group healthcare arrangements. Non-Executive Directors’ fees Fees for Non-Executive Directors are determined by the Board annually, taking advice as appropriate and reflecting the time commitment and responsibilities of the role. The Non-Executive Chairman received an annual fee of £75,000 (2022: £50,000) which is an increase from the previous year following a review of the time commitment and benchmarking of the Chair role in similar AIM listed businesses. Non-Executive Directors’ fees currently comprise a basic fee of £30,000 per annum plus £10,000 for chairing a committee. Non-Executive Directors do not participate in the annual bonus plan, pension scheme or healthcare arrangements. The Company reimburses the reasonable expenses they incur in carrying out their duties as Directors. Remuneration components – Executive Directors A proportion of each Executive Director’s remuneration is performance related. Basic salary Basic salary is set by the Remuneration Committee by considering the responsibilities, individual performance and experience of the Executive Directors, as well as the market practice for executives in a similar position and wage levels elsewhere in the Group. Basic salary is reviewed (but not necessarily increased) annually by the Remuneration Committee. Annual bonus plan The Executive Directors are eligible to participate in the annual bonus plan. The range of award is based on annual salary. The performance requirements, for the ability to earn a bonus, are set by the Committee annually. Long Term Incentive Plan (LTIP) and Company Share Option Plan ( CSOP) On 13 April 2023, post period end, the Company granted 1,152,000 LTIP (Long Term Incentive Plan) share options to Andrew Fryatt (CEO) and 4,640,000 CSOP (Company Share Option Plan) options to certain senior employees of the Group. The total number of Shares that can be acquired pursuant to options granted under the LTIP and CSOP amounts to 5,782,000 Shares. See further details in post balance sheet event note 35. 17 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Directors’ remuneration The total amounts of the remuneration of the Directors of the Group for the years ended 31 March 2023 and 2022 are shown below: 31 March Aggregate emoluments Sums paid to third parties for Directors’ services The emoluments of the Directors are shown below: 31 March Andrew Fryatt Caroline Ackroyd Ian Robinson Philip Hanson Mark Carrington* Total Appointed 21 April 2020 Appointed 21 April 2021 Resigned 14 March 2022 2023 Fees and salary £ 226,667 - 75,000 40,000 30,000 371,667 2023 £ 341,677 30,000 371,677 2022 Fees and salary £ 275,000 189,022 50,000 40,000 30,000 584,022 2022 £ 554,022 30,000 584,022 2023 Pension contributions £ 9,067 - - - - 2022 Pension contributions £ 8,800 6,686 - - - 9,067 15,486 * Fee paid to a third party for the Director’s services The salary of the highest paid Director was 4 times the average salary of all Group employees excluding the Directors in the table above (2022: 5 times). Pensions The Group made pension contributions on behalf of the Executive Directors. The amount is shown in the table above. Directors’ service agreements and letters of appointment Contracts of service are negotiated on an individual basis as part of the overall remuneration package. The contracts of service are not for a fixed period. Details of these service contracts are set out below: Andrew Fryatt Caroline Ackroyd Date of contract 26 March 2020 7 September 2020 Date of appointment 21 April 2020 Notice period 6 months 21 April 2021 N/A resigned 14 March 2022 Company with whom contracted Jaywing plc Jaywing plc In the event of termination of their contracts, each Director is entitled to compensation equal to their basic salary and bonus for their notice period. Non-Executive Directors have letters of appointment, the details of which are as follows: Ian Robinson Philip Hanson Mark Carrington Date of contract Notice period Company with whom contracted 21 May 2014 27 April 2017 21 March 2018 3 months 3 months 3 months Jaywing plc Jaywing plc Jaywing plc 18 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Directors’ interests in shares The Directors’ interests in the share capital of the Company are set out below: 31 March Ian Robinson Philip Hanson Andrew Fryatt 2023 Number of shares 470,267 109,462 120,993 2022 Number of shares 470,267 109,462 96,969 Other related party transactions No Director of the Group has, or had, a disclosable interest in any contract of significance subsisting during or at the end of the year. Disclosable transactions by the Company under IAS 24, Related Party Disclosures, are set out in Note 30. There have been no other disclosable transactions by the Company and its Subsidiaries with Directors of the Company or any of the subsidiary companies and with substantial shareholders since the publication of the last Annual Report. By Order of the Board Philip Hanson Dated: 6 September 2023 19 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Corporate Governance Statement This report is prepared by the Board and describes how the principles of corporate governance are applied, to the extent applicable for a company the size of Jaywing plc. The Board has adopted the QCA Corporate Governance Code and considers that the Company complies with each of the principles of the Code. The following should be noted with regard to the independence of the Company’s Non-Executive Directors. The Board considers Philip Hanson, a Non-Executive Director, to be independent. The Board notes that Ian Robinson and Mark Carrington are associated with one of the Company’s major shareholders which could appear to impair their independence for the purposes of the Code. However, the Board considers that both Ian Robinson and Mark Carrington can bring an independent view to bear on all matters dealt with by the Board and its various Committees. Independence is a Board judgement. There are details of how the Group applies the ten principles of the QCA Code on the Group’s investor website. The Board At 31 March 2023, the Board comprised Non-Executive Chairman Ian Robinson and Non-Executive Directors Philip Hanson and Mark Carrington. Andrew Fryatt was appointed to the Board as Chief Executive Officer on 21 April 2020. The Board is responsible to the shareholders for the proper management of the Group and meets at least six times a year to set the overall direction and strategy of the Group. All strategic operational and investment decisions are subject to Board approval. Caroline Ackroyd, Chief Financial Officer, resigned effective on 14 March 2022 and was replaced by an Interim Chief Financial Officer (non-statutory director), Ajay Handa, on the same date until the 31 August 2022 when the Company announced the appointment of Christopher Hughes as the Company’s Chief Financial Officer. The roles of Chief Executive Officer and Chairman are separate and there is a clear division of their responsibilities. All Directors are subject to re-election at least every three years. The Chairman’s role is to provide leadership to the Board, plan and conduct Board meetings effectively, ensure the Board focuses on its key tasks, and engage the Board in assessing and improving its performance. Board committees Remuneration Committee The Remuneration Committee comprises Philip Hanson (Chair), Ian Robinson and Mark Carrington. The Remuneration Committee, on behalf of the Board, meets at least once a year and as and when necessary to review and approve as appropriate the contract terms, remuneration and other benefits of the Executive Directors and senior management and major remuneration plans for the Group as a whole. The Remuneration Committee approves the setting of objectives for all the Executive Directors and authorises their annual bonus payments for achievement of objectives. The Remuneration Committee approves remuneration packages sufficient to attract, retain and motivate Executive Directors required to run the Group successfully, but does not pay more than is necessary for this service. The Committee did not award any share options or pay rises to Executive Directors during the year. It awarded an annual bonus to the CEO and CFO as set out in the Directors Remuneration Report in respect of the prior financial year. It has not awarded an annual bonus in respect of the year to 31 March 2023. Further details of the Group’s policies on remuneration and service contracts are given in the Directors’ Remuneration report. Audit & Risk Committee The Audit & Risk Committee comprises Ian Robinson (Chair), Mark Carrington and Philip Hanson. By invitation, the meetings of the Audit & Risk Committee may be attended by the other Directors and the auditor. The Committee meets not less than two times annually. The Audit & Risk Committee oversees the monitoring of the adequacy and effectiveness of the Group’s internal controls, accounting policies and financial reporting and provides a forum for reporting by the Group’s external auditor. Its duties include keeping under review the scope and results of the audit and its cost effectiveness, consideration of management’s response to any major audit recommendations and the independence and objectivity of the auditor. The Audit & Risk Committee review the significant estimates, judgements and risks in relation to the annual report and these are outlined in the Strategic Report. The Committee also reviews the risks outlined in the Principal Risks and Uncertainties and challenges the Executive Directors on the controls and processes in place to manage these. The effectiveness of the external audit process has been assessed through discussions with both management and the auditors, and it is proposed that Grant Thornton be reappointed as external auditor. Nomination Committee The Nomination Committee comprises Philip Hanson (Chair), Ian Robinson and Mark Carrington. It is responsible for nominating to the Board candidates for appointment as Directors, having regard for the balance and structure of the Board. The committee meets at least once a year. The terms of reference for all committees are available on the Group’s website. 20 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Company Secretary The Company Secretary is responsible for advising the Board through the Chairman on all governance issues. All Directors have access to the advice and services of the Secretary. Board performance and evaluation In addition to the re-election of Directors every three years, the Board has a process for evaluation of its own performance and that of its committees and individual Directors, including the Chairman. Attendance at Board and Committee meetings The Directors attended the following Board and Committee meetings during the year ended 31 March 2023: Total meetings held Ian Robinson Philip Hanson Mark Carrington Andrew Fryatt Board 12 Remuneration 6 Audit & Risk 2 Nomination 1 12 12 12 12 6 6 6 6 2 2 2 2 1 1 1 1 Relationships with shareholders The Board recognises the importance of effective communication with the Company’s shareholders to ensure that its strategy and performance is understood and that it remains accountable to shareholders. The Company communicates with investors through the Company’s website: https://investors.jaywing.com. At the Company’s AGM shareholders are given the opportunity to question the Board. The Company obtains feedback from its broker on the views of institutional investors on a non-attributed and attributed basis and any concerns of major shareholders would be communicated to the Board. Interim Statements, audited Annual Reports, press releases and Internal controls The Board acknowledges its responsibility for establishing and maintaining the Group’s system of internal controls and will continue to ensure that management keeps these processes under regular review and improves them where appropriate. Management structure There is a clearly defined organisational structure throughout the Group with established lines of reporting and delegation of authority based on job responsibilities and experience. Financial reporting Monthly management accounts provide relevant, reliable, up-to-date financial and non-financial information to management and the Board. Annual plans, forecasts and performance targets allow management to monitor the key business and financial activities and the progress towards achieving the financial objectives. The annual budget is approved by the Board. Monitoring of controls The Audit Committee receives reports from the external auditor and assures itself that the internal control environment of the Group is operating effectively. There are formal policies and procedures in place to ensure the integrity and accuracy of the accounting records and to safeguard the Group’s assets. Significant capital projects and acquisitions and disposals require Board approval. Corporate Social Responsibility The Board recognises the importance of social, environmental and ethical matters and it endeavours to take into account the interests of the Group’s stakeholders, including its investors, employees, clients, suppliers and business partners when operating the business. Employment At a subsidiary level, each individual company has established policies which address key corporate objectives in the management of employee relations, communication and employee involvement, training and personal development and equal opportunity. The Board recognises its legal responsibility to ensure the wellbeing, safety and welfare of its employees and to maintain a safe and healthy working environment for them and for its visitors. Health and Safety is on the agenda for regularly scheduled plc Board and Executive Team meetings. Environment By their nature, the Group’s regular operations are judged to have a low environmental impact and are not expected to give rise to any significant inherent environmental risks over the next 12 months. By Order of the Board Andrew Fryatt Dated: 6 September 2023 21 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Directors’ Responsibilities Statement The directors are responsible for preparing the Strategic Report, Directors’ Report, the Directors’ Remuneration 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 have to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable law, and they have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law, including FRS 101 ‘Reduced Disclosure Framework’. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the company and group for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; • • make judgements and accounting estimates that are reasonable and prudent; • for the Group financial statement state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; for the parent company state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business. • • 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 confirm that: • • so far as each director is aware, there is no relevant audit information of which the company’s auditor is unaware; and the directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the company’s auditor is aware of that information. The directors are responsible for preparing the annual report in accordance with applicable law and regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. By Order of the Board Andrew Fryatt Dated: 6 September 2023 22 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Independent auditor’s report to the members of Jaywing plc Opinion Our opinion on the financial statements is unmodified We have audited the financial statements of Jaywing plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 March 2023, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity, notes to the Consolidated financial statements, including a summary of significant accounting policies, the Company Profit and Loss account, the Company Balance Sheet, the Company Statement of Changes in Equity and the notes to the Parent company financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK-adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice). In our opinion: • • • • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2023 and of the group’s loss and the parent company’s loss for the year then ended; the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (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 FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern. A description of our evaluation of management’s assessment of the ability to continue to adopt the going concern basis of accounting, and the key observations arising with respect to that evaluation is included in the Key Audit Matters section of our report. In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the group’s and the parent company’s business model including effects arising from macro-economic uncertainties such as current interest and inflation rates, we assessed and challenged the reasonableness of estimates made by the 23 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F directors and the related disclosures and analysed how those risks might affect the group’s and the parent company’s financial resources or ability to continue operations over the going concern period. 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. 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 the parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are 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. Our approach to the audit Overview of our audit approach Overall materiality: Group: £222,000, which represents approximately 1% of the group’s revenue. Parent company: £140,000, which represents 0.5% of the parent company’s total assets at the planning stage of the audit. Key audit matters in respect of both the group and parent company were identified as: • Going concern (same as previous year for the Group but new for the parent company); Key audit matters in respect of the group were identified as: • Revenue recognition (same as previous year); • Impairment of goodwill and other non-current assets (same as previous year); and • Business combinations including deferred and contingent Materiality Key audit matters Scoping consideration (new). Key audit matters in respect solely of the parent company were identified as: • Impairment of investments in subsidiaries (same as previous year). Our auditor’s report for the year ended 31 March 2022 included no key audit matters that have not been reported as key audit matters in our current year’s report. A full scope audit was performed on the financial information of two components that were determined to be significant. An audit of one or more classes of transactions, account balances or disclosures was performed on one component within the Group. Analytical procedures at group level was performed on eight components. The components where we performed full or specified audit procedures accounted for 97% of the Group’s revenue, 83% of the Group’s total assets and 100% of the Group’s loss before tax. The approach taken differs to the prior year and this is described further in the section below named ‘An overview of the scope of our audit’. 