Kooth plc
Annual Report 2023

Plain-text annual report

Annual report 2023 koothplc.com About Kooth Our purpose is to build mentally healthier populations, leaving no one behind. We achieve this by providing everyone with effective digital support from their first moment-of-need. Our strategy is to focus on supporting youth to help turn the tide on the growing mental health crisis, and apply our learnings to deliver support for adults throughout life. Our north star is to deliver accretive health economics outcomes. By reducing the number of people that need acute mental healthcare we can save public services money, and build a healthier, happier, more productive society. Strategic report Corporate governance Financial statements Contents Highlights: a transformational year Investment case: why invest in Kooth Chief Executive Officer’s statement Chair’s statement Strategic report 1 At a glance 2 4 6 8 11 Our business model 15 Our strategy and markets 19 26 34 Strategic progress Soluna: Kooth’s next generation platform Case study: universal support from ages 10 and up in Greater Manchester 36 Key performance indicators 38 Chief Financial Officer’s review 42 Environmental, Social and Governance (‘ESG’) report 59 65 Principal risks and uncertainties Section 172 statement Corporate governance 69 Chairs’ introduction to Governance 70 Board of Directors 75 Compliance with the QCA Code 83 Report of the Audit Committee 85 Report of the Remuneration Committee 91 Directors’ Report 97 Directors’ Responsibilities Statement Independent Auditors Report 99 Financial statements 117 Consolidated statement of profit and loss and other comprehensive loss 118 Consolidated statement of financial position 119 Consolidated statement of changes in equity 120 Consolidated cash flow statement 121 Notes to the financial statements 145 Parent company statement of financial position 146 Parent company statement of changes in equity 147 Notes to the parent company financial statements Annual report 2023Kooth plc At a glance There is a growing public health crisis in mental health Page 1 UK US 1-in-5 children and young people have a probable mental health disorder, up from 1-in-9 in 2017 22% of high school students seriously considered suicide in the past year Referrals to Children and Adolescent Mental Health Services (CAMHS), designed to support those with the most severe mental health needs, have risen by 53% Average waiting times to receive care is over 6 times the 4-week target, with some waiting 2 years 10% attempted suicide one or more times 40% of parents are very worried about the mental health of their children Kooth provides early and responsive support to reduce the demand and cost for acute mental health care Significant improvement in mental health >70% of cases Deploying Kooth provides short term cost savings of 3:1 in the UK, up to 12:1 in the US Key markets we serve US Youth +$1bn UK Children & Young People +£100m UK Adults +£300m International (future) +$2bn Group highlights £33.3m 66% increase in Group revenue £64.6m 206% increase in Group ARR 77.6% Gross margin £11m Cash, with no debt Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportStrategic report Corporate governance Financial statements Page 2 Highlights: a transformational year 2023 2022 2023 2022 £21.1m £33.3m +66% £20.1m £64.6m +206% 2023 2022 2023 2022 2023 2022 £0.9m £2.3m +40% £1.6m £11.0m +29% £8.5m £2.3m -148% Annual report 2023Kooth plcRevenue £mAnnual £m Recurring RevenueAdjusted £m EBITDANet Cash £mOperating Loss £mKooth plc Strategic report Corporate governance Financial statements Page 3 Highlights: a transformational year Continued Strategic progress Successful launch of major contract with California Delivering mental health care to 13-25 year olds $188 million expected value over four years Development and launch of Soluna Kooth’s next-generation platform Strong uptake of Kooth in Pennsylvania pilot 1-in-10 high school students using Kooth in its first year First US Medicaid partnership Aetna Better Health Illinois Expanding behavioural health support to youth in low-income families Accelerated investment in US Government sales To expand into additional States UK stable Despite NHS headwinds with short-term funding pressures US investment Drives operating loss £2.3m (2022: £0.9m) Annual report 2023 Kooth plc Strategic report Corporate governance Financial statements Page 4 Chair’s statement Dear Shareholders, Without doubt, 2023 has been a transformational year for Kooth, with significant growth and progress towards our vision to build mentally healthier populations by providing everyone with access to effective digital support from their first moment of need. I want to thank all members of the team in both the UK and US for their incredible hard work in delivering on the opportunities that have presented themselves to us. In addition, I want to record my appreciation to our customers who entrust us as custodians for the mental health of their populations. Reflecting on the progress we have made in the US since late 2021 ― first in Pennsylvania, and then in California ― we are grateful for the endorsement of our innovation, clinical efficacy, and scale. The rapid progress we are making in the US would not be possible without the proof points we have developed over decades in the UK. As a result of our $188m expected value, four- year contract win in California, we upgraded our growth outlook, and I am pleased to report 2023 Group revenues of £33.3 million, a 66% increase over 2022 revenues of £20.1 million, and a 40% increase in EBITDA to £2.3 million. Peter Whiting Non-Executive Chair “ Building on the strong foundations we have built in the UK, 2023 was a transformational year for us as we expanded into the US.” Annual report 2023Strategic report Corporate governance Financial statements Page 5 Chair’s statement Continued Given our rapid progress in California in Despite these short-term headwinds, Kooth’s particular, we successfully raised £10m of recurring revenue business model, with 98% equity in July, primarily to invest in accelerating of Kooth’s contracts having a duration of 12 our US growth. I’m pleased to report that months or more, gives us strong forward revenue this has enabled us to expand our Sales and visibility, ending 2023 with £64.6m Annual Research efforts, with discussions underway Recurring Revenue (ARR), up from £21.1m a in a number of States, and a partnership with year ago. We enter 2024 with significant growth opportunities, a solid financial position ― £11.0m in cash, no debt, and an undrawn $9.5m working capital credit facility ― a proven business model, and a strong social purpose. Peter Whiting Non-Executive Chair 25 March 2024 Aetna to pilot Kooth in Illinois to support youth in low-income families that qualify for Medicaid. The latter represents a potentially significant expansion of our modes of funding, and in turn a reinforcement of our market position. Turning to the UK, 2023 has been a challenging year given the short-term financial and political pressures to reduce spending to pre-pandemic levels, whilst tackling the elective care waiting lists. Given the estimated £7 billion budget deficit at the start of 2023, NHS commissioners have been faced with difficult decisions to scale back services to balance budgets. As a result, churn in the UK has increased to £2.3m, up from £2.0m in 2022, with Kooth Adult pilot contracts being disproportionately impacted. However, given the unsustainable, continued double-digit increase in demand for mental healthcare, and the political imperative to transform services for the benefit of society, NHS productivity, and the economy, we anticipate an improvement in the UK following the general election as NHS priorities and funding solidify. Annual report 2023Kooth plcStrategic report Corporate governance Financial statements Page 6 Investment case: why invest in Kooth There is a growing, global crisis in mental health. Looking to the UK and US, demand for mental healthcare in the UK and US continues to grow at double-digit rates annually, with budgets and workforce unable to match the growing demand. We believe the status-quo is unsustainable. To address the supply /demand imbalance, governments and healthcare systems need to innovate to provide early and responsive help to those in need, and by doing so, reduce the demand for costly mental health treatments and downstream pressure on healthcare services. Founded in 2001, Kooth has been a pioneer and leader in digital mental health care, and is committed to helping turn the tide on the growing crisis to help people live healthier, happier lives. Annual report 2023Kooth plcStrategic report Corporate governance Financial statements Page 7 Investment case: why invest in Kooth Continued Growing demand Market position 1-in-5 of the population has a diagnosable mental health need every year. Untreated conditions contribute to 13% of total disease burden and, by 2030, mental health problems are expected to be the leading causes of death and disability worldwide. The global cost of mental health will reach $6 trillion by 2030 (Currently: $467bn US, £118bn UK). UK’s largest provider of digital mental health support for children and young people, with ~60% of 11-25 year olds having free access. Rapid progress in the US since entering the market in late 2021, with the California Department of Health Care Services (DHCS) awarding a four year contract to Kooth after vetting 450 providers. Strong recurring revenue model Kooth’s B2B2C business model is an annual-subscription model with over 95% revenue coming from contracts of 12-months or longer. Category leading 65%+ gross margin. Clear growth potential Long term advantage US represents an addressable market of +$1bn. UK market opportunity of +£400m. Future expansion into other international markets represents a +$2bn opportunity. Trust and safety at scale: Kooth has a proven, tested model to deliver population-wide mental health services at scale. Impact: With more than 50 peer-reviewed research studies, Kooth has an abundance of evidence on its therapeutic, social, and economic impact. Data and