24 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 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 that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit. Description Audit response KAM Disclosures Key results High Potential financial statement impact Impairment of goodwill and other non-current assets Revenue recognition Going concern Impairment of investments in subsidiaries (Parent company only) Business combinations IFRS 16 balances Management override of controls Wages and salaries Trade receivables Contract assets and liabilities Trade payables Bank and cash Low Low Extent of management judgement High Key audit matter Significant risk Other risk Key Audit Matter – Group How our scope addressed the matter – Group Revenue recognition In responding to the key audit matter, we performed the following audit procedures: 25 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Key Audit Matter – Group How our scope addressed the matter – Group • Assessed revenue recognition policies for compliance with the requirements of International Financial Reporting Standard (‘IFRS’) 15 ‘Revenue from Contracts with Customers’, and tested the revenue recorded in the year for adherence to the policy adopted; • Used data analytics to assess entries made to the revenue nominal account and investigated any outside of our expectation, including agreeing to supporting evidence; • • For a sample of open projects in the last two months of the year agreed to supporting documentation including signed contract, invoice and timesheet data to corroborate the occurrence of revenue; For the sample of open projects, recalculated expected revenue based on the input method per IFRS 15 'Revenue from Contracts with Customers' to assess management's judgement regarding revenue recognised in the year; • Selected a sample of retainers within the last month of the year to supporting documentation including signed contract to corroborate the occurrence of revenue and that revenue was recognised in the correct period; and • Assessed whether there was an indication of loss-making contracts (such as by identifying contracts with negative margins), and held discussions with management to understand any negative margins included on client contracts which may have an indication of loss- making jobs at year end. Our results Based on our audit work, we did not identify material misstatements or fraudulent transactions in the revenue recognised in the year to 31 March 2023. We identified revenue recognition as one of the most significant assessed risks of material misstatement due to fraud and error. The Group enters into a high volume of transactions and some contracts are entered into which span the 31 March 2023 year end. The contracts across all revenue streams have varying terms and degrees of complexity. We have pinpointed the significant risk of fraud in revenue recognition to open projects which have had time incurred within the last 2 months of the year; and the last month of the year for the retainers revenue. These are open contracts which are not yet complete and include more judgement around the amount of revenue to recognise and therefore have heightened potential for material misstatement due to fraud and error. We have also pinpointed the risk to any transactions impacting revenue, where the offsetting side of the journal does not affect accounts receivable or cash balances, meaning they pose a risk due to their unusual nature. This is across all revenue streams. Relevant disclosures in the Annual Report and Accounts for the year ended 31 March 2023 • Financial statements: Principal Accounting Policies • Financial statements: Note 1 to the consolidated financial statements, Segmental analysis • Financial statements: Note 17 to the consolidated financial statements, Contract Assets and Liabilities Impairment of goodwill and other non- current assets In responding to the key audit matter, we performed the following audit procedures: We identified impairment of goodwill and other non-current assets as one of the most 26 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Key Audit Matter – Group How our scope addressed the matter – Group significant assessed risks of material misstatement due to error. The carrying value of goodwill at 31 March 2023 was £10.1m (2022: £21.7 million) after an impairment charge of £12.1m (2022: £6.1m). Based on the current trading conditions in the environment within which the Group operates, we have identified a significant risk in relation to the impairment of goodwill and other non-current assets, pinpointed to the UK cash-generating unit (CGU), based on the size of the balance and the expected headroom. The goodwill in respect of the UK CGU is subject to an annual impairment review under International Accounting Standard ('IAS') 36 'Intangible Assets'. The key judgements made by management in assessing goodwill and other non-current assets for impairment include, due to the sensitivity of amounts determined to changes in these assumptions, the growth and discount rates applied in the discounted cash flow calculations, and the identification of CGUs. • Obtained and challenged the impairment review performed by management, assessing and testing key inputs; • Assessed management’s allocation of assets to CGUs and challenged the appropriateness of CGUs identified within the group; • Challenged the assumptions and calculations incorporated in the impairment review of goodwill and intangible assets and subsequent impairment assessments; • Assessed the reasonableness of the discount rate calculated by management’s expert, including through the use of our internal valuation experts; • Recalculated and challenged the implied growth rates included in the model by comparing the actual results to historical forecasting and assessing post-year end performance against budget; • Evaluated management’s sensitivity analysis and performed additional sensitivities to understand the impact of reasonably possible changes on the impairment charge; and • Assessed the disclosures prepared in the financial statements for appropriateness in accordance with IAS 36. Relevant disclosures in the Annual Report and Accounts for the year ended 31 March 2023 • • Financial statements: Principal Accounting Policies Financial statements: Notes 14 and 15 to the consolidated financial statements, Goodwill and Other intangible assets, respectively Our results From our audit work performed we are satisfied that the impairment review is appropriate. We are satisfied that the impairment charge of £12.1m is not materially misstated and consequently that the goodwill and other non-current assets are held at an appropriate carrying value. Business Combinations (including deferred and contingent consideration) We identified business combinations as one of the most significant assessed risks of material misstatement due to error. The acquisition of Midisi Limited gave rise to consideration in the form of cash, deferred and contingent consideration. IFRS 3 ‘Business Combinations’ requires most assets and liabilities in the consolidated financial statements to be recorded at fair value. There is significant management judgement involved in determining the fair value of the assets and liabilities acquired, In responding to the key audit matter, we performed the following audit procedures: • Obtained management’s purchase price allocation assessment for the acquisition in the year, assessed it for reasonableness and agreed it to supporting legal documentation; • Obtained and inspected legal documentation to corroborate the details of the acquisition and understand all elements of the transaction and agreed the consideration paid / payable to supporting documentation; • Read the acquisition documentation to ensure consideration is appropriately defined and 27 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Key Audit Matter – Group How our scope addressed the matter – Group including the calculation of the fair value of technology and customer-related intangible assets acquired, and the discount rate and long-term growth rates used in the valuation. There is also significant management judgement in determining the contingent consideration as this is reliant on whether future conditions are met. . Relevant disclosures in the Annual Report and Accounts for the year ended 31 March 2023 • • Financial statements: Principal Accounting Policies Financial statements: Note 32 to the consolidated financial statements, Business combination quantified, in addition to inspecting the related conditions to classify deferred and contingent balances; • Assessed the treatment of the acquisition in accordance with IFRS 3, specifically around the valuation of contingent consideration and intangible assets recognition; • Tested the acquisition balance sheet by agreeing material balances to supporting evidence, including cash balances to bank letter; • Utilised our valuation experts to assist in assessing the work performed by management in relation to the valuation of acquired intangible assets and consideration paid. This included challenging whether the methodology used in the valuation is in accordance with acceptable valuation methods and whether inputs such as future profits, attrition rates and discount rates used are appropriate; and • Assessed the disclosures in the financial statements in relation to these transactions. Our results Based on our audit work performed we have not identified material misstatements relating to the valuation of intangible assets arising on acquisition. Key Audit Matter – Group and Parent company How our scope addressed the matter – Group Going concern We identified going concern as one of the most significant assessed risks of material misstatement due to error. Due to the disruption caused to the UK economy in recent years and the current high interest and inflationary environment, there is a heightened risk that the entity will not be able to continue in operation for the foreseeable future. In recent years the group and parent company have both suffered losses which have weakened their respective financial positions. In undertaking their assessment of going concern for the Group and the Parent company, the directors considered the impact of macro- economic factors in their forecast future performance of the Group and the Parent company. and Parent company In responding to the key audit matter, we performed the following audit procedures: • Obtained management’s assessment of the use of the going concern assumption and considered for reasonableness; • Examined the reasonabless of management’s going concern assumptions and supporting information for the going concern period, including budgets and cash flow forecasts; • Assessed the accuracy of management’s forecasting by comparing the reliability of past forecasts to management’s actual results, and considered whether management’s historic forecasting accuracy impacts the reliance we can place upon the forecasts provided; • Obtained management’s sensitivity analysis, including reverse stress test, and 28 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F The directors have concluded, based on the various scenarios developed, that the Group and the Parent company have sufficient resources available to meet their liabilities as they fall due untill March 2025, and have concluded that there are no material uncertainties that may cast significant doubt over the Group’s and the Parent company’s ability to continue as a going concern. assessed the likelihood of the assumptions which would mean that the going concern assumption was not appropriate; • Assessed the plausibility of the mitigating actions available to management to continue as a going concern if downside sensitivities were to crystalise; • Assessed the financing facilities which are in place, including speaking directly to the lenders and obtaining the letters of support which have been provided from the loan holders and shareholders; • Obtained confirmation of post-year end performance and cash position to assess whether this is in line with budgeted results; • Evaluated the arithmetical accuracy and consistency of management’s going concern base case model; and • Assessed the adequacy of related disclosures within the annual report and accounts. Relevant disclosures in the Annual Report and Accounts for the year ended 31 March 2023 Our results • • Financial statements (Group): Principal accounting policies, Going concern Financial statements (Parent company) Note 1 ‘Accounting policies’ to the Parent company financial statements, Going concern We have nothing to report in addition to that stated in the ‘Conclusions related to going concern’ section of our report. Key Audit Matter – Parent company How our scope addressed the matter– Parent company Impairment of investments in subsidiaries We identified impairment of investments in subsidiaries as one of the most significant assessed risks of material misstatement due to error. The carrying value of the Parent company’s investments in subsidiaries at 31 March 2023 was £20.5m (2022: £26.2m) after an impairment charge of £8.8m (2022: £9.2m). Based on the current trading conditions in the environment within which the parent company operates, we have identified an elevated risk in relation to the impairment of investments in subsidiaries. The investments held in subsidiaries are subject to an annual assessment as to whether there is any indication that the assets may be impaired. If any such indication exists, management are required to estimate the recoverable amount of the investments held in accordance with International Accounting Standard ('IAS') 36 'Intangible Assets'. In responding to the key audit matter, we performed the following audit procedures: • Obtained management’s assessment of impairment indicators and considered its reasonableness; • Obtained and challenged the impairment review performed by management, testing key inputs and performing sensitivity analysis; • Challenged the assumptions and calculations incorporated in the impairment review of investments in subsidiaries and subsequent impairment assessments; • Assessed the reasonableness of the discount rate calculated by management’s expert, including the use of our internal valuation experts; • Recalculated and challenged the implied growth rates included in the model by comparing the actual results to historical 29 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F The key judgements made by management in assessing the carrying value of investments in subsidiaries for impairment include the growth and discount rates applied in the discounted cash flow calculations, due to the sensitivity of the determined amount to changes in these assumptions. forecasting and assessing post-year end performance against budget; and • Assessed the disclosures prepared in the financial statements for appropriateness in accordance with IAS 36. Relevant disclosures in the Annual Report and Accounts for the year ended 31 March 2023 • Financial statements: Note 12 to the Parent company financial statements, Investments Our results We did not identify a material misstatement in relation to the impairment charge recognised. Our application of materiality We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report. Materiality was determined as follows: Materiality measure Group Parent company Materiality for financial statements as a whole Materiality threshold We define materiality as the magnitude of misstatement in the financial statements that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of these financial statements. We use materiality in determining the nature, timing and extent of our audit work. £222,000, which is approximately 1% of the Group’s revenue. £140,000, which is 0.5% of the Parent company’s total assets at the planning stage of the audit. Significant judgements made by auditor in determining materiality In determining materiality, we made the following significant judgements: In determining materiality, we made the following significant judgements: • Revenue is a key • The Parent company is a performance indicator for management as identified within the Strategic Report and is the focus for further growth of the Group. We therefore considered revenue to be the most appropriate benchmark for the Group. • We determined a percentage of 1% to be appropriate based on the Group’s size and holding company which has no trade, so we therefore considered total assets to be the most appropriate benchmark for the Parent company. • The percentage of 0.5% was selected based on the risk profile of the company as a component within a listed entity Group. Materiality for the current year is higher than the level that we determined for the year ended 30 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Materiality measure Group Parent company 31 March 2022 due to materiality in the prior year being capped as a percentage of group materiality. complexity as an AIM- listed entity. Materiality for the current year is higher than the level that we determined for the year ended 31 March 2022 due to a change in the measurement percentage being applied to total revenue. Performance materiality used to drive the extent of our testing We set performance materiality at an amount less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. Performance materiality threshold £166,500, which is 75% of financial statement materiality. £105,000, which is 75% of financial statement materiality. Significant judgements made by auditor in determining performance materiality In determining performance materiality, we made the following significant judgements: In determining performance materiality, we made the following significant judgements: • that management of the group maintain an effective control environment; and • our experience auditing the financial statements of the Group, including the limited number and quantum of misstatements and significant control deficiencies identified in previous audits. • • that management of the parent company maintain an effective control environment; and in our experience of previous audits of the parent company we have not identified a significant number of uncorrected misstatements nor significant control deficiencies. We determine specific materiality for one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. We determined a lower level of specific materiality for the following areas: We determined a lower level of specific materiality for the following areas: • Directors’ remuneration; and • Directors’ remuneration; • Related party transactions. and • Related party transactions. Specific materiality Specific materiality 31 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Materiality measure Group Parent company Communication of misstatements to the audit committee Threshold for communication We determine a threshold for reporting unadjusted differences to the audit committee. £11,100 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. £7,000 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements. Overall materiality – Group Overall materiality – Parent company Revenue £26,892,000 PM £166,500 75% FSM £222,000, approx.1% Total assets £22,771,000 PM £105,000 75% FSM £140,000, 0.5% of total assets at the planning stage TFPUM £55,500 25% TFPUM £35,000 25% FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements An overview of the scope of our audit We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular matters related to: Understanding the group, its components, and their environments, including group-wide controls • We obtained an understanding of the group and its environment, including group-wide controls, and assessed the risks of material misstatement at the group level; • We obtained an understanding of the individual components, including component specific controls, and assessed the risks of material misstatement at the Group level. We held planning discussions with the Group’s management team; • We obtained an understanding of the business processes for key areas of focus, including significant risks, in order to confirm our understanding of the control environment across the Group; and • We documented and assessed the design and implementation of controls related to key audit matters communicated in this report 32 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Identifying significant components • We identified a total of eleven components, of which two were identified as significant based on their individual financial significance to the Group. The measures used to determine significance were based on the Group’s revenue, the Group’s loss before tax and the Group’s total assets. • Additional components were selected based on an assessment of the risk of material misstatement to the group. For these components an audit of one or more accounts, balances, class of transactions or disclosures (specific-scope audit) was performed. Type of work to be performed on financial information of parent and other components (including how it addressed the key audit matters) • We performed an audit of the financial information of the component using component materiality (full-scope audit) on two components identified as significant. These full-scope audits included our work on the revenue recognition key audit matter as described in the key audit matter section of our report. • We performed an audit of one or more classes of transactions, account balances or disclosures (specific- scope audit) on one component identified as likely to include significant risks to the group. We identified impairment of investments in subsidiaries as a key audit matter and the work we performed to address this is as described in the key audit matters table above. • We performed analytical procedures on the financial information of the remaining components. • We identified impairment of goodwill and other non-current assets and going concern at a group level as key audit matters. The procedures performed in respect of these have been included in the key audit matter section of our report. Performance of our audit • We performed full and specific-scope audit procedures across the components in accordance with the scope described above with the support of one component auditor. Audit approach No. of components % coverage total assets % coverage revenue % coverage LBT 100 0 0 27 56 17 97 0 3 100% 100% 100% Full-scope audit Specific-scope audit Analytical procedures Total 2 1 8 10 Communications with component auditors • The Group engagement team communicated with one component auditor covering one component performing a single full-scope audit. The Group audit team were involved in all stages of their work, from planning and risk assessment, through fieldwork and as part of concluding procedures. Changes in approach from the previous period • Our audit scope has changed since the prior year. As a result of the trade and assets of Frank Digital Pty Ltd being transferred into Jaywing Australia Pty Limited the component is no longer individually financially significant and therefore analytical procedures were performed at Group level. Other information The other information comprises the information included in the annual report and accounts for the year ended 31 March 2023, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report and accounts for the year ended 31 March 2023. Our 33 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themsleves. 