AI: As Kooth embarks on a future with AI playing a bigger role in supporting the delivery of mental healthcare, the company benefits from 15+ years of text-based mental health data to help deliver support more effectively and economically. Annual report 2023Kooth plcStrategic report Corporate governance Financial statements Page 8 Chief Executive Officer’s statement Tim Barker Chief Executive Officer “ Building on the strong foundations we have developed in the UK.” Dear Shareholders, What drew me to Kooth in 2020, in addition to its strong social purpose, was the thoughtfulness with which the team approached tackling the ever-growing demand for mental healthcare. In many ways, it was contrary to the thinking at the time: • Building a tech-enabled service supported by professionals, when everyone was trying to build apps that can scale without human involvement. • Growing awareness and usage of the service by embedding engagement leads within local communities, where others focused solely on digital promotion. • Developing a service that could support a whole population, with the goal of reducing demand for acute mental health care, where others were building networks of therapists solely to service the demand for acute care. A key reason why Kooth chose this path was because the company is ultimately focused on what is going to turn the tide on the growing crisis in mental health: we need to build a mentally healthier population, leaving no-one behind. Over the four years that I have been at Kooth, from the pandemic to today, every year has seen its own opportunities and challenges. 2023 brought significant opportunities in the US — and challenges in the UK given the political and financial backdrop in the NHS. However, there are clear moments in one’s career that can be seen as pivotal to the transformation of a business and its prospects. Based on strategic progress in 2023, I believe this was such a year. Annual report 2023Kooth plcStrategic report Corporate governance Financial statements Page 9 Chief Executive Officer’s statement Continued Executing on Kooth’s strategy Executing on Kooth’s strategy to to expand in US States As is well documented in this year’s annual report, Kooth is significantly ahead of schedule support youth through Medicaid managed care providers More than 29 million under 18s — almost 40% on its US expansion strategy. Firstly with of the US youth population — are covered by Pennsylvania, and then with California, it’s Medicaid, the Federal and State funded insurance clear that there was a growing imperative and programme for low-income families; Annual investment case for addressing youth mental Medicaid spending on youth behavioural health health. Kooth’s transformational contract and care exceeds $30.2 billion. A key challenge for partnership with California put the company Medicaid programmes is providing access to in the spotlight to execute and demonstrate mental health support given the shortage and cost its impact. In discussions with many investors, of therapists. Through an innovative partnership execution risk was often cited as the key area of and pilot programme with Aetna Better Health concern given the size and scale of the contract. of Illinois, agreed post-period end, Kooth aims to Seeing the hard work that so many people did demonstrate the impact the company can make to launch Soluna (the name of the platform in building mentally healthier populations. This is and app in the US) initially in September 2023 a key pillar to Kooth’s US strategy. and fully on 1st January 2024, I couldn’t have wished to work with a more engaged, passionate and expert team. As CEO, given the opportunity that California has entrusted to Kooth, this will remain mine and the team’s number one priority throughout 2024 to ensure the company is building a strong foundation for the future. In addition, the £10m fundraise in July 2023 enabled Kooth to engage with a growing pipeline of States to bring its services to their population, and invest in research studies with US academic partners to demonstrate Kooth’s impact. I’m optimistic that Kooth will expand into further States in 2024. Continuing to innovate in technology to transform mental health care, Kooth’s partnership and contract with California significantly accelerated the development of the company’s product roadmap. It enabled us to build this next- generation platform, incorporating everything Kooth has learnt over time — co-produced with input from over 200 young people to help build ‘their dream mental health app’. Soluna will be the platform and brand the company expands into other States, with minimal capital expenditure required to do so. In addition, Kooth will bring its enhanced platform to the UK in the next 12 months to deliver a platform specifically designed for youth that is both engaging and clinically effective. Annual report 2023Kooth plcKooth plc Annual report 2023 Strategic report Corporate governance Financial statements Page 10 Page 10 Chief Executive Officer’s statement Continued Focusing on UK renewals and retention given NHS headwinds 2023 was a more challenging year in the UK Outlook Our proven track record, excellent recurring revenue and net cash position give us a great for Kooth and the many organisations that platform as we enter 2024. The strength of serve the NHS. With the reorganisation of our model, strategy and market position — NHS England from 135 Clinical Commissioning allied to long-term demand for digital mental Groups to 42 Integrated Care Systems finalised, health services in the UK and US — support our their challenge now is to balance the budgets confidence of further progress in the year ahead. Tim Barker Chief Executive Officer 25 March 2024 to pre-pandemic levels and address the forecast £7 billion budget deficit. While Kooth’s team worked continually to demonstrate its value in each region it serves, the company at times saw highly successful services decommissioned in response to these financial pressures. In a small number of cases, a cheaper substitute — providing an informational portal or peer- support only option — replaced Kooth. The UK is Kooth’s home market, and the company will continue to prioritise and focus on its current customers. Post-election, Kooth anticipates priorities and funding to become clearer. Our people When I joined Kooth in early 2020, the company had around 130 employees. Kooth ended 2023 with 585 employees across the US and UK, with staff in 26 States and all corners of the UK. 2023 was a year where everyone at Kooth had to step-up; to deliver on US opportunities, tackle UK headwinds and to provide mental health support to people where the company continued to see a long term increase in acuity, suicidal ideation and self- harm. I couldn’t be prouder of the attitude and achievements of the team during these rapidly- changing times. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Kooth plc Annual report 2023 Strategic report Corporate governance Financial statements Page 11 Page 11 Our business model Kooth is a Business-to-Business-to-Consumer (B2B2C) business. We provide individuals with free access to mental health support, funded by public healthcare systems, government, insurers, or charities. This enables Kooth to support individuals in need regardless of their economic circumstances, and provides our commissioners with a digital model that can scale to reach the whole population in their care. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportStrategic report Corporate governance Financial statements Page 12 Our business model Continued B2B2C Subscription Model. Expansion-focused. (min-max age) Define age-range (1-in-N usage) Estimate uptake Annual platform subscription Digital and in-person engagement Growth usage, demonstrate impact Grow contract value as usage grows or we expand into new age groups Kooth’s pricing model is built on a ‘seed and grow’ approach. This helps to establish Kooth’s service within a region, and then to grow the contract over time as awareness and usage increases. By working with customers, we will determine the population they want to provide support for, for example, 11-18 year olds. With our 20+ year track record and over 25 million data points in our platform, we can estimate the likely uptake of service within the first year. This enables us to provide an annual subscription that covers the digital platform and practitioner support that we will be providing. Our community engagement team will promote Kooth to local communities, schools/universities, healthcare and welfare organisations. In addition, our marketing team will focus on building awareness for Kooth in the local region through both PR and digital marketing campaigns. As individuals sign-up and usage grows, we build the business case to grow contracts further to meet increasing demand. We grow our contracts based on the increased usage of the platform, or to support additional age groups such as 19-25 years or adults. In 2023, over 40% of our contracts expanded upon renewal, proving a sustainable, scalable approach to delivering a population-wide service. Annual report 2023Kooth plcStrategic report Corporate governance Financial statements Page 13 Our business model Continued Population health model: 95% of service users get the support they want/need without 1:1 structured counselling. Professional support 5% of users Professional support 35% of users Self-directed therapy 60% of users Structured Counselling Responsive (drop-in) chat Asynchronous messaging Community Outcomes Goal-based outcomes (CoGS): 75% achieve a positive change in life goals Outcomes Session wants and needs outcomes measure (SWAM-OM): 72% achieve their wants and needs Outcomes 75% find beneficial to their mental health Self-help content and activities Scalable delivery model Kooth enables individuals to access a range of tools and interventions to support their individual wants and needs. This approach, which spans self-therapy and professional support (including counselling), is a key differentiator for Kooth in the industry. It demonstrates the “one size does not fit all” approach that we view as fundamental to empowering individuals to take control of their mental health. At the same time, it creates economic benefits as we deliver self-guided therapies that require less intense direct support from practitioners. . Annual report 2023Kooth plc Strategic report Corporate governance Financial statements Page 14 Our business model Continued Self-directed therapy Around 60% of Kooth platform users engage with Proven clinical outcomes Kooth provides a clinically effective service. self-guided therapy. This enables them to access We measure this through goal-based outcomes, the support they want and/or need from helpful with 73% of users achieving their life and therapy content, self-therapy activities, and by engaging goals. For users that solely engage with our with the Kooth community for peer support. therapeutic content and community, 75% find it beneficial to their mental health. Professional support Around 40% of Kooth platform users engage with professional support, through asynchronous Mental health trends and insights Kooth provides clients and commissioners with messaging with our practitioners, attending a near real-time anonymous trends and insights responsive (drop-in) chat session, or getting more into the mental health of populations. This regular support through structured or ongoing enables healthcare providers and businesses counselling sessions. This is all delivered as a to identify where they need to focus additional text-based chat, similar to WhatsApp, but within resources to improve the wellbeing of their Kooth’s own platform. constituents. Benefits Kooth’s focus is to provide effective support from the ‘first moment of need’, providing both early help before things escalate, and giving responsive help alongside individuals throughout their life. In addition to helping individuals, this approach helps reduce the demand for costly mental health treatment, with the York Health Economics Consortium (YHEC) estimating that for every £1 spent with Kooth, over £3 is saved due to reductions including healthcare utilisation (GP appointments), hospitalisation (A&E admissions), prescribing and interactions with the criminal justice system. Kooth’s own research in the US estimates a 12x cost saving, given the higher cost of healthcare in the US. Annual report 2023Kooth plcStrategic report Corporate governance Financial statements Page 15 Our strategy and markets Our purpose is to build mentally healthier populations, leaving no one behind. We achieve this by providing everyone with effective digital support from their first moment-of-need. Our strategy is to focus on supporting youth to help turn the tide on the growing mental health crisis, and apply our learnings to deliver support for adults throughout life. Our north star is to deliver accretive health economics outcomes. By reducing the number of people that need acute mental healthcare we can save public services money, and build a healthier, happier, more productive society. Annual report 2023Kooth plcStrategic report Corporate governance Financial statements Page 16 Our strategy and markets Continued US Youth UK Children & Young People UK Adults International (future) • State Government • Medicaid / Payers • School Districts • NHS Integrated Care • NHS Integrated Care Systems Systems • NHS Regional Health • NHS Regional Health • Healthcare providers • Government organisations Boards • Local Authorities Boards • Charities Early help and responsive support to expand access to mental health services Population-wide service to reduce demand for acute mental health services SaaS platform for healthcare operators +$1bn +£100m +£300m +$2bn We sell to: We provide: Market size: Sources: Internal company data / Liberum research Annual report 2023Kooth plcStrategic report Corporate governance Financial statements Page 17 Our strategy and markets Continued Kooth has a four pillar growth strategy to meet the global demand for clinical and cost effective mental healthcare. This is powered by Kooth’s proprietary integrated technology platform. 1. US Youth: Partner with State governments and healthcare providers 2. UK Children and Young People: Partner with the NHS to tackle growing demand for mental health support Building on our rapid momentum in the US in California and Pennsylvania, our strategy is to As a UK-founded organisation, Kooth rolled out partner with State governments and healthcare its first contract in the UK in 2004. Since then, providers to help turn the tide on the growing Kooth has grown across the UK, primarily through youth mental health crisis by making Kooth freely regional commissions from the NHS. As of the available to the population, thereby removing end of 2023, Kooth is available to approximately 60% of 10-25 year olds in the UK. Our ambition and strategy is to expand to become a nationwide service, accessible to all. barriers to accessing support. To achieve this, Kooth’s US commercial team is focused on building advocacy to fund Kooth within the State, and responding to State-issued RFPs. In addition, we are focused on partnering with Medicaid managed care providers to support youth in low-income families. For context, Federal and State governments spend over $30.2bn annually on Medicaid for youth behavioural health care. Annual report 2023Kooth plcKooth plc Annual report 2023 Strategic report Corporate governance Financial statements Page 18 Our strategy and markets Continued 3. 4. UK Adults: Deliver population-wide support to reduce NHS demands for acute mental health care The NHS continues to expand mental health International: Expand into international markets by licensing Kooth’s platform to healthcare and government organisations services to meet rising demand, with five million According to the WHO (World Health patients accessing care in 2022/23, an increase of Organisation), nearly a billion people — including over one million in five years. However, threshold 14% of the world’s adolescents — were living with levels for accessing support mean that individuals a mental disorder in 2019. Mental disorders are who may benefit from additional support cannot the leading cause of disability, and people with qualify for treatment unless they deteriorate severe mental health conditions die on average further. Kooth Adult is focused on providing support to the whole adult population within a region, providing early and responsive help to tackle 10 to 20 years earlier than the general population. Just a small fraction of people in need have access to effective, affordable and quality mental health care. problems before they escalate, and be alongside In response, in 2022 the WHO issued an people throughout life. It supports those that are sub-threshold, and delivers rapid and responsive help to prevent those that have received urgent call for action, with the publication of a comprehensive mental health action plan1. All 194 WHO Member States have signed up to this treatment from a relapse. In addition, with a plan, which commits them to global targets for focus on population-health, we aim to reach and transforming mental health. support underserved groups that may be less likely to use established NHS services e.g., ethnic minority groups and LGBTQIA+ communities. While Kooth’s immediate focus is on expanding in the US and UK, we see a long-term opportunity to support other geographies by licensing Kooth’s proprietary digital platform and know- how to healthcare providers and government organisations in international marketing, akin to Software-As-A-Service (SaaS) licensing. This represents a potential market of +£2 billion, and remains a long term ambition of Kooth’s to help scale-up and tackle the global crisis in mental health. ― 1. https://www.who.int/initiatives/mental-health-action-plan-2013-2030 Kooth plc Annual report 2023 Strategic report Corporate governance Financial statements Page 19 Strategic progress Successful launch of contract with California Department of Health Care Services (DHCS) to deliver behavioural health care to the State’s population of 13-25 year olds, representing a $188 million expected value contract over four years. In April 2023, following an extensive nine month evaluation process spanning 450 providers, the California Department of Health Care Services (DHCS) selected Kooth as its platform of choice to deliver behavioural health care support to the State’s population of 13-25 year olds. This four-year, $188 million expected value contract for Kooth forms part of the State’s $4.7 billion multi-year investment to address the growing youth mental health crisis. The contract and partnership with DHCS falls into three key workstreams: • Development of an enhanced platform and service based on DHCS requirements, co-produced with youth. • Development of the workforce and delivery of the service. • Promotion and marketing of the service to grow awareness and uptake. We are proud to report that Soluna (the brand name for our enhanced platform and service) went live in September 2023 and more widely on January 1 2024, providing access to one-to-one professional support, self-guided tools, content and activities, and peer support communities, all moderated by trained behavioural health professionals. Soluna provides professional coaching support in English and Spanish as well as telephone-based support in all 19 Medi-Cal threshold languages. Strategic report Corporate governance Financial statements Page 20 Strategic progress Continued Achieving this was an immense, cross-functional project for both US and UK teams, with some of our key stats being: Project Achievements HR & Recruitment Product & Engineering >60 Contractual deliverables 200 US team hires >200 Youth engaged in co-design of Soluna 3 2 2 New services built Counties in September soft-launch Certifications: ISO27001 SOC2 3k Interviews conducted 67 New features delivered from the roadmap 25k Employment applications submitted 125 New pieces of content released 26 States in which we have employees 19 Telecoaching languages provided While there will be continued investments in platform development for the majority of 2024, our focus now shifts