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. Our opinion on other matters prescribed by the Companies Act 2006 is unmodified 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. Matter on which we are required to report under the Companies Act 2006 In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 22, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (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. 34 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307FIrregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below: • We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or whether they had any knowledge of actual, suspected or alleged fraud. We corroborated our enquiries through our analysis of board minutes. • We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and the parent company and determined that the most significant are UK-adopted international accounting standards (for the group), Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (for the parent company) and the Companies Act 2006. • We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, through discussion with the directors and the Audit Committee, and from inspection of the Group board minutes and legal and regulatory correspondence. We discussed the policies and procedures regarding compliance with laws and regulations across the Group with the directors and the Audit Committee, and reviewed meeting minutes to identify any instances of non-compliance with laws and regulations. • We assessed the susceptibility of Jaywing plc's consolidated financial statements to material misstatement, including how fraud might occur, by meeting with management from relevant parts of the business to understand where they considered there was a susceptibility to fraud. We also considered performance targets and their influence on efforts made by management to manage earnings or influence the perceptions of analysts. This included the evaluation of the risk of management override of controls. We determined that the principal risks were in relation to: journal entries that reclassified costs from the income statement to the balance sheet or were posted by senior finance personel; potential management bias in determining accounting estimates, especially in relation to the calculation of impairment of intangible assets; and transactions with related parties. • Audit procedures performed by the engagement team included: - - - - - - journal entry testing, with a focus on material manual journals, including those posted by senior finance personnel and those posted directly to the consolidation that reduced costs in the last quarter of the financial year; performing stress testing on management’s impairment calculation; challenging assumptions and judgements made by management in its significant accounting estimates; testing the completeness of the Group's related party transactions through information obtained at the Parent and other component entities and corroborating that those transactions had a valid business purpose; assessing matters reported through the Group's whistleblowing programme and the results of management's evaluation of such matters; and assessing the compliance of disclosures in the annual report and accounts with applicable financial reporting requirements. • These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it. • The engagement partner’s assessment of the appropriateness of the collective competence and capabilities of the engagement team included consideration of the engagement team's: 35 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F- - - understanding of, and practical experience with, audit engagements of a similar nature and complexity, through appropriate training and participation; knowledge of the industry in which the Group and Parent company operate; and understanding of the legal and regulatory frameworks applicable to the Group and the Parent company. • Relevant laws and regulations and potential fraud risks were communicated to all engagement team members. We remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. • We enquired of the component auditor to request details of any instances of non-compliance with laws and regulations that could give rise to a material misstatement of the Group financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our reithereport 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. Victoria McLoughlin Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Leeds 6 September 2023 36 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Consolidated Statement of Comprehensive Income For the year ended 31 March Revenue Other operating income Operating expenses Operating Loss Finance costs Loss before tax Tax (expense)/credit Loss for the year Note 1 2 3 4 5 Loss for the year is attributable to: Non-controlling interests Owners of the parent Other comprehensive income Items that will be reclassified subsequently to profit or loss Exchange differences on retranslation of foreign operations 27 Total comprehensive loss for the period Total comprehensive loss is attributable to: Non-controlling interests Owners of the Parent Basic and diluted loss per share Loss per share 26 6 2023 £’000 Restated 2022* £’000 22,062 23,324 507 40 (33,909) (29,450) (11,340) (1,195) (12,535) (291) (12,826) - (12,826) (12,826) (368) (13,194) - (13,194) (13,194) (6,086) (574) (6,660) 123 (6,537) 12 (6,549) (6,537) 279 (6,258) 12 (6,270) (6,258) (13.73p) (7.01p) The accompanying Notes form part of these Consolidated Financial Statements. *The comparative information has been restated due to misstatements in the prior period as discussed in note 34. 37 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Consolidated Balance Sheet As at 31 March Non-current assets Property, plant and equipment Goodwill Deferred tax asset Other intangible assets Current assets Trade and other receivables Contract assets Current tax asset Cash and cash equivalents Total assets Current liabilities Borrowings Trade and other payables Contract Liabilities Current lease liabilities Current tax liabilities Provisions Non-current liabilities Non-current lease liabilities Provision Deferred tax liability Trade and other payables Total liabilities Net (liabilities) / assets Equity Equity attributable to owners of the parent Share capital Share premium Capital redemption reserve Treasury shares Foreign currency translation reserve Retained earnings Equity attributable to owners of the parent Non-controlling interest Total equity Note 12 14 20 15 16 17 18 18 19 17 13 21 13 21 20 19 22 23 25 24 27 28 26 2023 £’000 4,023 10,602 620 2,125 17,370 4,418 352 - 1,089 5,859 23,229 11,435 5,810 983 380 20 - 18,628 2,638 570 592 2,021 5,821 Restated 2022* £’000 2,173 21,705 644 69 24,591 6,415 453 32 714 7,614 32,205 9,007 7,931 1,408 395 - 42 18,783 1,448 - - - 1,448 24,449 20,231 (1,220) 11,974 34,992 10,088 125 (25) (250) (46,150) (1,220) - (1,220) 34,992 10,088 125 (25) 118 (33,324) 11,974 - 11,974 *The comparative information has been restated due to misstatements in the prior period as discussed in note 34. These Financial Statements were approved by the Board of Directors on 6 September 2023 and were signed on its behalf by: Andrew Fryatt Director Company number: 05935923 The accompanying Notes form part of these Consolidated Financial Statements. 38 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Consolidated Cash Flow Statement For the year ended 31 March Cash flow from operating activities Loss after tax Adjustments for: Impairment of Goodwill Depreciation of property, plant & equipment Depreciation and impairment of right of use assets Amortisation of intangibles Financial costs Taxation expense/(credit) Operating cash flow before changes in working capital Decrease/(Increase) in trade and other receivables (Decrease)/Increase in trade and other payables Cash generated from operations Interest paid Net tax paid Net cash flow from operating activities Cash flow from investing activities Payment of deferred consideration Acquisition of subsidiaries Acquisition of property, plant and equipment Net cash outflow from investing activities Cash flow from financing activities Increase in borrowings Repayment of Lease Liabilities (IFRS16) Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash and cash equivalents comprise: Cash at bank and in hand Note 2023 £’000 Restated 2022* £’000 (12,826) (6,537) 3 3 3 3 4 5 33 12 18 18 18 12,095 245 641 320 1,195 291 1,961 1,986 (2,654) 1,293 - (21) 1,272 (818) (400) (483) (1,701) 1,500 (696) 804 375 714 1,089 6,131 327 752 730 574 (123) 1,854 (168) (99) 1,587 (58) (240) 1,289 (442) - (163) (605) - (722) (722) (38) 752 714 1,089 714 The accompanying Notes form part of these Consolidated Financial Statements. *The comparative information has been restated due to misstatements in the prior period as discussed in note 34. 39 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Consolidated Statement of Changes in Equity Share Capital Share Premium Account Capital Redempti on Reserve Treasury Shares Foreign Currency Translatio n Reserve Retained Earnings Equity attributabl e to parent Non- controlling Interest Total equity £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 34,992 10,088 125 (25) (161) (26,332) 18,687 354 19,041 - - - - - (153) (153) - (153) 34,992 10,088 125 (25) (161) (26,485) 18,534 354 18,888 - - - - - - - - - - - - - - - - - - - - - - - 279 279 (290) (290) (290) (290) (6,549) (6,549) - 279 (366) (366) 12 - (656) (656) (6,537) 279 (6,839) (6,560) (354) (6,914) Balance at 31 March 2021 (as previously stated) Prior year adjustment (see note 34) Restated Balance at 31 March 2021* Acquisition of subsidiaries NCI Transactions with owners Profit/(loss) for the period* Retranslation of foreign currency Total comprehensive income for the period* Balance at 31 March 2022* 34,992 10,088 125 (25) 118 (33,324) 11,974 Loss for the period Retranslation of foreign currency Total comprehensive income for the period - - - - - - - - - - - - - (12,826) (12,826) (368) - (368) (368) (12,826) (13,194) Balance at 31 March 2023 34,992 10,088 125 (25) (250) (46,150) (1,220) - - - - - 11,974 (12,826) (368) (13,194) (1,220) The accompanying Notes form part of these Consolidated Financial Statements. *The comparative information has been restated due to misstatements in the prior period as discussed in note 34. 40 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Principal Accounting Policies Jaywing plc is a Company incorporated in the UK and is AIM listed. The Consolidated Financial Statements consolidate those of Jaywing plc and its subsidiaries (together referred to as the ‘Group’). The Consolidated Financial Statements have been prepared and approved by the Directors in accordance with UK Adopted International accounting standards. The Consolidated Financial Statements have been prepared under the historical cost convention, except for the revaluation of any assets and liabilities carried at fair value. Items included in both the consolidated and company financial statements are measured using the currency of the primary economic environment in which the Group operates (‘the functional currency’). The financial statements are presented in ‘Pounds Sterling’ rounded to the nearest thousand (£’000), which is also the company’s functional currency. The principal accounting policies of the Group are set out below. The policies have remained unchanged from the previous year. Going concern The Group financial statements have been prepared on a going concern basis in accordance with UK Adopted International accounting standards. In coming to their conclusion, the Directors have considered the Group’s profit and cash flow forecasts for period of at least 12 months from the date these financial statements were approved. In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. In addition to the normal process of preparing forecasts for the Group, the Board has also considered downside risks and the potential impact of the economic environment on the cash flows of the Group for a period to 31 March 2025. This has been done by looking at various scenarios within the forecasts for the potential effect of changes in the market during the forecast period. In considering their position the Directors have also had regard to letters of support in respect of the secured debt which have received from each of the holders of that debt confirming that the debt will not be called in and support will be provided for the foreseeable future. Details of this debt are contained in Note 18 and Note 30. The Group financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. The Directors have a reasonable expectation that the Group has adequate resources to continue in existence for the foreseeable future and have concluded it is appropriate to adopt the going concern basis of accounting in the preparation of the financial statements. Basis of consolidation Subsidiaries are entities controlled by the Group. Control exists when the Group has the rights to variable returns from its involvement with the investee and has the ability to affect these returns through its power over the investee. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases. Transactions between subsidiary companies are eliminated on consolidation. Revenue Revenue is generated mainly under the following four contractual models: 1. Monthly retainers 2. Project-based 3. Consulting day rates 4. Licences (with and without support) To determine whether to recognise revenue, the Group follows a 5-step process: 1. Identify the contract with the customer 2. Identify the performance obligations 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations 5. Recognise revenue when the performance obligations are satisfied The Group often enters into transactions involving a range of the Group’s products and services, for example providing a client with data consultancy and brand development work. In all cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. Revenue is recognised over time, as the Group satisfies performance obligations by transferring the promised goods or services to its customers in accordance with IFRS15.35 (c). 41 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these on the face of the consolidated balance sheet. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises a receivable in its consolidated balance sheet as a contract asset. Monthly retainers A client will sign up to a contract for a period of between six and 18 months, with a fixed fee each month for an agreed amount of work to be performed. Under each contract, there may be more than one service provided to the customer, such as Pay Per Click (PPC) and Search Engine Optimisation (SEO) management. These will have agreed KPIs and are separately identifiable, hence are identified as separate performance obligations. These services will be set out in the contract with revenue amounts associated and the revenue streams will be recognised separately. Most fees are fixed but some fees are variable each month and are based on a ratchet scale calculation. The transaction price is set out in the contract for each service provided and revenue is allocated to the various performance obligations on this basis. The customer may choose to take additional services for a period of time, which would be subject to a separate agreement. Any performance fees payable under a contract would relate to a specific month and be calculated in line with the provisions set out in the contract. Revenue is recognised over time as the customer simultaneously receives and consumes the benefits of the services as the service is performed. It is recognised using the output method, on a straight-line basis over the life of the contract as the amount of work required to perform under these contracts does not vary significantly from month to month, therefore the straight-line method provides a faithful depiction of the transfer of goods or services. Project-based A client will enter into a framework agreement that covers all work performed by Jaywing and will then issue a brief or work order for a specific piece of work to be performed. This could be the development of a website for a client, or the production of a creative campaign. The work would normally take a period of between one and six months to complete. Normally, a specific brief or work order is provided for a project under the overall framework agreement. This will detail the services to be provided to the customer, with a price set out against each element as appropriate. The transaction price is set out in the work order for each element of the project. Due to the high degree of interdependence between the various elements of these projects, they are accounted for as a single performance obligation. The customer may choose to vary the scope at any stage, and that would be subject to an updated work order. That work order would still be part of the original contract as those services would not be distinct from those in the original contract, hence this does not create a separate performance obligation. Revenue is recognised over time, using the input method as Jaywing’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, and the revenue recognised reflects the efforts or inputs Jaywing has made to the satisfaction of the performance obligation. Consulting day rates A client will enter into a contract for a piece of work that is quoted as a number of days charged at a rate per day. This work will be either risk, marketing or data based and could involve building models, databases and analysis of data. There may be various elements to the work quoted, however due to the high degree of interdependence between these, they are accounted for as a single performance obligation. Invoices will usually be raised monthly for the number of days of work performed. A specific piece of work is contracted for, which will normally be a number of days’ work charged at a rate per day, with different rates for different levels of seniority. The transaction price is set out in the contract. The customer may choose to vary the scope at any stage, and that would be subject to an updated work schedule. That work order would still be part of the original contract as those services would not be distinct from those in the original contract, hence this does not create a separate performance obligation. Revenue is recognised over time as the customer simultaneously receives and consumes the benefit of the services as the services are performed. It is recognised using the input method, based on the number of days’ work performed during the month. Licences A client enters into a contract for a product licence, including support from Jaywing, to run that product and interpret the results from it. The product and support are not separately identifiable because the client is not able to operate the product licence without this support as they do not have the skills or a login to the system. Therefore, they are accounted for together as a single performance obligation. The license price is set out in the contract. 