to growing awareness and usage of the service in California, supported by a blend of digital marketing and community engagement that promote and embed Soluna within the diverse communities that it serves. “I’ve had at least 20 (probably) mental health apps and I haven’t seen a single one like this. This is like, next level.” Soluna user feedback ― Anon, age 18 Annual report 2023Kooth plcStrategic report Corporate governance Financial statements Page 21 Strategic progress Continued Strong uptake of Kooth in Pennsylvania pilot, with 1-in-10 high school students using Kooth in its first year. In September 2022, the Pennsylvania State Government awarded a one-year contract to Kooth to pilot its platform in up to 30 school districts, providing much needed support for youth across Pennsylvania, and augmenting existing investments in school-based counsellors with digital support options. The objective for the pilot was to engage with school districts to opt into the programme, raise awareness through engaging with educators, parents, and youth, and demonstrate the uptake and impact that Kooth can have in supporting youth in both rural and urban areas. Some of the key-results of the pilot and research studies include: • Over 95,000 students have access to Kooth through their School District. • A strong uptake of 1-in-10 high school students accessing the service. • 79% of service users surveyed reported “Kooth is a useful source of support”. • 93% of young people who provided feedback said they felt heard, understood and respected. 91% found the session helpful. • 75% of School Administrators said they felt confident or very confident that Kooth will improve support for their students. Based on the success of the pilot, we are finalising discussions with the State of Pennsylvania regarding an extension of its current service contract. Annual report 2023Kooth plcStrategic progress Continued Page 22 First US private-sector pilot contract announced with Aetna Better Health Illinois to expand Medicaid access to behavioural health support to teens and young people. Aetna Better Health® of Illinois Medicaid is the largest single health insurance programme for American children, funded by State and Federal Governments to support low-income families. More than 29 million under-18s — almost 40% of the US youth population — are covered by Medicaid2. Annual spending on youth behavioural health care exceeds $30.2 billion. Given Kooth’s mission to make effective mental health care accessible to all, supporting the Medicaid population is a strategy priority and growth pillar for our US expansion. To progress on this imperative, Kooth and Aetna Better Health of Illinois are embarking on an innovative partnership, agreed post-period end, to pilot Kooth within the Chicago area to expand access to mental health support to the local youth Medicaid population. According to a National Alliance for Mental Illness report3, over 60% of 12-17 year olds in Illinois with depression did not receive any care in the last year. The same report indicates that high school students with depression are more than two times more likely to drop out than their peers, and 7 in 10 youths in the juvenile justice system have a mental health condition. As part of the partnership and pilot, Kooth and Aetna will make Soluna available to students in the Chicago area to expand access and provide early help. Aetna Better Health, a CVS Health business (NYSE: CVS) operates Medicaid- managed healthcare plans in 16 states. ― 2: https://www.kff.org/other/state-indicator/children-0-18 3: https://www.nami.org/NAMI/media/NAMI-Media/StateFactSheets/IllinoisStateFactSheet.pdf Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Strategic progress Continued Page 23 Accelerated investment in US Government sales to expand into additional States. Following our successful £10m fundraise in July 2023 ― primarily to fuel Kooth’s US expansion ― we have accelerated investments in our US commercial and research teams to support our expansion into additional states and continue to innovate in research to demonstrate our impact. Progress includes: • Growing our US commercial team with expertise in government relationships, sales, and clinical strategy. • Conducting a US-wide review of all States to prioritise those that we should focus our efforts on for the coming year. • Engaging lobbyists in high priority States to help build awareness and advocacy for Kooth, and support in the development of initiatives to fund digital mental health support. • Investing in research studies, in collaboration with US academic institutions to further build the evidence-base for Kooth in the US market. From progress so far, we are optimistic about the short and medium-term opportunities to expand into additional States. In addition, we are confident in our ability to execute on these opportunities and expect the capital investment to rollout Soluna to additional States to be minimal. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 24 Strategic progress Continued UK CYP services stable, despite short-term NHS funding pressures. As reported in our interim results, the short-term NHS financial pressures to balance budgets represent a challenging environment. Context Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportNHS England short-term financial pressuresComing out of the pandemic, and with the added costs and challenges caused by industrial action, at the start of 2023 it was estimated that NHS England would end the year with a budget deficit of £7 billion for 2023/24.In January 2023, a mandate was issued for NHS Integrated Care Systems to implement cost efficiency savings to balance budgets.In March, this was followed with a mandate for ICSs to reduce their running cost allowance (RCA) in real terms by 30% by 2025/26. The RCA allowance covers day-to-day administrative operating expenses of running the NHS, for example, management and administrative staff. In May, a target of 6% efficiency savings was issued to ICSs to address the challenges of balancing the budget deficit.In November, guidance was issued to identify additional cost efficiency savings to cover the estimated £1 billion cost of industrial action. Strategic progress Continued UK CYP services stable, despite short-term NHS funding pressures. These pressures have resulted in a challenging environment for both contract renewals and new business, with: • Annual churn increased to £2.3m from £2.0m in 2022. • Net revenue retention reduced to 98% from 107% in 2022. • However, we saw an increase to 41% of contracts expanding (based on expanded usage and inflationary increases) upon renewal, up from 38% in 2022. Kooth Adult pilot projects were disproportionately impacted by loss of funding, which had a negative impact on our Net Revenue Retention. In 2022 we won pilots in eight new regions. However, despite demonstrating a strong demand and uptake for services, funding pressures have resulted in seven contract losses for Kooth Adult. Page 25 Our UK priorities for 2024 remain focused on five key areas: 1. Prioritise contract retention and renewals to continue to provide our service across the country. 2. Deliver research studies to demonstrate the impact that Kooth has for children, adults, and alleviating pressures and reducing NHS costs. 3. Invest in policy and public affairs to champion the role that Kooth and digital mental healthcare can have in helping build a mentally healthier and more productive population. 4. Deliver ongoing pilots of our Integrated Digital Pathway (IDP) service to help tackle waiting lists by supporting individuals awaiting treatment. 5. Bring our Soluna platform to the UK over the next 12 months, delivering a more engaging and effective service. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 26 Soluna: Kooth’s next generation platform Kooth provides an integrated platform for personalised mental health care. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 27 Soluna Continued In awarding a statewide contract, the California 1. Building an enhanced platform (launched Department of Health Care Services (DHCS) as Soluna), shaped by research conducted with vetted over 450 providers. Kooth’s credentials over 200 youth to design their ‘dream mental for this, in addition to already meeting 70% of health app’. Youth co-design is a critical the State’s requirements, include: element to developing an app that is both • Extensive operating experience in delivering an open, digital ‘front-door’ to provide effective, welcoming, culturally relevant, engaging and clinically effective. safe, youth behavioural healthcare, 2. Growing our team in the US from under at population-scale. • A decade of research studies and evidence to 30 staff, to over 200 to deliver, promote and manage the service and business. demonstrate positive outcomes. 