42 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Revenue is recognised over time based on the provision of the licence and support during the month as the customer simultaneously receives and consumes the benefit of the services as the services are provided. There are no differences in payment terms for each of these categories; the only differences in payments terms are from individual terms agreed with clients which are between 30 and 60 days. Foreign currency Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at period- end exchange rates are recognised in profit or loss. Non-monetary items are not retranslated at the period-end. They are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. Dilapidations provision Provision is made for expected future dilapidations costs in respect of property held under leases. The estimated costs are capitalised within the right of use asset and depreciated over the remaining lease term based on the present value of expected future cash flows. Classification of instruments issued by the Group Instruments issued by the Group are treated as equity (i.e. forming part of shareholders’ funds) only to the extent that they meet the following two conditions: ▪ they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other financial assets, or to exchange financial assets or financial liabilities with another party, under conditions that are potentially unfavourable to the Company (or Group); and ▪ where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company’s own equity instruments, or is a derivative that will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the items are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these Financial Statements for called up Share Capital and Share Premium Account exclude amounts in relation to those shares. Finance payments associated with financial liabilities are dealt with as part of finance expenses. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows: Leasehold improvements Office equipment Buildings - - - over period of lease 3 - 5 years over period of lease It has been assumed that all assets will be used until the end of their economic life. 43 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Intangible assets and goodwill All business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Identifiable intangibles are those that can be sold separately, or that arise from legal or contractual rights, regardless of whether those rights are separable, and are initially recognised at fair value. Development costs incurred in the year, which meet the criteria of IAS 38, are capitalised and amortised on a straight-line basis over their economic life. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses. Intellectual property acquired in a business combination that qualifies for separate recognition are recognised as intangible assets at their fair values. Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of intangible assets, unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: Customer relationships Development costs Trademarks Order books Intellectual property - - - - - 4 to 12 years 3 to 6 years 2 to 20 years 1 year 5 years Impairment For goodwill that has an indefinite useful life, the recoverable amount is estimated annually. For other assets, the recoverable amount is only estimated when there is an indication that an impairment may have occurred. The recoverable amount is the higher of fair value less costs to sell and value in use. Value in use is determined by assessing net present value of the asset based on future cash flows. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units, are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised no longer exists. Put/call options In the previous year the put/call option in Frank Digital PTY had been valued by an independent assessor and was recognised with both a service and non-service element in the accounts. The non-service element was fully recognised as at the date of acquisition and the fair value reviewed annually. The service element was treated as a cash-settled share-based payment with the share-based payment valued at the point of inception and the cost being spread over the life of the asset. In the prior year the put/call option was executed and settled. Fair value measurement Management uses valuation techniques to determine the fair value of financial instruments and non-financial assets, including contingent consideration. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible, but this is not always available. In that case, management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date (see contingent consideration accounting policy). Employee benefits Defined contribution plans Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss as incurred. Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. 44 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Leases The Company reports using IFRS 16, whereby the Company now recognises a lease liability and a right of use asset. The Group leases three offices and printers. The Group has elected not to separate lease and non-lease components and instead accounts for these as a single lease component. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable; • variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable by the group under residual value guarantees; • the exercise price of a purchase option if the group is reasonably certain to exercise that option; and • payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right of use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Group, where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received. If the Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect, then when adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right of use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right of use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability; • any lease payments made at or before the commencement date less any lease incentives received; • any initial direct costs; and • restoration costs. Right of use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right of use asset is depreciated over the underlying asset’s useful life. Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Incentives received to enter into an operating lease are credited to the profit and loss account, to reduce the lease expense, on a straight-line basis over the period of the lease. Associated costs, such as maintenance and insurance, are expensed as incurred. Net financing costs Net financing costs comprise interest payable and interest receivable on funds invested, and withholding tax on borrowings interest expense. Interest income and interest payable are recognised in profit or loss as they accrue using the effective interest method. 45 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Taxation Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income, or directly in equity, in which case it is recognised in other comprehensive income or in equity, respectively. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, except to the extent that it arises on: • • • the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Business combinations The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. Assets acquired and liabilities assumed are measured at their acquisition-date fair values. See separate deferred and contingent consideration accounting policy. Intellectual property acquired in a business combination that qualifies for separate recognition are recognised as intangible assets at their fair values. Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Other intangible assets are amortised from the date they are available for use. The estimated useful life for intellectual property is 5 years. Financial assets Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Trade and other receivables and contract assets Trade and other receivables and contract assets are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. IFRS 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. 46 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Financial liabilities Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in profit or loss over the period of the borrowings on an effective interest basis. Deferred and contingent consideration Deferred consideration is recorded at fair value and is estimated using a present value technique, discounted at 3.5%, which is the risk free rate. Contingent consideration is recorded at fair value using the probability-weighted estimated future cash flows using a present value technique. The consideration is discounted at 11.5% Weighted Average Cost of Capital. The effects on the fair value of risk and uncertainty in the future cash flows are dealt with by adjusting the estimated cash flows rather than adjusting the discount rate. Contingent consideration is a level 3 financial instrument, and is measured at fair value through profit and loss. As such, at each reporting date the contingent consideration is fair valued, with movement in the fair value taken to the statement of comprehensive income Trade and other payables Trade payables are initially recorded at fair value and thereafter at amortised cost using the effective interest rate method. Segmental reporting Internal reporting and monitoring by the Chief Operating Decision Maker (CODM) is based on the location of the business, as such under IFRS 8 the two operating segments of the business are deemed to be the results in respect of the United Kingdom and Australia. Share Capital Share Capital represents the nominal value of shares that have been issued. Share Premium Share Premium includes any premiums received on issue of Share Capital. Any transaction costs associated with the issuing of shares are deducted from Share Premium, net of any related income tax benefits. Capital Redemption Reserve Capital Redemption Reserve represents the amount by which the nominal value of the shares purchased or redeemed is greater than proceeds of a fresh issue of shares. Shares Purchased for Treasury Represents the nominal value of the shares purchased by the Company. Foreign Currency Translation Reserve Represents the exchange differences on retranslation of foreign operations. Earnings per Share Earnings per share is calculated by taking the loss attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding where loss making diluted earnings per share is equal to basic. Retained Earnings Retained Earnings includes all current and prior period retained profits and share-based employee remuneration. Non-controlling interests The profit or loss attributable to the non-controlling ownership stakes in subsidiary companies is transferred from Retained Earnings to non-controlling interests each year. Significant judgement in applying accounting policies and key estimation uncertainty When preparing the financial statements, management makes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses. Accounting estimates and judgements Judgements made by the Directors in the application of these accounting policies that have a significant effect on the Consolidated Financial Statements, together with estimates with a significant risk of material adjustment in the next year, are discussed below. 47 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Accounting estimates Impairment of goodwill and other intangible assets The carrying amount of goodwill is £10,602k (2022: £21,705k) and the carrying amount of other intangible assets is £2,125k (2022: £69k). The Directors are confident that the carrying amount of goodwill and other intangible assets is fairly stated and have carried out an impairment review. The forecast cash generation for each CGU and the WACC represent significant assumptions and should the assumptions prove to be incorrect, there would be a significant risk of a material adjustment within the next financial year. The sensitivity to the key assumptions is shown in Note 14. Business combinations and Contingent Consideration Management uses valuation techniques when determining the fair values of certain assets and liabilities acquired in a business combination (see Note 33). In particular, the fair value of contingent consideration which is a Level 3 Fair Value asset with movements through the P&L and is dependent on the outcome of the acquirees’ future revenues. The key judgement relates to the 30% of estimated revenues in future periods and the 11.5% discount rate used for which management undertake regular reviews of forecasts and obtain external support for the WACC calculation (see Note 33). The present value of the maximum consideration not booked is £1.5m. Accounting judgements Revenue Recognition of revenue The Directors consider that they act as a principal in transactions where the Group has control over the goods and services prior to being transferred to the customer. Where this is via an agency arrangement and the Group does not have full control over the goods and services, it recognises gross billings as gross revenue, with the direct costs being deducted to present the reportable revenue figure under IFRS 15. For other income sources, revenue recognition is assessed in line with the five steps of IFRS. This decision over the stage of completion, includes judgements made by management. Identification of performance obligations The determination of the number of distinct performance obligations in a contract requires judgement, based on whether the customer can benefit from use of the service on its own or together with other resources that are readily available to it, and also whether the promise to transfer the service is separately identifiable from other promises in the contract. Allocation of the transaction price to performance obligations Where a contract contains multiple performance obligations, the transaction price is required to be allocated to the different performance obligations. Wherever possible, the transaction price is allocated on a standalone selling price basis, by reference to the agreed customer statement of works. In the event that this is not available, the price is allocated to the various performance obligations on a reasonable basis with reference to the expected time involved in performing the service and management’s experience of similar projects. Recognition of contract assets and liabilities Contract assets related to the portion of performance obligations already fulfilled by the Group and for which the definitive right to receive cash was subject to completing further work under the relevant contract. Contract assets are converted into trade receivables at the point that work delivered to the client is invoiced resulting in the Group’s unconditional right to receive cash. Contract assets therefore represent a portion of future payments receivable by the Group under existing contracts. IFRS 16 Under IFRS 16 the Group is required to make a judgement in determining the discount rate to be used in calculating the present value of lease payments when recognising the lease liabilities and right of use asset. For the discount rate the Group has used the lessee’s incremental borrowing rate, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right of use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Group, where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received. The right of use asset is depreciated over the term of the lease. The term has been determined with reference to the lease agreements and any expected extension based on management’s judgement beyond the end of the lease end date specified in the lease agreement. 48 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Notes to the Consolidated Financial Statements 1. Segmental analysis The Group reported its operations based on location of the business (United Kingdom & Australia). The Group’s Chief Operating Decision Maker (CODM) is its chief executive and they monitor the performance of these operating segments as well as deciding on the allocation of resources to them. Segmental performance is monitored using adjusted segment operating results. During the year, no customer accounted for greater than 10% of the Group's revenue (2022: None). Revenue, Contribution and Adjusted EBITDA by Operating Segments Revenue: United Kingdom Australia Total Contribution (1): United Kingdom Australia Total Adjusted EBITDA (2): United Kingdom Australia Total All revenue is recognised over time. 2023 £'000 16,380 5,682 22,062 2023 £'000 4,886 2,142 7,028 2023 £'000 1,882 528 2,410 2022 £'000 18,099 5,225 23,324 2022 £'000 4,849 2,057 6,906 2022 £'000 1,680 526 2,206 (1) Contribution is defined as Revenue less Direct Costs comprise staff and other costs directly attributable to the revenues of the respective operating segments. (2) Adjusted EBITDA represents Earnings Before Interest Tax, Depreciation & Amortisation (‘EBITDA’) before restructuring costs and acquisition & related costs Non-current assets by Geographic Markets The Group’s non-current assets (other than financial instruments, investments accounted for using the equity method, deferred tax assets and post-employment benefit assets) are located into the following geographic markets: United Kingdom Australia 2. Other operating income Covid-19 government support Other income 2023 £'000 13,859 3,511 17,370 2023 £'000 - 507 507 2022 £'000 21,576 3,015 24,591 2022 £'000 40 - 40 Within other income this period is a settlement of £502k from the claimant, in relation to the reimbursement of previously incurred legal costs following the dismissal of the claimants’ case in April 2022, associated with the 2016 acquisition of Bloom Media (UK) Limited. The remaining £5k relates to sundry income. The Group has taken the option to present income received from Government sources in relation to Covid-19 as other operating income, rather than netted against costs. In the period to September 2021 the Group received funds from the UK Government 49 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F under the Covid-19 Job Retention Scheme of £37k, and £3k under the corresponding scheme in Australia, Cashflow boost and Job Keepers. There were no receipts of support after September 2021. 