3. Developing our promotion and engagement • Proven experience in promotion and engagement to embed Kooth within communities to drive awareness and uptake. strategy to grow awareness of Kooth through both digital channels and via our community engagement teams which act as our ‘feet on the street’ to engage youth in schools, colleges, • Expertise in service co-production with youth healthcare organisations and community based to ensure services are built with ― not just organisations. built for ― youth. This was an opportunity to take a fresh look After Kooth was awarded the contract in April at Kooth’s technology, platform, and service, 2023, we embarked on an transformation project applying lessons learned from over two decades to build our platform, service and teams ahead of operating experience, to build our ‘next of launching in September 2023 and more widely generation platform for the next generation’. on 1 January 2024: A key foundational element to this are the five principles that underpin our Soluna platform, and the research-driven Theory of Change that defines the positive impact we want to make to people’s lives. “Definitely the coaching section, the coach I got was great and it worked very well in my opinion, that’s the best part about the app because it gives it a uniqueness that most other apps don’t offer.” Soluna user feedback ― Anon, age 23 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 28 Soluna Continued Five principles that underpin Soluna Early help Too often, stigma and the complexities of navigating healthcare Early help At the ‘moment of need’ Culturally relevant, sigma free systems mean that children and young people don’t seek help until they reach crisis. To address this, we need to provide a welcoming, culturally-relevant, stigma-free space for youth to get help from the first ‘moment of need’ when a problem first emerges. But also, to be alongside people for life, providing them with responsive support whenever they need it. Integration Digital front door into other services ‘Appropriate use’ of other services Integration Soluna is a digital front-door to getting support, but also a gateway into other services for youth that may have more acute or specialised needs. Prevention Of mental illness Of need for acute and specialist services Population Health Scaling the workforce through task-shifting Insights into population needs Ethical AI Detect risk Improve productivity Personalised user experience In California, Kooth operates as a sub-clinical service, staffed with licensed behavioural health coaches. However, where more specialist support would be beneficial ― for example support from a counsellor to provide treatment for a mental health disorder ― Soluna’s care navigation service will identify relevant services that are suitable based on the individual’s demographics, preferences, location, and insurance eligibility. They will then hand-hold them into this service to ensure they get the support they need. This ensures that Soluna acts as a simple, single point of entry for youth, and connects them to the most appropriate support services when needed. Prevention Prevention is, of course, the best solution to addressing the mental health crisis. We want to prevent both the heartache and suffering of young people and their families, but also prevent and reduce the need and demand for costly, high- intensity specialist services. By doing so, we can help build a mentally healthier population, reduce the overall cost of healthcare, and create a happier, more productive society. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 29 Soluna Continued Population health As a population health model, Soluna is for Ethical AI While technologies such as Generative AI have everyone. Developing a culturally-relevant service generated a huge amount of excitement about is a key foundation for this, as is giving people the ‘art of the possible’, as a healthcare service, choice in support options, as there is no ‘one size we must move with extreme caution by applying fits all’ to better mental health. an ethical-first approach to using AI within In addition, to a population-wide service, it’s important to deliver a service that can address the Soluna. Unethical AI can be dangerous and discriminatory. workforce challenges given the shortage of mental One of the first questions we are often asked health practitioners. We address this in two ways: 1. By innovating in therapeutic-content, community powered peer-support, and professional support, we can give people a choice of ways to get the support they need, which of course may change over time 2. Given the ‘work to be done’ by our practitioners in the Soluna platform, we can expand the mental health workforce by applying the principles of task-shifting, This enables us to hire, train, and audit in 1:1 chat sessions is “are you a real person?”. Therapy is a deeply humanistic interaction, where compassion and empathy are key. By following the Alan Turing Institute’s framework for responsible innovation, our focus is to use AI to support: Risk detection: Risk detection: For example, using AI to analyse journal entries in real-time to identify risks or safeguarding concerns. If a journal entry indicates an individual may self- harm, for example, our practitioner team will reach out to them through the app. professionals from adjacent professions (such as teachers and social workers) to provide Practitioner productivity: AI can augment the efforts of our practitioners, helping them to emotional support to young people, enabling be more productive. For example, applying AI licensed counsellors to provide support for to assist in the moderation of user-generated those with a higher level of need. As every content means that we can reduce the burden of practitioner is trained, supervised, and audited moderation for content that is clearly acceptable, frequently, we can ensure a high quality enabling them to focus their efforts elsewhere. service at scale through this proven model. “In the constellation section, the videos really resonated with my battles with stress and the ways I would cope with stress and anxiety.” Soluna user feedback ― Anon, age 15 User experience and personalisation: AI can assist in improving the user experience, giving users a highly personalised experience that, over time, becomes uniquely theirs. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 30 Soluna Continued Theory of Change model: building psychological flexibility to help support good mental health for life. Soluna’s Theory of Change model is a psychologically- informed, and research-driven foundation for guiding our product and users to good mental health for life. Self-therapy content Tools & activities Peer-support Professional support “The community!! It’s so hard to find a safe and anonymous place to feel connected to others.” Soluna user feedback ― Anon, age 22 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportSoluna: Theory of Change model Continued Our mission is to provide a wellbeing app for young people, shaped by young people, to help them build skills to navigate life’s challenges. Page 31 All in one place, Soluna offers • Engaging tools, activities, and content that speak to diverse experiences • A safe and supportive peer community Young people will gain knowledge and skills including Self- efficacy Autonomy Mastery Fueled by purpose, young people take meaningful action and make decisions according to their values and goals Here, self-determination is born • Personalized 1-to-1 coaching Relatedness Hope • Guidance to national and local resources and services We will then see young people develop psychological flexibility as they learn to open up be present do what matters This has a positive ripple effect on their future We will see young people who: • respond to situations with a mindful approach • develop meaningful relationships with others • enhance their wellbeing by coping effectively with life’s challenges • lead purposeful and fulfilling lives Achieving all of this, for every person, will fulfill our vision that Soluna cultivates strong, vibrant, and productive communities. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 32 Soluna: Theory of Change model Continued We recognise that change is a complex, interconnected process, and that young people Psychological flexibility Engaging with Soluna yields a long-term outcome: require support that aligns with their values and the cultivation of psychological flexibility. This is aspirations as they grow and evolve. the superpower of adapting to life’s challenges Drawing from positive psychology, our Theory of Change promotes a wellness-oriented approach, encouraging young individuals to embrace their while staying true to personal values and goals. In non-clinical terms, Soluna helps young people build resilience. strengths, values, and aspirations. By emphasising Psychological flexibility is a learnable skill, and positivity, personal growth, autonomy, and Soluna serves as the ultimate guide by offering: optimal functioning, Soluna empowers young people to proactively enhance their mental wellbeing through their own unique journeys. Our Theory of Change model creates a structured framework, ensuring that each Soluna feature is directly linked to the positive outcomes we aim to achieve. This fosters a learning-oriented environment for users and instils accountability within our product, and in our clinical and service delivery teams. It serves as a guiding light in our mission to provide youth with the tools and resources they need to navigate life’s challenges • One-to-one support. • Creative features and content. • A supportive peer community. These elements help young people understand how to observe thoughts and feelings without judgement, embrace themselves fully, tackle stress head-on, and savour the present moment. Armed with psychological flexibility, users are empowered to craft meaningful goals, build rewarding connections, and pursue satisfying lives aligned with their personal values. in a way that resonates with their values and The three core areas of psychological flexibility aspirations. that Soluna fosters are: “I really enjoyed the purple/starry aesthetic of it all. I like that it emphasizes calmness more than happiness, it’s hard to be happy in many situations but it’s doable to be calm.” Soluna user feedback ― Anon, age 18 Open up: Ability to recognise and accept unpleasant thoughts and feelings as they come up Be present: Stay calm, engaged and aware in the moment Do what matters: Choose steps that lead towards personal goals based on one’s own values Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportSoluna Continued Roadmap: Bring Soluna innovations to additional US States and the UK Soluna represents a step-change in both providing early help, and supporting children and young people to develop life-skills to navigate life’s challenges. Page 33 Our roadmap for 2024 is to continue to invest in Soluna to ensure success in California, use Soluna as our platform to expand into additional US States, and embark on a project to upgrade our UK service for children and young people with Soluna’s innovations. As part of our UK project, our team will engage and conduct research with NHS commissioners, children, and young people to ensure that we are delivering a service that supports the evolving needs of the NHS, and delivers a culturally relevant, engaging service for today’s youth. It is worth noting that California’s investment in youth behavioural health represents the world’s most comprehensive and progressive investment globally. We believe this can act as a blueprint for other States and nations to help them rapidly improve the support available for the next generation, and build mentally healthier populations. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportCase study Universal support from ages 10 and up in Greater Manchester “ To enable a consistent, full, all-age digital clinical support offer across Greater Manchester, in recognition of the ongoing post-pandemic support mental health and emotional wellbeing needs of our local populations” Sandy Bering Strategic Lead Clinical Commissioner — Mental Health & Disabilities Greater Manchester Health & Care Commissioning Page 34 In the post-pandemic health and social care landscape, commissioners on the Integrated Care Board in Greater Manchester had a vision for a consistent, all-age digital clinical support offer across the region. Kooth was seen as a key part of this vision, due in part to our clinical efficacy and therapeutic approach, which lined up with the contracting authority’s strategy. With our children and young people support offer already commissioned across the 10 regional clinical commissioning groups in the Integrated Care System footprint, and our adult service ready to mobilise rapidly, we were well positioned to scale in the region to provide whole population support from 10 years of age upwards. We worked closely with the commissioners to unify the currently commissioned services and launch the new adult service. Scale and scalability Kooth’s combined offer is available to a total eligible population of 1.9 million people aged 10 and above in Greater Manchester. We were initially commissioned across the 10 Clinical Commissioning Group (CCG) areas in the region but the new Integrated Care System structure coalesced these contracts to create a vertically integrated offer that provides seamless support across the region. Engagement strategy Using a combined top down and bottom up approach to engaging local stakeholders, influencers, healthcare bodies and potential service users, Kooth and Kooth Adult (Qwell) have become deeply embedded in the local system and clinical pathways. Combining a strategic level approach from our customer success team and account managers with on-the-ground delivery by our Kooth Engagement Leads enabled us to streamline our engagement and marketing approach and scale registrations quickly. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Case study Continued Universal support from ages 10 and up in Greater Manchester Page 35 An initial combined communications approach with NHS and ICS stakeholders was used to then cascade awareness, deliver promotional materials, and build stakeholder support throughout the healthcare system in Greater Manchester to all NHS providers, private and public, as well as local community providers and voluntary and community sector organisations. A simultaneous social media launch was also implemented to engage service users throughout the mobilisation period, scaling the service quickly. Seminars for the public and for NHS teams, tailored to the required audience, were promoted and delivered across the region to maximise awareness. Promotional materials were designed and localised to maximise reach and engagement, and then disseminated through the online Kooth Promotional Hub where local stakeholders and service providers can download digital Kooth content or order physical collateral. Our service user marketing strategy also included a significant element of social media promotion. Internally, a communications planning matrix was built to track, manage and implement this engagement plan, which in turn was disseminated to local stakeholders and the commissioning authority. Impact The execution of our engagement plan in the region has seen a significant uptake across all 10 areas. Qwell, for example, saw 4,600 new registrations between October and December 2023, with 12,000 logins and over 1,000 chat/counselling sessions in the same period. 94% of users stated they would recommend Qwell to a friend. In addition, the granularity and depth of reporting allows stakeholders to understand the mental health of their constituent populations, comparing regional trends, understanding the difference between rural and urban presenting issues, viewing year on year comparisons, and breaking down data by age, ethnicity, and gender. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 36 Key performance indicators We use our key performance indicators (KPIs) to measure our business. These indicators provide us with the visibility of both our strategic and financial performance, which is set by the Board; non-financial KPIs provide us with a measure of how successful we are in supporting our customers. Revenue is a KPI that reflects the work we are doing and the fees received over a period of time for that work. It has been driven by US expansion, fee uplifts from existing clients and new business in ‘Adult’ and ‘Children and Young People’. 2023 2022 2021 2020 2019 £8.7m £20.1m £16.7m £13.0m Annual Recurring Revenue (ARR) is the annualised revenue of customers engaged or closed at the year-end date (31 December) and is an indication of the upcoming annual value of the recurring revenue. This is used by management to monitor the long-term revenue growth of the business. Our 2023 growth is predominantly driven by US expansion in California. 2023 2022 £21.1m 2021 £16.7m 2020 £14.1m 2019 £10.6m Gross Profit as a percentage of revenue. Direct costs are the costs of our practitioners directly involved in the delivery of our services. We have seen an increase in 2023 as certain US revenues include platform development revenue, the cost of which is predominantly capitalised. 2023 2022 2021 2020 2019 £33.3m £64.6m 77.6% 68.9% 69.5% 69.8% 63.6% Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportGross margin %Total revenue £mAnnual Recurring Revenue £mKey performance indicators Continued Page 37 Earnings before interest, tax, depreciation and amortisation in the financial year, adjusted for share based payments and exceptional costs. This metric provides a more comparable indication of the Group’s core business performance by removing the impact of non-trading items that are reported separately. 2023 2022 2021 2020 2019 £0.1m £0.9m £2.3m £1.6m £2.1m Cash is a key metric as it provides assurance on our ability to invest to grow the business, as well as provide comfort to customers from a vendor risk perspective. The increase in 2023 followed a successful fundraise (gross £10m) in July, as well as cash generated from operations offset by investment in our platforms. 2023 2022 2021 2020 2019 £0.2m £11.0m £8.5m £7.1m £7.8m The total number of people who have access to the Kooth service is a good indicator of our accessibility. The number of annual logins to Kooth from users, demonstrating uptake of our service. 2023 2022 2021 2020 2019 2023 2022 2021 2020 2019 17.3m 16.7m 1.5m 1.5m 10.9m 7.8m 5.9m 1.3m 1.1m 0.7m Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportAdjusted EBITDA £mCash £mPopulation coverage MillionsService user logins MillionsKooth plc Annual report 2023 Strategic report Corporate governance Financial statements Page 38 Chief Financial Officer’s review Sanjay Jawa Chief Financial Officer “ A record year for growth.” Significant growth The results reflect a transformational year for the business as we executed on our strategic plans, delivering significant growth in the US, and built solid foundations to support future growth in the UK and internationally. Revenue I am pleased to report Group revenue grew strongly during the year by a record 66% (2022: 21%) to £33.3 million (2022: £20.1 million). As previously reported, this has been driven primarily by our US growth, predominantly our contracts during the year in California and Pennsylvania, which delivered £14.2 million (2022: £1.5 million) with UK revenue up 3% despite headwinds (2022: 12%) Recurring revenue comprises income invoiced for services that are repeatable, consumed and delivered on a monthly basis over the term of a customer contract. Annual Recurring Revenue (ARR) of £64.6 million is the annualised revenue of customers engaged or closed at that date (31 December) and is an indication of the upcoming annual value of the recurring revenue. This is used by management to monitor the long term revenue growth of the business and has increased to 98% of total revenues (2022: 95%). While we have seen an increase in contracts that expand upon renewal to 41% (2022: 38%), gains were offset by £2.3 million of churn, a combination of funding unavailable to continue pilot contracts, reductions as contracts consolidated and a small number of competitive losses. In addition we have excluded £2.6 million from ARR as we continue to negotiate an extension to our contract in Pennsylvania. Strategic report Corporate governance Financial statements Page 39 Chief Financial Officer’s review Continued Net revenue retention, which is a measure of the depth and longevity of our client relationships, Administrative expenses Excluding depreciation, amortisation, share although still strong, fell to 98% in the UK based payments and exceptional costs, (2022: 107%). This is measured by the total value administrative expenses grew by £11.4 million of ongoing ARR at the year end from customers in the year, an 92.8% increase year on year, in place at the start of the year as a percentage which whilst well ahead of revenue growth, of the opening ARR from those clients. remains in line with our strategic investment Gross profit Gross profit grew by 86.6% to £25.9 million plans. The real (i.e. non inflationary) increase in costs was almost entirely focused on the US where, in addition to increased commissions (2022: £13.9 million) with gross margin up to and bonuses, we strengthened the business 77.6% (2022: 68.9%). Direct costs are the costs development, clinical and customer engagement of the practitioners directly