3. Operating expenses Continuing operations: Wages and salaries Social Security Costs Other Pension Costs Impairment of Goodwill Depreciation of property, plant & equipment Depreciation and impairment of right of use assets Amortisation Release of deferred consideration Court legal fees Restructuring costs Acquisition and related costs Other operating expenses Total operating expenses 4. Finance costs Interest expense on borrowings Withholding tax on borrowings interest expense Interest on lease liabilities (see note 13) Interest on deferred and contingent consideration Total 5. Tax credit The tax charge / (credit) is based on the loss for the year and represents: UK corporation tax at 19% (2022: 19%) Adjustment for prior year Total current tax Deferred tax: Origination and reversal of timing differences Total tax charge / (credit) The tax charge / (credit) can be explained as follows: Loss before tax Tax using the UK corporation tax rate of 19% (2022: 19%) Effect of: Recognition of previously unrecognised losses Goodwill impairment Adjustment for prior year Non-deductible expenses Current year charge / (credit) 2023 £'000 14,210 1,306 905 12,095 245 641 320 - - 190 259 3,738 33,909 2023 £'000 748 180 142 125 1,195 2023 £'000 152 198 350 (59) 291 2023 £’000 (12,535) 2022 £'000 14,865 1,724 915 6,131 327 752 730 (882) 774 352 - 3,762 29,450 Restated 2022* £'000 416 100 58 - 574 Restated 2022* £'000 48 - 48 (171) (123) Restated 2022* £'000 (6,660) (2,382) (1,265) (129) 2,298 198 306 291 (125) 1,164 - 103 (123) 50 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 6. Loss per share Basic loss per share Diluted loss per share 2023 Pence per Share Restated 2022* Pence per Share (13.73p) (7.01p) (13.73p) (7.01p) Loss per share has been calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the year. The calculations of basic and diluted loss per share are: Loss for the year attributable to shareholders Weighted average number of ordinary shares in issue: Basic and diluted 7. Auditor's remuneration Auditor's remuneration: Audit of Company Financial Statements Other amounts payable to the auditor and its associates in respect of: Audit of Subsidiary Company Financial Statements Audit related assurance services Taxation compliance services 2023 £'000 Restated 2022* £'000 (12,826) (6,549) 2023 Number 2022 Number 93,432,217 93,432,217 2023 £'000 48 118 5 30 2022 £'000 45 111 5 30 Amounts paid to the Group’s auditor in respect of services to the Company, other than the audit of the Company’s Financial Statements, have not been disclosed separately as the information is required instead to be disclosed on a consolidated basis. 51 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 8. Key management personnel compensation Key management of the Group is considered to be the Board of Directors and the Senior Leadership Team. Short-term benefits: Salaries including bonuses Social security costs Total short-term benefits Defined contribution pension plan costs Key management compensation Further information in respect of Directors is given in the Directors’ Remuneration Report. Remuneration in respect of Directors was as follows: Emoluments receivable Fees paid to third parties for Directors’ services Company pension contributions to money purchase pension schemes 2023 £’000 1,513 190 1,703 53 1,756 2023 £'000 342 30 9 381 2022 £’000 1,703 235 1,938 68 2,006 2022 £'000 555 30 15 600 During the current period and the prior year, there were no benefits accruing to Directors in respect of the defined contribution pension scheme. The highest paid Director received remuneration of £236k (2022: £284,000). 9. Staff numbers and costs The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows: Management and administration Client Service Staff The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Other pension costs Total 10. Employee benefits 2023 Number 2022 Number 34 251 285 2023 £'000 14,210 1,306 905 16,421 35 261 296 2022 £'000 14,865 1,724 915 17,504 There were no share options outstanding at the year-end. Refer to note 35 for details of employee benefits issues post year end. 52 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 11. Non-controlling interests The details of subsidiaries held directly by the Group are set out in Note 12 of the plc Parent Company accounts. After the acquisition of the remaining 25% of Frank Digital PTY in November 2021 the Group includes no subsidiaries with non- controlling interests (NCI): Name Frank Digital PTY Proportion of ownership interests and voting rights held by NCI 2022 % - 2023 % - Total comprehensive income allocated to NCI 2023 £’000 - - 2022 £’000 12 12 Accumulated NCI 2023 £’000 - - 2022 £’000 - - No dividends were paid to the NCI during the financial years 2023 and 2022. Jaywing plc acquired the remaining 25% of Frank Digital PTY on 2 November 2021 after the remaining shareholders exercised their put option. The 25% stake was acquired for $1.2m (£0.7m), the total consideration for the purchase of the 100% interest was $3.0m (£1.7m). At 31 March 2022 an amount of £0.7m was still outstanding to the original shareholders, this was fully paid by 31 July 2022. 12. Property, plant and equipment Cost At 31 March 2021 Additions Right of use asset additions At 31 March 2022 Additions Right of use asset additions Disposals At 31 March 2023 Depreciation At 31 March 2021 Depreciation charge for the year Impairment of right of use asset Depreciation of right of use asset At 31 March 2022 Depreciation charge for the year Depreciation of right of use asset Depreciation on disposals At 31 March 2023 Net book value At 31 March 2023 At 31 March 2022 At 31 March 2021 Buildings £'000 Leasehold improvements £'000 Office equipment £'000 Total £'000 2,673 - 985 3,658 - 2,253 - 5,911 1,280 - 44 674 1,998 - 588 - 2,586 3,325 1,660 1,393 1,438 - - 1,438 - - - 1,438 1,125 102 - - 1,227 64 - - 1,291 147 211 313 594 163 44 801 483 - (283) 1,001 240 225 - 34 499 181 53 (283) 450 551 302 354 4,705 163 1,029 5,897 483 2,253 (283) 8,350 2,645 327 44 708 3,724 245 641 (283) 4,327 4,023 2,173 2,060 The assets, excluding the right of use assets, are covered by a fixed charge in favour of the Group’s lenders. 53 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 13. Leases The company has lease contracts for offices occupied and printers. The amounts recognised in the financial statements in relation to the leases are as follows: (i) Amounts recognised in the consolidated balance sheet The balance sheet shows the following amounts relating to leases: Right of use assets Buildings Office equipment Lease liabilities Current Non-current (ii) Amounts recognised in the income statement The income statement shows the following amounts relating to leases: Depreciation and impairment charge of right of use assets Buildings Office equipment Interest expense (included in finance cost) 2023 £'000 3,325 74 3,399 380 2,638 3,018 2023 £'000 588 53 641 142 2022 £'000 1,660 90 1,750 395 1,448 1,843 2022 £'000 718 34 752 58 There are no other amounts relating to low value or short term leases excluded from the above amounts. 14. Goodwill Cost At 31 March 2021 Foreign Exchange At 31 March 2022 Recognition on acquisition Foreign Exchange At 31 March 2023 Impairment At 31 March 2021 and 31 March 2022 Impairment charge At 31 March 2022 Impairment charge At 31 March 2023 Net book value At 31 March 2022 At 31 March 2022 At 31 March 2023 Goodwill by CGU United Kingdom Australia Goodwill £'000 27,581 255 27,836 1,279 (287) 28,828 - (6,131) (6,131) (12,095) (18,226) 27,581 21,705 10,602 2022 £'000 18,742 2,963 21,705 2023 £'000 7,926 2,676 10,602 54 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Goodwill and other intangible assets have been tested for impairment by assessing the value in use of the relevant cash generating units (“CGU”), the cash generating units are measured at UK and Australia level as this is how the Board review the trading positions. The value in use calculations were based on projected cash flows into perpetuity. Budgeted cash flows for 2023/24 were haircut by applying a reduction in EBITDA, and used and extrapolated based on the assumptions below. The budget has been approved by management and the Board of Directors and is based on a bottom-up assessment of costs and uses the known and estimated revenue pipeline. The key assumptions are revenue growth, cost growth (and by implication EBITDA) and the WACC. The average year-on-year growth that has been used as the basis for forecasting cash flows for each of the cash generating units when testing for impairment were: Year-on-year growth 2023/24 to 2024/25 2024/25 to 2025/26 2025/26 to 2026/27 2026/27 to Perpetuity Revenue 8.0% 7.0% 7.0% 1.0% Costs 6.0% 6.0% 6.0% 1.0% The growth rates shown are the average applied to the cash flows of the individual cash generating units and do not form a basis for estimating the consolidated profits of the Group in the future. The growth rates used and the periods they cover are based on an ability to deliver additional revenue efficiently. The discount rate used to test the cash generating units was the Group’s post-tax Weighted Average Cost of Capital (“WACC”) of 16.6% for the UK and 16.4% for Australia (2022: 11.8% for the UK and 11.5% for Australia). As a result of these tests, that there was no impairment necessary in Australia. Budgeted cash flows for 2023/24 were haircut by applying a reduction in EBITDA in respect of the UK results and future cash flows, management believes that an impairment is required for the goodwill in relation to the UK CGU of £12.1m (2022: £6.1m). This is predominantly due to the increase in WACC as a result of the currently economic climate in the UK. If the WACC was the same as the previous year then a reduced impairment charge of £5.6m would have been recognised. As part of the impairment review, several scenarios affecting the UK CGU were calculated, using the impairment model and applying sensitivities to the key assumptions. These looked at what effect changes in the WACC rates and movements in EBITDA would have on the outcome. • • If there was no Revenue growth from FY25, and costs remained static, there would be an additional impairment of £2.3m If revenues and costs increase by 5% but indirect costs stay the same, this would result in an additional impairment of £1.5m Due to the significance of the headroom in the Australian CGU, detailed sensitivity analysis was not undertaken. 55 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 15. Other intangible assets Customer relationships Order books Trademarks Intellectual property Development costs £'000 £’000 £’000 £’000 £'000 Total £'000 Cost At 31 March 2021 Additions during the year At 31 March 2022 Additions during the year (note 33) At 31 March 2023 Amortisation At 31 March 2021 Amortisation charge for the year At 31 March 2022 Amortisation charge for the year 21,305 - 21,305 - 21,305 20,714 591 21,305 - 1,457 - 1,457 - 1,457 1,457 - 1,457 - At 31 March 2023 21,305 1,457 Net book amount At 31 March 2023 At 31 March 2022 At 1 April 2021 - - 591 - - - 1,080 - 1,080 - 1,080 1,080 - 1,080 - 1,080 - - - - - - 2,376 2,376 - - - 277 277 2,099 - - 1,421 25,263 - 1,421 - 1,421 1,213 139 1,352 43 - 25,263 2,376 27,639 24,464 730 25,194 320 1,395 25,514 26 69 208 2,125 69 799 Development costs relate to internally developed products that are either sold to clients standalone or used to provide services to them. 16. Trade and other receivables Trade receivables Prepayments Other receivables 2023 £'000 3,723 508 187 4,418 2022 £'000 5,629 589 197 6,415 The carrying amount of trade and other receivables approximates to their fair value. Detailed disclosures relating to credit risk exposures and analysis relating to the allowance for expected credit losses are in Note 32. 56 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 17. Contract assets and liabilities Contract assets Accrued income Contract assets as at 31 March 2022 Amounts billed on contract assets as at 31 March 2022 New contract assets recognised Contract assets as at 31 March 2023 2023 £'000 352 2022 £'000 453 £'000 453 (437) 336 352 Contract assets related to the portion of performance obligations already fulfilled by the Group and for which the definitive right to receive cash was subject to completing further work under the relevant contract. Contract assets are converted into trade receivables at the point that work delivered to the client is invoiced resulting in the Group’s unconditional right to receive cash. Contract assets therefore represent a portion of future payments receivable by the Group under existing contracts. There is a credit risk associated with these assets. Contract Liabilities Deferred income Contract liabilities as at 31 March 2022 Revenue recognised in the year on contract liabilities as at 31 March 2022 New contract liabilities net of revenue recognised against these Contract liabilities as at 31 March 2023 2023 £'000 983 2022 £'000 1,408 £'000 1,408 (1,314) 889 983 Contract liabilities consist of cash advances received from customers on account of work orders received and the remaining liabilities relate to the amount of performance obligations still to be fulfilled and for which payment has already been received from the client. Of the existing contracts that were unsatisfied or partially satisfied at 31 March 2023, revenue is expected to be recognised in the financial year to 31 March 2024. 57 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 18. Borrowings and Net Debt Borrowings Average interest rates at the balance sheet date were: 2023 £'000 Restated* 2022 £'000 11,435 9,007 % 8.57 % 4.75 As the loans are at variable market rates their carrying amount is equivalent to their fair value. The borrowings are repayable on demand and interest is calculated at 3 month LIBOR plus a margin. The borrowings are secured by charges over all the assets of Jaywing plc and guarantees and charges over all of the assets of the various subsidiaries (Jaywing UK Limited, Alphanumeric Limited, Gasbox Limited, Jaywing Central Limited, Jaywing Innovation limited, Bloom Media (UK) Limited, Epiphany Solutions limited, Jaywing Pty Limited, Frank Digital Pty Limited). Reconciliation of Net debt excluding lease liability and deferred consideration Cash and cash equivalents Borrowings Net Debt excluding lease expense and deferred consideration Reconciliation of Net debt Borrowings Lease liability Deferred and Contingent Consideration Financial liabilities Cash and cash equivalents Net debt Restated* 1 April 2022 £’000 714 (9,007) (8,293) Restated* 1 April 2022 £’000 (9,007) (1,843) (626) (11,476) 714 (10,762) Cash flow Draw down Accrual recognised 31 March 2023 £’000 £’000 £’000 £’000 375 - 375 - (1,500) - (928) 1,089 (11,435) (1,500) (928) (10,346) Cash flows Draw down Accrual recognised 31 March 2023 £’000 £’000 £’000 £’000 - 696 776 1,472 375 1,847 (1,500) - - (1,500) - (1,500) (928) (1,871) (2,694) (5,493) - (5,493) (11,435) (3,018) (2,544) (16,997) 1,089 (15,908) 58 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 19. Trade and other payables Trade payables Tax and social security Accruals Deferred consideration payable on acquisition of subsidiary undertakings Contingent consideration payable on acquisition of subsidiary undertakings Other payables Trade and other payables due in less than one year Deferred consideration payable on acquisition of subsidiary undertakings Contingent consideration payable on acquisition of subsidiary undertakings Trade and other payables due in greater than one year 2023 £'000 2,169 1,519 946 414 109 653 5,810 770 1,251 2,021 Restated 2022* £'000 3,686 1,125 1,678* 626 - 816* 7,931 - - - The carrying amount of trade and other payables approximates to their fair values. All amounts are short term. * Included in other payables is £539k (2022: £719k) for media spend not yet purchased, but paid for by the customer. In the prior year these amounts were included within accruals, and as such the prior year accruals balance has been restated to reclassify this amount out of accruals and into other payables, to more closely reflect the nature of the balance. 20. Deferred tax assets and liabilities Recognised deferred tax assets and liabilities: Accelerated capital allowances on property, plant and equipment: At start of year Deferred tax on acquisition Unwind of deferred tax on acquisition Origination and reversal of temporary differences At end of year Other temporary differences: At start of year Origination and reversal of temporary differences Utilisation/(Recognition) of previously unrecognised losses At end of year Total deferred tax: At start of year Deferred tax on acquisition Origination and reversal of temporary differences At end of year Origination on acquisition Deferred tax is included within: Deferred tax liability Deferred tax asset 2023 £'000 2022 £'000 10 661 (69) 28 630 (654) 80 (129) (703) (644) 592 24 (28) 592 (620) (28) (48) - - 58 10 (425) (104) (125) (654) (473) - (171) (644) - (644) (644) There are no deductible differences or losses carried forward for which no deferred tax asset is recognised. The March 2021 Budget announced an increase in the UK standard rate of corporation tax to 25% from 1 April 2023 with the legislation receiving Royal Assent on 10 June 2021. Deferred tax as at 31 March 2023 has been provided at a rate of 25% (2022: blended rate or 19% and 25%) which is based on when the deferred taxation is expected to crystalise. Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary difference will be utilised against future taxable income. This is assessed based on the Group’s forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any unused tax loss or credit. 59 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 21. Provisions The carrying amounts and the movement in the provision account are as follows: At 1 April 2022 Additional provisions Amounts utilised At 31 March 2023 Dilapidations £'000 42 570 (42) 570 The dilapidations provision of £570k (2022: £42k) has been recognised across the three offices in the UK and Australia. The dilapidations provision will be settled at the end of the lease period for the three offices, which is greater than one year for all. 22. Share capital Authorised: Authorised Share Capital at 31 March 2022 and at 31 March 2023 Allotted, issued and fully paid 45p deferred shares 5p ordinary shares 45,000 10,000 At 31 March 2022 At 31 March 2023 45p deferred shares Number 67,378,520 67,378,520 5p ordinary shares Number 93,432,217 93,432,217 £’000 34,992 34,992 The 5 pence ordinary shares have the same rights (including voting and dividend rights and rights on a return of capital) as the previous 50 pence ordinary shares. Holders of the 45 pence deferred shares do not have any right to receive notice of any General Meeting of the Company or any right to attend, speak or vote at any such meeting. The deferred shareholders are not entitled to receive any dividend or other distribution and shall, on a return of assets in a winding up of the Company, entitle the holders only to the repayment of the amounts paid up on the shares, after the amount paid to the holders of the new ordinary shares exceeds £1,000,000 per new ordinary share. The deferred shares are also incapable of transfer and no share certificates have been issued in respect of them. 23. Share premium At start and end of year 2023 £'000 2022 £'000 10,088 10,088 Share Premium includes any premiums received on issue of Share Capital. Any transaction costs associated with the issuing of shares are deducted from Share Premium, net of any related income tax benefits. 24. Treasury shares 2023 £'000 2022 £'000 At start and end of year (99,622 shares) (25) (25) Treasury shares represent the nominal value of the shares purchased by the Company. 60 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 25. Capital redemption reserve At start and end of year 2023 £'000 2022 £'000 125 125 Capital redemption reserve represents the amount by which the nominal value of the shares purchased or redeemed is greater than proceeds of a fresh issue of shares. 26. Non-controlling interest At start of year Acquisition of non-controlling interest (note 11) Share of profit for the year At end of year 2023 £'000 - - - - 2022 £'000 354 (366) 12 - The profit or loss attributable to the non-controlling ownership stakes in subsidiary companies is transferred from retained earnings to non-controlling interests each year. 27. Foreign currency translation reserve At start of year Exchange differences on translation of foreign operations At end of year 2023 £’000 118 (368) (250) 2022 £’000 (161) 279 118 Foreign currency translation reserve represents the exchange differences on retranslation of foreign operations. 28. Retained earnings At start of year Acquisition of subsidiaries NCI Retained loss for the year At end of year 2023 £'000 (33,324) - (12,826) (46,150) Restated 2022* £'000 (26,485) (290) (6,549) (33,324) Retained Earnings includes all current and prior period retained profits and share-based employee remuneration. 29. Capital commitments The Group had no commitments to purchase property, plant and equipment at 31 March 2023 or at 31 March 2022. 61 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 30. Related parties The services of Mark Carrington as Non-Executive Director of the Company were purchased from Deacon Street Partners Limited for a fee of £30,000 (2022: £30,000). At the year end, £52,500 (2022: £22,500) was outstanding to Deacon Street Partners Limited. Ian Robinson (Non-Executive Chairman) is a Director of Gusbourne Estate Limited, with which Jaywing commenced trading on an arm’s length basis in H1 FY22. Gusbourne Estate Limited were invoiced £498k (2022: £128k) in the year, of which £360k was for third party digital advertising. As at 31 March 2023 there was a debtor’s balance of £49k (2022: £46k). On 2 October 2019 entities associated with two of its major shareholders (the “Lenders”) acquired the Company’s existing secured loan facility of £5,200,000 (“Jaywing Facility”) The Lenders immediately provided the Company with additional secured facilities by increasing the Jaywing Facility by £3,000,000 to £8,200,000, which enabled the Company to repay its existing outstanding overdraft and provide it with additional working capital. An additional £500,000 and £1,000,000 was drawn down on the facility in FY23. The Jaywing Facility has been provided to the Company on the same terms as those provided by the previous lender. At the year-end £11,435k (2022: £9,007k) was outstanding. Further details of these borrowings are provided in Note 18. 31. Standards and interpretations in issue at 31 March 2023 but not yet effective At the date of authorisation of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Group. No new standards have been adopted in the current year. Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New Standards, amendments and Interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Group’s financial statements. 62 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 32. Financial risk management The Group uses various financial instruments. These include loans, cash, issued equity investments and various items, such as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Company’s operations. The existence of these financial instruments exposes the Group to several financial risks, which are described in more detail below. The main risks arising from the Group’s financial instruments are market risk, cash flow interest rate risk, credit risk and liquidity risk. The Directors review and agree policies for managing each of these risks and they are summarised below. Market risk Market risk encompasses three types of risk, being currency risk, fair value interest rate risk and price risk. In this instance, price risk has been ignored as it is not considered a material risk to the business. The Group’s policies for managing fair value interest rate risk are considered along with those for managing cash flow interest rate risk and are set out in the subsection entitled “interest rate risk” below. Currency risk The Group is only minimally exposed to translation and transaction foreign exchange risk. Liquidity risk The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs by closely managing the cash balance and by investing cash assets safely and profitably. The Group policy throughout the period has been to ensure continuity of funding. Borrowings are repayable on demand. Interest rate risk The Group finances its operations through a mixture of cash, working capital and borrowings. The Directors’ policy to manage interest rate fluctuations is to regularly review the costs of capital and the risks associated with each class of capital, and to maintain an appropriate mix between fixed and floating rate borrowings. The interest rate exposure of the financial assets and liabilities of the Group is shown in the table below. The table includes trade receivables and payables as these do not attract interest and are therefore subject to fair value interest rate risk. Financial assets: Floating interest rate: Cash Zero interest rate: Trade receivables Financial liabilities: Floating interest rate: Bank loans/revolving facility Zero interest rate: Trade payables 2023 £'000 2022 £'000 1,089 714 3,723 4,812 5,629 6,343 11,435 9,007 2,169 13,604 3,686 12,693 As at 31 March 2023, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: 31 March 2023 Bank borrowings Lease liabilities Deferred consideration payable on acquisition of subsidiary undertakings Contingent consideration payable on acquisition of subsidiary undertakings Trade and other payables Total amount due Current Within 6 months 6 to 12 months Non-current 1 to 5 years later than 5 years £'000 11,435 190 231 34 6,270 18,160 £'000 - 190 183 75 - 448 £'000 - 1,980 770 1,251 - 4,001 £'000 - 658 - - - 658 63 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting period as follows: 31 March 2022 Bank borrowings Lease liabilities Deferred consideration payable on acquisition of subsidiary undertakings Trade and other payables Total amount due Current Within 6 months 6 to 12 months Non-current 1 to 5 years later than 5 years £'000 9,007 197 626 8,713 18,543 £'000 - 198 - - 198 £'000 - 1,448 - - 1,448 £'000 - - - - - The above amounts reflect the contractual undiscounted cash flows, which may differ from the carrying values of the liabilities at the reporting date. Sensitivity to interest rate fluctuations If the average interest rate payable on the net financial asset/net financial liabilities, subject to a floating interest rate during the year, had been 1% higher than reported on the average borrowings during the year, then loss before tax would have been £104k (2022: £85k) lower, and if the interest rate on these liabilities had been 1% lower, loss before tax would have improved by £104k (2022: £85k). Credit risk The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component. In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due and also according to the geographical location of customers. The expected loss rates are based on the payment profile for sales over the past 48 months before 31 March 2020 and 1 January respectively, as well as the corresponding historical credit losses during that period. The historical rates are adjusted to reflect current and forward-looking macroeconomic factors affecting the customer’s ability to settle the amount outstanding. The Group has identified gross domestic product (GDP) and unemployment rates of the countries in which the customers are domiciled to be the most relevant factors, and accordingly adjusts historical loss rates for expected changes in these factors. However, given the short period exposed to credit risk, the impact of these macroeconomic factors has not been considered significant within the reporting period. Trade receivables are written off (i.e. derecognised) when there is no reasonable expectation of recovery. Failure to make payments within 180 days from the invoice date and failure to engage with the Group on alternative payment arrangement, amongst other things, are considered indicators of no reasonable expectation of recovery. The Directors consider that after review, the Group’s trade receivables require an impairment for the year ended 31 March 2023 of £82,000 (2022: £22,000) which has been provided accordingly. 64 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Summary of financial assets and liabilities by category The carrying amount of financial assets and liabilities recognised at the balance sheet date of the reporting periods under review may also be categorised as follows: Financial assets Financial assets measured at amortised cost Trade and other receivables Cash and cash equivalents Financial liabilities: Financial liabilities measured at amortised cost Borrowings Lease liabilities Deferred consideration payable on acquisition of subsidiary undertakings Trade and other payables Provisions for liabilities Financial liabilities measured at fair value Contingent consideration payable on acquisition of subsidiary undertakings 2023 £'000 3,910 1,089 4,999 (11,435) (3,018) (1,184) (6,270) (570) (1,360) (23,837) Restated 2022* £'000 5,826 714 6,540 (9,007) (1,843) (626) (8,713) (42) - (20,231) Net financial assets and liabilities (18,838) (13,691) Plant, property and equipment Goodwill Other intangible assets Contract assets Prepayments Deferred tax asset Deferred tax liability Taxation (payable)/receivable 4,023 10,602 2,125 352 508 620 (592) (20) 17,618 2,173 21,705 69 453 589 644 - 32 25,665 Total equity (1,220) 11,974 Capital management policies and procedures The Group’s capital management objectives are: ▪ ▪ to ensure the Group’s ability to continue as a going concern; and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. This is achieved through close management of working capital and regular reviews of pricing. Decisions on whether to raise funding using debt or equity are made by the Board based on the requirements of the business. Capital for the reporting period under review is summarised as follows: Total equity 2023 £'000 2022 £'000 (1,220) 11,974 Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly • Level 3: unobservable inputs for the asset or liability. 65 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Measurement of fair value of financial instruments The Group’s finance team performs valuations of financial items for financial reporting purposes, including Level 3 fair values, in consultation with third party valuation specialists for complex valuations. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The finance team reports directly to the chief financial officer (CFO) and to the audit committee. Valuation processes and fair value changes are discussed among the audit committee and the valuation team at least every year, in line with the Group’s reporting dates. The following table provides information about the sensitivity of the fair value measurement to changes in the most significant inputs: Description Significant unobservable input Put and call options and other deferred consideration Contingent Consideration Probability of meeting target Estimate of the input 100% Sensitivity of the fair value measurement to input Not applicable Probability of meeting target 100% Sensitive to a fluctuation in expected revenues There are no significant interrelationships between the inputs and the unobservable inputs. Level 3 fair value measurements The reconciliation of the carrying amounts of financial instruments classified within Level 3 is as follows: Balance at 31 March 2021 Amount recognised through retained earnings Balance at 31 March 2022 Amount recognised through acquisition Interest expenses Balance at 31 March 2023 Put/call options £’000 49 (49) Contingent Consideration £’000 - - - - - - - 1,262 98 1,360 66 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 33. Business combination On 26 August 2022 the group purchased 100% of the ordinary share capital of Midisi Limited for consideration of £3.3m, before discounting.. The amounts below recognised in respect of the identifiable assets and liabilities acquired are as set out in the table below: Assets Goodwill Intangible assets (note 15) Liabilities Deferred tax Accruals Social security and other taxes Total identifiable net assets at fair value Purchase consideration Satisfied by: Cash Deferred consideration Contingent consideration Total consideration Fair value on acquisition £’000 1,279 2,376 3,655 (661) (3) (22) (686) 2,969 400 1,307 1,262 2,969 The initial consideration for the acquisition was £0.4m which was paid from Jaywing’s existing cash resources. Further fixed payments totalling £1.4m will be paid at 6-monthly intervals over 42 months, plus an additional performance-related earn-out payable at 6-monthly intervals between months 13 and 49. The discounted deferred consideration outstanding at the year end is £1.2m. The earn-out relates to revenues generated from Midisi, and the maximum earn-out payment is capped at £3.0m. Following the acquisition, the incremental revenue contributions delivered by Midisi are estimated to be at least £5.7m over 42 months, based on planned growth in the client base and enhancements to other existing Jaywing services. This would generate earn-out payments totalling £1.7m. The figures included in the table above are recorded at present value. 67 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 34. Prior year restatement Withholding tax Borrowings are in respect of lenders in low tax jurisdictions and as a result withholding tax is payable. Recognition of withholding tax within the interest expense and borrowing costs lines is required as this was omitted from the previous financial years results. For the year end 31 March 2021, the closing retained earnings was adjusted by £153k to recognise the withholding tax liability at 31 March 2021. The following table summarises the impact of the prior period restatement in relation to the financial statements of the Group: 2022 £000 (6,437) (100) (6,537) 2022 £000 12,227 (253) 11,974 Restated 2022 £’000 23,324 40 (29,450) (6,086) (574) Loss for the year as previously stated Adjustment 1 - Recognition of withholding tax expense Loss for the year as restated Total equity for the year as previously stated Adjustment 2 - Recognition of withholding tax expense Total equity for the year as restated Statement of Comprehensive Income For the year ended 31 March 2022 Adjustment 1 Revenue Other operating income Operating expenses Operating Loss Finance costs Loss before tax Tax (expense)/credit Loss for the year Loss for the year is attributable to: Non-controlling interests Owners of the parent Other comprehensive income Items that will be reclassified subsequently to profit or loss Exchange differences on retranslation of foreign operations Total comprehensive loss for the period Total comprehensive loss is attributable to: Non-controlling interests Owners of the Parent Basic and diluted loss per share Loss per share £’000 23,324 40 (29,450) (6,086) (474) (6,560) 123 - - - - (100) (100) (6,660) - 123 (6,437) (100) (6,537) 12 (6,449) (6,437) - (100) (100) 12 (6,549) (6,537) 279 (6,158) - 279 (100) (6,258) 12 (6,170) (6,158) - (100) (100) 12 (6,270) (6,258) (6.90p) (0.11p) (7.01p) 68 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Statement of Financial Position As at 31 March 2022 Adjustment 2 Non-current assets Property, plant and equipment Goodwill Deferred tax asset Other intangible assets Current assets Trade and other receivables Contract assets Current tax asset Cash and cash equivalents Total assets Current liabilities Borrowings Trade and other payables Contract Liabilities Current lease liabilities Current tax liabilities Provisions Non-current liabilities Non-current lease liabilities Total liabilities £’000 2,173 21,705 644 69 24,591 6,415 453 32 714 7,614 32,205 8,754 7,931 1,408 395 - 42 - - - - - - - - - - - 253 - - - - - Restated 2022 £’000 2,173 21,705 644 69 24,591 6,415 453 32 714 7,614 32,205 9,007 7,931 1,408 395 - 42 18,530 253 18,783 1,448 1,448 19,978 - - 1,448 1,448 253 20,231 Net (liabilities) / assets 12,227 (253) 11,974 Equity Equity attributable to owners of the parent Share capital Share premium Capital redemption reserve Treasury shares Foreign currency translation reserve Retained earnings Equity attributable to owners of the parent Non-controlling interest Total equity 34,992 10,088 125 (25) 118 (33,071) 12,227 - 12,227 - - - - - (253) 34,992 10,088 125 (25) 118 (33,324) (253) 11,974 - - (253) 11,974 69 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Statement of Cash Flows As at 31 March Cash flow from operating activities Loss after tax Adjustments for: Impairment of Goodwill Depreciation of property, plant & equipment Depreciation and impairment of right of use assets Amortisation of intangibles Financial costs Taxation expense/(credit) Operating cash flow before changes in working capital Decrease/(Increase) in trade and other receivables (Decrease)/Increase in trade and other payables Cash generated from operations Interest paid Net tax paid Net cash flow from operating activities Cash flow from investing activities Payment of deferred consideration Acquisition of subsidiaries Acquisition of property, plant and equipment Net cash outflow from investing activities Cash flow from financing activities Increase in borrowings Repayment of Lease Liabilities (IFRS16) Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash and cash equivalents comprise: Cash at bank and in hand 2022 Adjustment 1 £’000 Restated 2022 £’000 (6,437) (100) (6,537) 6,131 327 752 730 474 (123) 1,854 (168) (99) 1,587 (58) (240) 1,289 (442) - (163) (605) - (722) (722) (38) 752 714 714 - - - - 100 - - - - - - - - - - - - - - - - - - - 6,131 327 752 730 574 (123) 1,854 (168) (99) 1,587 (58) (240) 1,289 (442) - (163) (605) - (722) (722) (38) 752 714 714 70 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 35. Post balance sheet events On 13 April 2023, post period end, the Company granted 1,152,000 LTIP (Long Term Incentive Plan) share options to Andrew Fryatt (CEO) and 4,640,000 CSOP (Company Share Option Plan) options to certain senior employees of the Group. The total number of Shares that can be acquired pursuant to options granted under the LTIP and CSOP amounts to 5,782,000 Shares. The LTIP Options granted to Andrew Fryatt are subject to a minimum vesting price of 10.0 pence per Share and an exercise price of 5.0 pence per Share. The performance period for LTIP Options granted under the LTIP will typically be four years commencing from the date of grant of the relevant LTIP Option. However, in the case of Andrew Fryatt, in recognition of his service to the Company since March 2020, 50% of the LTIP Options will vest and be exercisable on or after the second anniversary of the date of grant, subject to and to the extent that the performance conditions are met. Except in the event of a change of control of the Company and in certain 'good leaver' scenarios, LTIP Options may only be exercised after the expiry of the performance period and to the extent that the relevant performance criterion is met. Shares acquired on exercise of LTIP Options shall be subject to a two-year holding period, during which time they cannot be sold, except in certain circumstances including, but not limited to, the sale of Shares to meet any tax liabilities arising upon exercise of the LTIP Options. The market value CSOP Options were granted over a total of 4,640,000 Shares with an exercise price of 5.0 pence per Share. This total includes the 1,200,000 CSOP Options granted to each of Andrew Fryatt (CEO) and Christopher Hughes (CFO) , and 2,240,000 CSOP Options granted to certain senior employees of the Company. The vesting period of the CSOP Options shall be three years from the date of grant. Except in the event of a change of control of the Company and in certain 'good leaver' scenarios, no CSOP Options may be exercised prior to the expiry of the vesting period. Shares acquired on exercise of the CSOP Options shall be subject to a holding period of one year, during which time they cannot be sold, except in certain circumstances including, but not limited to, the sale of Shares to cover the exercise price payable upon exercise of the CSOP Options. No performance conditions attach to the exercise of the CSOP Options. 