involved in the teams as well as seeing increases in non-staff delivery of our services, a total of 304 at the costs, including legal and consulting expenses. year-end (2022: 267 heads). Gross margin benefitted from the contribution within US revenues to product development where costs Adjusted EBITDA Adjusted EBITDA grew by 40% to £2.3 million are either capitalised or included in overheads. (2022: £1.6 million) in the year, with increases This was offset by a small fall in UK gross in revenue and gross profit offset by our margin as direct costs continued to see the investment in the US and higher administrative impact of salary and cost inflation. expenses as outlined above. Foreign currency impact Whilst foreign currency markets were not as volatile as the previous year our increasing presence in the US impacted the Group which had around 43% of revenues in US Dollars, and 26% of Group expenses. The Group’s focus Adjusted results are prepared to provide a more comparable indication of the Group’s core business performance by removing the impact of certain items including exceptional items (material and non-recurring), and other, non- trading, items that are reported separately. on management of foreign currency risk resulted Adjusted results exclude items as set out in the in a small foreign currency loss of £0.2 million consolidated statement of profit and loss and (2022: loss £0.1 million). below, with further details given in Notes 2, 3, 4, 5, 6, 11, 12 & 13 to the financial statements. Operating loss The Group’s operating loss for the year was In addition, the Group also measures and presents performance in relation to various other £2.3 million (2022: loss of £0.9 million). This was non GAAP measures, such as annual recurring driven by the scaling up of activities in the US as revenue and revenue growth. mentioned in the section below. Annual report 2023Kooth plc Kooth plc Annual report 2023 Strategic report Corporate governance Financial statements Page 40 Chief Financial Officer’s review Continued Adjusted results are not intended to replace statutory results. These have been presented to Taxation There has been a corporation tax charge of provide users with additional information and £0.3 million (2022: £nil) recognised in the year analysis of the Group’s performance, consistent due to taxable profits accumulated in the US. with how the Board monitors results. There continues to be no corporation tax charge in the UK due to accumulated losses combined with £’m 2023 2022 the overall current year position (2022: £nil). Operating Loss (2.3) (0.9) Add Back: Depreciation and Amortisation Share based payment expense Adjusted EBITDA 3.8 0.7 2.3 2.2 0.3 1.6 Share-based payments are adjusted to reflect the underlying performance of the group as the fair value is impacted by market volatility that does not correlate directly to trading performance. The total charge for share based payments in the year was £0.7 million (2022: £0.3 million). The increase reflects the annual issue of three year grants to staff and a credit in 2022 following a reassessment of those grants subject to performance criteria. The tax credit for the year ended 31 December 2023 and 2022 relates to Research and Development expenditure credits. This has been enhanced in 2023 as the Research and Development claim for 2022 was subsequently carried forward at a higher effective tax rate rather than taking this as a cash credit resulting in a prior year adjustment. Cash The Group has had good cash management in the year with net cash generated from operating activities of £1.9 million (2022: £4.4 million). Free cash flow, after taking account of capital expenditure was a net outflow of £6.8 million in 2023 compared to an inflow of £1.3 million in 2022 as we invested significantly in the Soluna platform. Overall the Group has net cash inflow due to the net proceeds from financing activities following a successful placing, which resulted in the raise of a net £9.4m. The net cash at year end was £11.0 million (2022: £8.5 million). In addition we recently entered into a working capital credit facility with Citibank of $9.5 million that remains undrawn at this time. The Group continues to be debt free. Strategic report Corporate governance Financial statements Page 41 Chief Financial Officer’s review Continued Capitalised development costs The Group significantly increased investment in Capital and reserves The strength of the Group’s balance sheet with product and platform development in 2023 to net assets of £20.8 million (2022: £10.5 million), support the launch of our service in California high levels of recurring revenue and strong cash and this is expected to be ongoing in 2024. Costs generation from operating activities provide are a combination of internal and external spend. the Group with financial strength with which Where such work is expected to result in future to execute on its investment strategy which revenue, costs incurred that meet the definition continues to focus on US expansion and platform of software development in accordance with investment. IAS38, Intangible Assets, are capitalised in the statement of financial position. During the year the Group capitalised £8.7 million in respect of Dividend policy As outlined at the time of the IPO and previous software development (2022: £3.0 million) with reports, the Group’s intention in the short to an amortisation charge of £3.6 million (2022: medium term is to invest in order to deliver £2.1 million). Investment in product and development continues to be significant to the Group and we anticipate capitalising software costs at a higher rate over the next year as we continue to invest in the Soluna platform. Capital expenditure Software and product development costs aside, the Group’s ongoing capital expenditure requirements remain modest at £0.3 million (2022: £0.1 million). capital growth for shareholders. The Board has not recommended a dividend in respect of the year ended 31 December 2023 (2022: Nil) but may do so in future years.. Sanjay Jawa Chief Financial Officer 25 March 2024 Annual report 2023Kooth plcPage 42 Environmental, Social and Governance (‘ESG’) report About this report Our 2023 Environment, Social and Governance (ESG) report is our third annual report, reflecting our ESG performance and steps we have taken towards becoming a more sustainable business. 2023 was a material year for Kooth, with the baseline calculation of our Greenhouse Gas (GHG) emissions providing insight into our measured impact on the environment. We are committed to embedding ESG practices and policies into all aspects of our Company and strive to continue learning and implementing new strategies. Frameworks, guidelines and standards The information contained in this year’s ESG Report has been structured around three main frameworks and guidelines: the UN Global Compact, the Sustainable Development Goals and the Task Force on Climate-Related Financial Disclosures (TCFD). We remain a participant of the UN Global Compact, committing ourselves to aligning our strategies and operations with the Ten Principles on human rights, labour, environment and anti-corruption. Our participation in the UN Global Compact has given Kooth the tools and knowledge to further support the Sustainable Development Goals. The UN Sustainable Development Goals aim to build a more sustainable future for people and the planet by 2030. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportStrategic report Corporate governance Financial statements Page 43 ESG report: Continued Below are the specific goals that are reflected in our work throughout this Report: Goal 3 Ensure healthy lives and promote wellbeing for all at all ages It is only in the last decade that mental health was added to the agenda, when the impact of mental illness on healthcare systems was identified. This gap in healthcare is where Kooth has its greatest impact. Goal 5 Achieve gender equality and empower all women and girls We are committed to our workforce diversity by building a culture that is inclusive and empowers our employees. We aim to increase female representation across all levels throughout the business. As a result, 76% of staff at Kooth are female and 33% of the board is female. Goal 8 Goal 9 Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all As an employer of over 500 individuals worldwide, we support our staff by ensuring an excellent working environment and comprehensive benefits. We provide in-depth training to our people, as well as partner with universities to provide placement opportunities for students. Build resilient infrastructure, promote inclusion and sustainable industrialization and foster innovation Kooth’s proprietary technology platform underpins everything we do. Our strategy is focused on three key areas: 1. Delivering a welcoming and engaging space. 2. Delivering clinically and cost effective access to mental health support. 3. Applying artificial intelligence to improve the efficiency and effectiveness of our service. Goal 10 Reduce inequality within and between countries We work with governments, healthcare systems, and businesses to provide individuals with access to mental health support with no barriers, thresholds, or waiting lists. By providing a stigma free, non-judgemental and safe space, we can help tackle health inequity among seldom heard groups that may not have access to existing services, or feel unable to use them. Goal 13 Take urgent action to combat climate change and its impacts In the last year, we have taken large strides towards understanding our impact on the environment by calculating our Scope 1, 2 and 3 emissions for the first time. Moving forward, this data will inform our strategies and policies to reduce our impact on the environment. Annual report 2023Kooth plcESG report: Continued Page 44 100% Net Zero Environmental Pillar Calculated our Baseline GHG Emissions. Data Storage and Processors: Cloudflare (100% renewable). Data Storage and Processors: Google Cloud (net zero). 585 73% Social Pillar Published our first US Evidence Report. Grew our global workforce by 27% (460 to 585). 