71 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Company Financial Statements Company Profit and Loss account Turnover Administrative expenses Operating loss Income from fixed asset investment Other income Finance Costs Loss on ordinary activities before taxation Taxation on ordinary activities Note 2023 £'000 Restated 2022* £'000 2 3 4 4 5 6 - (10,275) - (10,743) (10,275) (10,743) - 418 505 - (1,100) (560) (10,870) (10,885) 125 573 Loss and total comprehensive loss on ordinary activities after taxation (10,745) (10,312) The accompanying Notes to the Parent Company Financial Statements form an integral part of these Financial Statements. *The comparative information has been restated in the prior period as discussed in note 27. 72 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Company Balance Sheet Non-current assets Tangible assets Deferred tax Investments Current assets Cash at bank Debtors due within one year Current liabilities Borrowings Creditors: amounts falling due within one year Total assets less current liabilities Non-current liabilities Creditors: amounts falling due after more than one year Provisions Net (liabilities)/assets Equity Called up share capital Share premium account Treasury shares Capital redemption reserve Profit and loss account Total equity Note 10 21 12 13 17 14 15 16 18 19 20 19 19 2023 £'000 1,154 717 20,457 22,328 1 442 443 (11,435) (14,757) (3,421) (2,625) (290) (6,336) 34,992 10,088 (25) 125 (51,516) (6,336) Restated 2022* £'000 1,040 605 26,235 27,880 2 575 577 (9,007) (14,351) 5,099 (690) - 4,409 34,992 10,088 (25) 125 (40,771) 4,409 The Financial Statements were approved by the Board of Directors and authorised for issue on 6 September 2023. Signed on behalf of the Board of Directors: Andrew Fryatt Director The accompanying Notes to the Parent Company Financial Statements form an integral part of these Financial Statements. *The comparative information has been restated in the prior period as discussed in note 27. 73 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Company Statement of Changes in Equity Called-up Share Capital £'000 Share Premium account £’000 Treasury Shares £’000 Capital Redemption Reserve £’000 Profit and loss account £'000 Total £'000 At 1 April 2021 (as previously stated) Prior year adjustment (see note 26) 34,992 10,088 - - At 1 April 2021 (restated*) 34,992 10,088 Release of Put / Call Option Loss for the year and total other comprehensive income* Total comprehensive income - - - - - - At 31 March 2022* 34,992 10,088 At 1 April 2022* 34,992 10,088 Loss for the year and total other comprehensive income Total comprehensive income - - - - (25) - (25) - - - (25) (25) - - 125 (30,355) 14,825 - (153) (153) 125 (30,508) 14,672 - - - 49 49 (10,312) (10,312) (10,263) (10,263) 125 (40,771) 4,409 125 (40,771) 4,409 - - (10,745) (10,745) (10,745) (10,745) (6,336) At 31 March 2023 34,992 10,088 (25) 125 (51,516) The accompanying Notes to the Parent Company Financial Statements form an integral part of these Financial Statements. *The comparative information has been restated in the prior period as discussed in note 27. 74 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Notes to the Parent Company Financial Statements 1. Accounting policies Jaywing plc is incorporated in England and Wales. Statement of compliance These Financial Statements have been prepared in accordance with applicable accounting standards and in accordance with Financial Reporting Standard 101 – 'The Reduced Disclosure Framework' (FRS 101). The principal accounting policies adopted in the preparation of these Financial Statements are set out below. These policies have all been applied consistently throughout the year unless otherwise stated. The Financial Statements have been prepared on a historical cost basis. The Financial Statements are presented in Sterling (£) and have been presented in round thousands (£'000). Going concern In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. In addition to the normal process of preparing forecasts for the Group, the Board has also considered downside risks and the potential impact of Covid-19 and the economic environment on the cash flows of the Group for a period to 31 March 2025. This has been done by looking at various scenarios within the forecasts for the potential effect of changes in the market during the forecast period. The outcome for the year and the forecasts prepared by the business show that we do not consider there to be same level of uncertainty now as there was 12 months ago. In considering their position the Directors have also had regard to letters of support in respect of the secured debt which have received from each of the holders of that debt confirming that the debt will not be called in and support will be provided for the foreseeable future. Details of this debt are contained in Note 18 and Note 30 in the consolidated financial statements. The Group financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. The Directors have a reasonable expectation that the Group has adequate resources to continue in existence for the foreseeable future and have concluded it is appropriate to adopt the going concern basis of accounting in the preparation of the financial statements. Disclosure exemptions adopted In preparing these Financial Statements, the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore, these Financial Statements do not include: 1 2 3 4 5 6 7 8 9 10 11 12. A statement of cash flows and related notes The requirement to produce a balance sheet at the beginning of the earliest comparative period The requirements of IAS 24 related party disclosures to disclose related party transactions entered in to between two or more members of the Group as they are wholly owned within the Group Presentation of comparative reconciliations for property, plant and equipment, intangible assets Capital management disclosures Presentation of comparative reconciliation of the number of shares outstanding at the beginning and at the end of the period The effect of future accounting standards not adopted Certain share-based payment disclosures Disclosures in relation to impairment of assets Disclosures in respect of financial instruments (other than disclosures required as a result of recording financial instruments at fair value) IFRS 9 disclosures in respect of allowances for expected credit losses reconciliations and credit risk and hedge accounting IFRS 15 disclosures in respect of disaggregation of revenue, contract assets reconciliations and contract liabilities reconciliation and unsatisfied performance obligations 75 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Investments in Subsidiaries, Associates and Joint Ventures Investments in Subsidiary undertakings are stated at cost less any applicable provision for impairment. In the previous year the trade and assets of subsidiary entities were transferred within the Group. As the economic substance of the transaction did not result in a loss of value, investments in subsidiaries have continued to be held at their carrying value. An impairment review is performed annually in line with IAS36. See valuation of investments in significant judgement and estimates. Tangible assets Property, plant and equipment (PPE) is initially recognised at acquisition cost or manufacturing cost, including any costs directly attributable to bringing the assets to the location and condition necessary for them to be capable of operating in the manner intended by the Company’s management. PPE is subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is recognised on a straight-line basis (unless otherwise stated) to write down the cost less estimated residual value of PPE. The following useful lives are applied: - - - Leasehold improvements: 5-10 years Office equipment: 2-5 years Buildings: period of the lease Material residual value estimates and estimates of useful life are updated as required, but at least annually. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets, and are recognised in profit or loss within other income or other expenses. Financial Instruments - Recognition, initial measurement and derecognition Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit or loss, which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities is described below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Financial Instruments - Classification and subsequent measurement of financial assets For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging instruments, are classified into the following categories upon initial recognition: • financial assets subsequently measured at amortised costs There are no financial assets that have been designated as fair value through other comprehensive income, or fair value through profit or loss. All financial assets are reviewed for impairment at least at each reporting date, to identify whether there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described below. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. IFRS 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. Recognition of credit losses is no longer dependent on the Company first identifying a credit loss event. Instead the Company considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. 76 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Financial instruments – classification and subsequent measurement of financial liabilities The Company’s financial liabilities include borrowings, trade creditors and other creditors. Financial liabilities are measured subsequently at amortised cost using the effective interest method. Cash and cash equivalents Cash comprises cash on hand and demand deposits, which is presented as cash at bank and in hand in the Balance Sheet. Cash equivalents comprise short-term, highly liquid investments with maturities of three months or less from inception, that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Cash equivalents are presented as part of current asset investments in the Balance Sheet. Leases The Company reports using IFRS 16, whereby the Company now recognises a lease liability and a right of use asset. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable; • variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable by the group under residual value guarantees; • the exercise price of a purchase option if the group is reasonably certain to exercise that option; and • payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right of use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Company, where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received. If the Company is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect, then when adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right of use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right of use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability; • any lease payments made at or before the commencement date less any lease incentives received; • any initial direct costs; and • restoration costs. Right of use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right of use asset is depreciated over the underlying asset’s useful life. Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. See note 11. 77 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Financial guarantees Financial guarantees in respect of the borrowings of fellow Group companies are not regarded as insurance contracts. They are recognised at fair value and are subsequently measured at the higher of: • • the amount that would be required to be provided under IAS 37 (see policy on provisions below); and the amount of any proceeds received net of amortisation recognised as income. Provisions, contingent assets and contingent liabilities Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required, and amounts can be estimated reliably. The timing or amount of the outflow may still be uncertain. Restructuring provisions are recognised only if a detailed formal plan for the restructuring exists and management has either communicated the plan’s main features to those affected or started implementation. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Where the time value of money is material, provisions are discounted to their present values using a pre-tax discount rate that reflects the current market assessment of the time value of money and the risks specific to the liability. Any reimbursement that is virtually certain to be collected from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote. Equity, reserves and dividend payments Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company's ordinary shares are classified as equity. Transaction costs on the issue of shares are deducted from the Share Premium Account arising on that issue. Dividends on the Company's ordinary shares are recognised directly in equity. Income Interest receivable Interest receivable is reported on an accrual basis using the effective interest method. Dividends receivable Dividends are recognised at the time the right to receive payment is established. Operating expenses Operating expenses are recognised in profit or loss upon utilisation of the service or as incurred. Foreign currency translation Foreign currency transactions are translated into the Company's functional currency using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the re-measurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or loss. Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value, which are translated using the exchange rates at the date when fair value was determined. Where a gain or loss on a non-monetary item is recognised in other comprehensive income, the foreign exchange component of that gain or loss is also recognised in other comprehensive income. 78 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Income taxes Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity. Calculation of current tax is based on tax rates and laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income taxes are calculated using the liability method. Calculation of deferred tax is based on tax rates and laws that have been enacted or substantively enacted by the end of the reporting period, that are expected to apply when the asset is realised, or the liability is settled. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the entity expects to recover the related asset or settle the related obligation. Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary difference will be utilised against future taxable income. This is assessed based on the Company’s forecast of future operating results, adjusted for significant non-taxable income and expenses, and specific limits on the use of any unused tax loss or credit. Deferred tax assets are not discounted. Deferred tax liabilities are generally recognised in full, with the exception of the following: • on the initial recognition of goodwill on investments in Subsidiaries, where the Company is able to control the timing of the reversal of the difference, and it is probable that the difference will not reverse in the foreseeable future, on the initial recognition of a transaction that is not a business combination and at the time of the transaction affects neither accounting nor taxable profit. Deferred tax liabilities are not discounted. Deferred and contingent consideration Deferred consideration is recorded at amortised costs and is estimated using a present value technique, discounted at 3.5%, which is the risk free rate. Contingent consideration is recorded at fair value using the probability-weighted estimated future cash flows using a present value technique. The consideration is discounted at 11.5% which is the prior year Weighted Average Cost of Capital. The effects on the fair value of risk and uncertainty in the future cash flows are dealt with by adjusting the estimated cash flows rather than adjusting the discount rate. Post-employment benefits and short-term employee benefits Short-term employee benefits Short-term employee benefits, including holiday entitlement, are current liabilities included in pension and other employee obligations, measured at the undiscounted amount that the Company expects to pay as a result of unused entitlement. Post-employment benefit plans Contributions to defined contribution pension schemes are charged to profit or loss in the year to which they relate. Prepaid contributions are recognised as an asset. Unpaid contributions are reflected as a liability. Profit from operations Profit from operations comprises the results of the Company before interest receivable and similar income, interest payable and similar charges, corporation tax and deferred tax. Fair value measurement Management uses valuation techniques to determine the fair value of financial instruments and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible, but this is not always available. In that case, management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date. 79 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Significant judgement in applying accounting policies and key estimation uncertainty When preparing the Financial Statements, management makes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses. The following are significant management judgements in applying the accounting policies of the Company that have the most significant effect on the Financial Statements. Useful lives of depreciable assets Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technological obsolescence that may change the utility of certain software and IT equipment. Valuation of investments Management reviews the carrying value of investments at each reporting date, based on the future cash flows of those investments. IFRS 16 Under IFRS 16 the Company is required to make a judgement in determining the discount rate to be used in calculating the present value of lease payments when recognising the lease liabilities and right of use asset. For the discount rate the Company has used the lessee’s incremental borrowing rate, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right of use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Company, where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received. The right of use asset is depreciated over the term of the lease. The term has been determined with reference to the lease agreements and any expected extension beyond the end of the lease end date specified in the lease agreement. Business combinations Management uses valuation techniques when determining the fair values of certain assets and liabilities acquired in a business combination (see Note 33 of the consolidated accounts). In particular, the fair value of contingent consideration is dependent on the outcome of the acquirees’ future revenues (see Note 33 of the consolidated accounts). 2. Other operating charges Impairment of investment (note 12) Administrative expenses Total administrative expenses 3. Operating loss Operating loss is stated after charging: Impairment of investment (note 12) Depreciation of owned fixed assets Depreciation of right of use assets 4. Income from fixed asset investments and other income Other income Dividends received from subsidiary companies 2023 £'000 8,747 1,528 10,275 2023 £'000 8,747 67 246 2023 £'000 505 - 2022 £'000 9,185 1,558 10,743 2022 £'000 9,185 73 241 2022 £'000 - 418 Within other income this period is a settlement of £505k in relation to previously incurred legal costs following the dismissal of the claimant’s case in April 2022, associated with the 2016 acquisition of Bloom Media (UK) Limited. 80 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 5. Finance costs Bank interest payable Withholding tax on borrowings interest expense Interest on lease liability (note 11) Interest on deferred and contingent consideration Total 6. Tax on ordinary activities The tax credit/(charge) is based on the loss for the year and represents: UK corporation tax at 19% (2022: 19%) Total current tax Deferred tax: Origination and reversal of timing differences Total tax credit The tax credit can be explained as follows: Loss before tax Tax using the UK corporation tax rate of 19% (2022: 19%) Effect of: Non-taxable income Recognition of unused losses Impairment of investments Non-deductible expenses / (credits) Current year credit 7. Auditor’s remuneration 2023 £'000 748 180 47 125 1,100 2023 £'000 - - (125) (125) 2023 £’000 (10,870) Restated 2022* £'000 416 100 44 - 560 2022 £'000 (2) (2) (571) (573) Restated 2022* £'000 (10,885) (2,065) (2,068) (505) 330 1,662 453 (125) - (240) 1,745 (10) (573) Details of remuneration paid to the auditor by the Company are shown in Note 7 to the Consolidated Financial Statements. 81 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 8. Directors and employees Average number of staff employed by the Company Aggregate emoluments (including those of Directors): Wages and salaries Social security costs Pension contribution Total emoluments Further information in respect of Directors is given in the Directors’ Remuneration Report. Remuneration in respect of Directors was as follows: Emoluments receivable Fees paid to third parties for Directors’ services Company pension contributions to money purchase pension schemes The highest paid Director received remuneration of £236k (2022: £284k). 9. Dividends The Directors do not recommend the payment of a dividend for the current year (2022: £Nil). 2023 2022 5 5 2023 £’000 453 53 12 518 2023 £'000 342 30 9 381 2022 £’000 584 73 15 672 2022 £'000 554 30 15 599 10. Tangible fixed assets Cost at 31 March 2022 Right of use asset additions Disposals Cost at 31 March 2023 Depreciation at 31 March 2022 Charge for the year on owned assets Disposals Charge on right of use assets Depreciation at 31 March 2023 Net book value at 31 March 2023 Net book value at 31 March 2022 Buildings Leasehold Improvements £’000 £’000 Office equipment £'000 1,147 427 - 1,574 438 - - - 223 661 913 709 389 - - 389 203 39 - - 242 147 186 416 - (5) 411 271 28 (5) 23 317 94 145 Total £’000 1,952 427 (5) 2,374 912 67 (5) 246 1,220 1,154 1,040 82 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 11. Leases The company has lease contracts for the offices occupied in Sheffield and printers. The amounts recognised in the financial statements in relation to the leases are as follows: (i) Amounts recognised in the statement of financial position The balance sheet shows the following amounts relating to leases: Right of use assets Buildings Office equipment Lease liabilities Current Non-current (ii) Amounts recognised in the income statement The income statement shows the following amounts relating to leases: Depreciation charge of right of use assets Buildings Office equipment Interest expense (included in finance cost) 2023 £'000 2022 £'000 913 73 986 135 604 739 2023 £'000 223 23 246 47 709 97 806 170 690 860 2022 £'000 152 89 241 44 83 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 12. Investments Cost at 31 March 2022 Additions Cost at 31 March 2023 Impairment at 31 March 2022 Impairment in year Impairment at 31 March 2023 Net book value at 31 March 2023 Net book value at 31 March 2022 Subsidiaries £'000 61,824 2,969 64,793 35,589 8,747 44,336 20,457 26,235 The Company has carried out an impairment review of the carrying amount of the investments in Subsidiaries. The impairment review of investments was performed using the same cash flows and assumptions as were used in the Group’s Financial Statements for the impairment review of goodwill, details of which can be found in Note 14 in the Group’s Financial Statements. This review has concluded that an impairment was required to the carrying value of the Company’s UK investments of £8.7m (2022: £9.2m) based upon sensitivities applied to forecast EBITDA. On 14 April 2022 the following companies which were 100% owned by the group were dissolved; Alphanumeric Group Holdings Limited, Alphanumeric (Holdings) Limited, Dig for Fire Limited, Digital Marketing Network Limited, Digital Media and Analytics Limited, DMG London Limited, Hyperlaunch New Media Limited, Inbox Media Limited, Iris Associates Limited, Jaywing Information Limited, Jaywing North Limited, Shackleton PR Limited, The Comms Department Limited, Woken Limited. On 26 August 2022 the group purchased 100% of the ordinary share capital of Midisi Limited for consideration of £3.3m, before discounting. Details of the business combination can be found in Note 33 of the consolidated financial statements. At 31 March 2023 the Company held either directly or indirectly, 20% or more of the allotted Share Capital of the following companies: Alphanumeric Limited Bloom Media (UK) Limited Epiphany Solutions Limited Frank Digital PTY Limited Gasbox Limited Jaywing Central Limited Jaywing Innovation Limited Jaywing Australia PTY Limited Jaywing UK Limited Midisi Limited Proportion held Class of share capital held By parent Company By the Group Nature of Business Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Non-trading Dormant Non-trading Website design and build Non-trading Non-trading Non-trading Search Engine Optimisation Direct marketing Non-trading All the companies listed above have been consolidated. All the companies listed above are incorporated in England and Wales with the following exceptions: Company Frank Digital PTY Limited Jaywing Australia PTY Limited Country of Incorporation Australia Australia Address 36 Hickson Road, Millers Point, NSW 2000 36 Hickson Road, Millers Point, NSW 2000 The companies incorporated in England and Wales all have their registered office at Albert Works, Sidney Street, Sheffield, S1 4RG. The companies incorporate in Australia all have their registered office at 36 Hickson Road, Millers Point, NSW 2000. 84 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 13. Debtors due within one year Amounts due from Group undertakings Prepayments Other taxation and social security Amounts due from Group undertakings attract no interest and are repayable on demand. 14. Creditors: amounts falling due within one year Trade creditors Amounts owed to Group undertakings Other taxation and social security Other creditors Accruals Lease liability Deferred consideration payable on acquisition of subsidiary undertakings Contingent consideration payable on acquisition of subsidiary undertakings Amounts owed to Group undertakings attract no interest and are repayable on demand. 15. Creditors: amounts falling due in more than one year Lease liability Deferred consideration payable on acquisition of subsidiary undertakings Contingent consideration payable on acquisition of subsidiary undertakings 16. Provisions The carrying amounts and the movement in the provision account are as follows: 2023 £’000 192 128 122 442 2022 £’000 58 173 344 575 2023 £'000 352 13,509 60 6 172 135 414 109 14,757 2023 £'000 604 770 1,251 2,625 2022 £'000 449 12,593 19 - 494 170 626 - 14,351 2022 £'000 690 - - 690 At 1 April 2022 Additional provisions Amounts utilised At 31 March 2023 Dilapidations £'000 - 290 - 290 The dilapidations provision of £290k (2022: £nil) has been recognised for the head office held within Jaywing Plc. The dilapidations provision will be settled at the end of the lease period, which is greater than one year. 85 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 17. Borrowings Summary: Borrowings Borrowings are repayable as follows: Within one year: Borrowings Total due within one year 2023 £'000 Restated 2022* £'000 11,435 9,007 2023 £'000 11,435 11,435 Restated 2022* £'000 9,007 9,007 As the loans are at variable market rates their carrying amount is equivalent to their fair value. Interest is calculated at 3 month LIBOR plus a margin. 18. Share capital Allotted, issued and fully paid: At 31 March 2022 At 31 March 2023 45p deferred shares Number 5p ordinary shares Number 67,378,520 93,432,217 67,378,520 93,432,217 £’000 34,992 34,992 The 5 pence ordinary shares have the same rights (including voting and dividend rights and rights on a return of capital) as the previous 50 pence ordinary shares. Holders of the 45 pence deferred shares do not have any right to receive notice of any General Meeting of the Company or any right to attend, speak or vote at any such meeting. The deferred shareholders are not entitled to receive any dividend or other distribution and shall, on a return of assets in a winding up of the Company, entitle the holders only to the repayment of the amounts paid up on the shares, after the amount paid to the holders of the new ordinary shares exceeds £1,000,000 per new ordinary share. The deferred shares are also incapable of transfer and no share certificates have been issued in respect of them. 19. Reserves Called-up Share Capital – represents the nominal value of shares that have been issued. Share Premium Account – includes any premiums received on issue of Share Capital. Any transaction costs associated with the issuing of shares are deducted from Share Premium. Profit and Loss Account – includes all current and prior period retained profits and losses. Treasury Shares – shares in the company that have been acquired by the company. Capital Redemption Reserve – represents amounts transferred from Share Capital on redemption of issued shares. 20. Treasury shares At 31 March 2023 and 31 March 2022 2023 £'000 2022 £'000 25 25 86 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 21. Deferred tax asset A deferred tax asset is provided for in the financial statements and consists of the following: Accelerated capital allowances Unused losses Deferred tax asset The amount of deferred tax recognised in profit or loss was as follows: Accelerated capital allowances Unused losses Total 2023 £'000 68 649 717 2023 £'000 (16) 141 125 2022 £'000 52 553 605 2022 £'000 18 553 571 The March 2021 Budget announced an increase in the UK standard rate of corporation tax to 25% from 1 April 2023 with the legislation receiving Royal Assent on 10 June 2021. Deferred tax as at 31 March 2023 has been provided at a rate of 25% (2022: blended rate of 19% and 25%) which is based on when the deferred taxation is expected to crystalise. Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary difference will be utilised against future taxable income. This is assessed based on the Group’s forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any unused tax loss or credit. 22. Contingent liabilities There is a cross guarantee between members of the Jaywing plc group of companies on all overdrafts and borrowings with the group’s lenders. At 31 March 2023 the amount thus guaranteed by the company was £9,200,000 (2022: £8,200,000). 23. Related parties The Company is exempt from the requirements of FRS 101 to disclose transactions with other 100% members of the Jaywing plc group of companies. Transactions with other related parties are disclosed in Note 30 to the Consolidated Financial Statements. 24. Ultimate controlling related party At the year end, the Directors considered that the Company had no ultimate controlling party. 25. Financial risk management objectives and policies Details of Group policies are set out in Note 32 to the Consolidated Financial Statements. 26. Retirement benefits Defined Contribution Schemes The Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund and amounted to £12,000 (2022: £32,000) with the financial year end pension creditor being £3,000 (2022: £2,000). 87 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 27. Prior year restatement Withholding tax Borrowings are in respect of lenders in low tax jurisdictions and as a result withholding tax is payable. Recognition of withholding tax within the interest expense and borrowing costs lines is required as this was omitted from the previous financial years results. The following table summarises the impact of the prior period restatement in relation to the financial statements of the parent company. Loss for the year as previously stated Adjustment 1 - Recognition of withholding tax expense Loss for the year as restated Total equity for the year as previously stated Adjustment 2 - Recognition of withholding tax expense Total equity for the year as restated Statement of Comprehensive Income For the year ended 31 March 2022 Adjustment 1 Turnover Administrative expenses Operating loss Income from fixed asset investment Other income Finance Costs Loss on ordinary activities before taxation Taxation on ordinary activities Loss and total comprehensive loss on ordinary activities after taxation £’000 - (10,743) (10,743) 418 - (460) (10,785) 573 (10,212) 2022 £000 (10,212) (100) (10,312) 2022 £000 4,662 (253) 4,409 Restated 2022 £’000 - (10,743) (10,743) 418 - (560) (10,885) 573 - - - - - (100) (100) - (100) (10,312) 88 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Statement of Financial Position As at 31 March 2022 Adjustment 2 Non-current assets Tangible assets Deferred tax Investments Current assets Cash at bank Debtors due within one year Current liabilities Borrowings Creditors: amounts falling due within one year Total assets less current liabilities Non-current liabilities Creditors: amounts falling due after more than one year Net (liabilities) / assets Equity Called up share capital Share premium account Treasury shares Capital redemption reserve Profit and loss account Total equity £’000 1,040 605 26,235 27,880 2 575 577 (8,754) (14,351) 5,352 (690) 4,662 34,992 10,088 (25) 125 (40,518) 4,662 Restated 2022 £’000 1,040 605 26,235 27,880 2 575 577 - - - - - - - (253) (9,007) - (14,351) (253) 5,099 - (253) (690) 4,409 - - - - 34,992 10,088 (25) 125 (253) (253) (40,771) 4,409 89 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 27. Post balance sheet events On 13 April 2023, post period end, the Company granted 1,152,000 LTIP (Long Term Incentive Plan) share options to Andrew Fryatt (CEO) and 4,640,000 CSOP (Company Share Option Plan) options to certain senior employees of the Group. The total number of Shares that can be acquired pursuant to options granted under the LTIP and CSOP amounts to 5,782,000 Shares. The LTIP Options granted to Andrew Fryatt are subject to a minimum vesting price of 10.0 pence per Share and an exercise price of 5.0 pence per Share. The performance period for LTIP Options granted under the LTIP will typically be four years commencing from the date of grant of the relevant LTIP Option. However, in the case of Andrew Fryatt, in recognition of his service to the Company since March 2020, 50% of the LTIP Options will vest and be exercisable on or after the second anniversary of the date of grant, subject to and to the extent that the performance conditions are met. Except in the event of a change of control of the Company and in certain 'good leaver' scenarios, LTIP Options may only be exercised after the expiry of the performance period and to the extent that the relevant performance criterion is met. Shares acquired on exercise of LTIP Options shall be subject to a two-year holding period, during which time they cannot be sold, except in certain circumstances including, but not limited to, the sale of Shares to meet any tax liabilities arising upon exercise of the LTIP Options. The market value CSOP Options were granted over a total of 4,640,000 Shares with an exercise price of 5.0 pence per Share. This total includes the 1,200,000 CSOP Options granted to each of Andrew Fryatt (CEO) and Christopher Hughes (CFO) , and 2,240,000 CSOP Options granted to certain senior employees of the Company. The vesting period of the CSOP Options shall be three years from the date of grant. Except in the event of a change of control of the Company and in certain 'good leaver' scenarios, no CSOP Options may be exercised prior to the expiry of the vesting period. Shares acquired on exercise of the CSOP Options shall be subject to a holding period of one year, during which time they cannot be sold, except in certain circumstances including, but not limited to, the sale of Shares to cover the exercise price payable upon exercise of the CSOP Options. No performance conditions attach to the exercise of the CSOP Options. 90 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Shareholder Information General Meeting A General Meeting will be held on 28 September 2023 at the offices of Jaywing plc, Albert Works, Sidney Street, Sheffield, S1 4RG at 2:30pm. Dividend There is no dividend payable. Multiple accounts on the shareholder register If you have received two or more copies of or notifications about this document, this means that there is more than one account in your name on the Shareholders Register. This may be caused by your name or address appearing on each account in a slightly different way. For security reasons, the Registrars will not amalgamate the account without your written consent, so if you would like any multiple accounts to be combined into one account, please write to Neville Registrars at the address given below. Documents The following documents, which are available for inspection during normal business hours at the registered office of the Company on any weekday (Saturdays, Sundays and public holidays excluded), will also be available for inspection at the place of the General Meeting from at least 15 minutes prior to the meeting until its conclusion. ▪ ▪ ▪ Copies of the Executive Directors’ service agreements and the Non-Executive Directors’ letters of appointment; The memorandum and articles of association of the Company; and Register of Directors’ interests in the Share Capital of the Company maintained under Section 809 of the Companies Act 2006. Particulars of the Directors’ interest in shares are given in the Remuneration Report, which is contained in the Report and Accounts for the year ended 31 March 2023. Issued Share Capital As at 31 August 2023 (being the last practicable date before the publication of this document), the Company’s issued Share Capital comprised 93,432,217 ordinary shares of 5p each, of which 99,622 are held in Treasury. Therefore, as at 31 August 2023 the total voting rights in the Company were 93,332,595. On a vote by show of hands, every member who is present in person or by proxy has one vote. On a poll, every member who is present in person or by proxy has one vote for every ordinary share of which he or she is a holder. Shareholder enquiries Neville Registrars Limited maintain the register of members of the Company. If you have any queries concerning your shareholding, or if any of your details change, please contact the Registrars: Neville Registrars Limited Neville House Steelpark Road Halesowen, B62 8HD Shareholder Helpline: 0121 5851131, fax: 0121 5851132. Website address www.nevilleregistrars.co.uk Website Information on the Group is available at https://investors.jaywing.com. 91 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F Company Information Registered Office Albert Works 71 Sidney Street Sheffield S1 4RG Registered Number: 05935923 Country of incorporation: England Auditor Grant Thornton UK LLP No.1 Whitehall Riverside Whitehall Road Leeds LS1 4BN Nominated adviser and broker Cenkos Securities plc 6.7.8 Tokenhouse Yard London EC2R 7AS Registrars Neville Registrars Limited Neville House Steelpark Road Halesowen B62 8HD Solicitors Fieldfisher LLP No 1 Spinningfields Hardman Street Manchester M3 3EB Company Secretary Chris Hughes Albert Works 71 Sydney Street Sheffield S1 4RG 92 Jaywing plc Annual Report and Accounts 2023 DocuSign Envelope ID: ADC985DC-8762-41CA-A278-3C55258E307F 

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