73% of management is female. 33% Governance Pillar 33% of our board is female. Awarded the ISO 27001:2022 certification. Achieved SOC 2 Type II compliance post year end. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportA year in review Page 45 ESG: Environment At Kooth, we are aware that a healthy planet is pivotal to both human health and business sustainability. In 2023 we made significant progress in understanding our role in climate change and our impact on the environment. In order to understand this and make positive changes, we calculated our baseline greenhouse gas emissions utilising FY 2022 as our baseline year. Reporting boundary An operational control approach has been selected for Kooth’s carbon footprint assessment. This approach determines the Scope 1, 2 and 3 emissions for which Kooth is responsible. The emissions are as follows: • Scope 1: Direct • Scope 2: Indirect • Scope 3: Indirect, Upstream and Downstream Methodology To calculate our emissions, Kooth employed the services of a consultancy specialising in the quantification of environmental performance and sustainability advisory services. The following methodology was applied in the preparation of this data: • Where available, Kooth provided datasets from direct sources for Eightversa to utilise. These consisted of consumption data, primary activity data and spend-based data. • Emissions factors for the dedicated reporting year have been applied to direct activity data to quantify total emissions from individual sources. • Where consumption and primary activity data was not provided by us, EightVersa utilised robust assumptions to quantify total emissions. • Emissions have been categorised according to Scope 1, 2 and 3 emissions following best practice guidance provided by the GHG Protocol. • A quantification model was developed to quantify the GHG emissions. Credible quantification tools provided by the GHG Protocol have been used where applicable. Results Tonnes CO₂e 2023 tCO₂e/FTE employee 2022 tCO₂e/FTE employee Tonnes CO₂e Total UK Energy Consumption (kWh) 36,475 – 26,220 Scope 1 Scope 2 Scope 3 Total emissions 1.48 6.2 2,187.4 2,195.1 0.003 0.01 3.74 3.75 0.00 5.07 624.16 629.2 – 0.00 0.01 1.35 1.36 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report ESG: Environment Continued Benchmarking data4 Organisation Kooth Company A: Healthcare Software Provider Company B: Tech Platform Provider Page 46 2023 Emissions Intensity (tCO₂e/FTE) 3.75 7.12 23.66 Kooth’s absolute emissions have seen an overall increase due to the rapid expansion of our services in the US and using location-based calculation methods. The focus of the increase was on Scope 3 emission, in particular purchased goods and services and employee homeworking. The increase in these two categories reflects the expansion of our US workforce who are primarily remote and costs incurred on set up of the US business. The increase in Scope 1 and Scope 2 data is nominal, reflecting Kooth’s minimal direct emissions. Reducing our impact Kooth is dedicated to understanding and reducing our impact on the environment. Having calculated our 2022 baseline and 2023 comparative carbon emissions, Kooth plans to outline a carbon reduction strategy. To date, we are committed to reducing our impact on the environment in the following ways: • One of the largest sources of carbon emissions and energy usage from the digital healthcare industry is the collection and storage of data. Kooth uses two cloud providers to store and process our data: Google Cloud and Cloudflare. Google Cloud has been carbon neutral since 2007 and aims to run on carbon-free energy by 2030. Kooth has chosen two of Google Cloud’s’ ‘Low CO2’’ host regions, including our US region operating on 97% carbon free energy consumption. Our other data processor, Cloudflare, powers its network with 100% renewable energy. • Given that the majority of our workforce works from home, all employees have a company laptop. Kooth reduces the waste created by laptops by collecting, wiping and reusing old laptops for new starters. Kooth recycled 103 laptops in 2023. ― 4. Provided by EightVersa, our third-party environmental consultants Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 47 Social As a provider Today, 1-in-4 British adults5 are living with a mental health condition and 1-in-5 Americans6 are diagnosed with a mental health condition. Reducing wait times for treatment is therefore crucial to population health management. This year Kooth was accessible to 17 million people and had 1.5 million user logins across our platforms. In the UK, the volume of people accessing our platform reduced pressure on the NHS, in particular on children and adolescent mental health services (CAMHS), which are seeing wait times of up to 13 weeks for treatment. Expanding in the US addresses the shortage of mental health practitioners, where as many as 1-in-3 people live in federally designated practitioner shortage areas. Accessibility is at the forefront of Kooth’s mission. We have created our platforms to be accessible by removing potential barriers: • Confidentiality is at the heart of design. Allowing users to access help while choosing their level of disclosure. • At no cost to the user: healthcare can be expensive or stressful to deal with, this takes away those barriers. Diversity and inclusion Kooth aims to remove barriers and ensure all individuals ― regardless of race, age, gender, disability, sexuality or socio-economic background ― have access to effective mental health services. We are aware that mental health affects different communities in different ways, as well as acknowledging health inequalities between communities. In 2023, our marketing, engagement and content teams focused on strengthening relationships with certain ethnic minority communities. These partnerships enable us to create content with specific audiences, ensuring Kooth is a space where everyone is seen, heard and represented. ― 5. https://www.england.nhs.uk/mental-health/ 6. https://www.nimh.nih.gov/health/statistics/mental-illness Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 48 ESG: Social Continued Two of our 2023 UK partnership highlights include: The Muslim Community Mothers We collaborated with Muslim teachers, mental health The team worked with teen and young mums, mothers practitioners, young Muslims born in the UK or who who have experienced mental health difficulties during had moved to the UK from other countries. and after pregnancy and Black mothers (with a focus on The clinical content team helped to produce multiple Black maternal health). articles and personal stories covering topics such as The clinical content team collaborated with mothers to develop articles, podcasts and videos which acknowledge and address the experiences of new mums, giving both personal and clinical perspectives. — ‘Stigma and mental health and its effects in the Muslim community’. — ‘Why wearing a hijab is important to me’. — ‘Managing mental health through self-love and faith: a Muslim woman’s perspective’. A podcast called ‘Role models and representation in the Muslim community’, reflects the views of a Muslim teacher on how faith and culture can impact mental health. In Q4 of 2023, Kooth beta launched ‘Soluna’ in California ― an app for youth, designed by youth. Before development, we recruited a panel of 13-25 year olds from intentionally diverse, intersectional and BIPOC communities. This panel of youth has helped to design elements of the app including the brand name, imaging, demographic categories and the sign up flow. The intention from the beginning was to build an app to be representative of those who will utilise it. Ethnicity Users from ethnic minorities Gender Users identifying as non-binary or gender fluid 2023 19% 2022 19% 2023 5.1% 2022 7.6% Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPersonalised service Page 49 ESG: Social Continued Providing a personalised experience is one of Kooth’s biggest aims through person-centred care. This approach enables users to be the decision-makers in their Kooth journey. Giving users options allows them to Personalised service be in control of their needs. 64% of our users in 2023 used ‘self-directed therapy’ indicating Providing a personalised experience is one of Kooth’s biggest aims through person-centred care. they chose to find their own blend of mental health support through our forums, articles and options allows them to be in control of their needs. 64% of our users in 2023 used ‘self-directed mini activities on the platform. therapy’ indicating they chose to find their own blend of mental health support through our This approach enables users to be the decision-makers in their Kooth journey. Giving users forums, articles and mini activities on the platform. Comparatives [self-directed therapy]: Comparatives Self-directed therapy ● 2023: 64% ● 2022: 70% 2023 64% 2022 60% Building an evidence base Building an evidence base Kooth is committed to developing the evidence base for mental health Kooth is committed to developing the evidence base for mental research. We continue to be skilled in developing strong relationships between academia, industry, policy and commissioners, and in aligning user needs and wants with an evidence base to ensure we are possible. providing the best service possible. an evidence base to ensure we are providing the best service strong relationships between academia, industry, policy and commissioners, and in aligning user needs and wants with health research. We continue to be skilled in developing In 2023, we published our first US Evidence Report of our service in Pennsylvania. This report provides an overview of the In 2023, we published our first US Evidence Report of our service in services we provide, with trends noted by users, highlighting Pennsylvania. This report provides an overview of the services we provide, with trends noted by users, highlighting the value of a whole-school approach to mental health. the value of a whole-school approach to mental health. (2) As an Employer Diversity and inclusion ● Diversity Working Groups were set up for Menopause, LGBTQIA+, Neurodiversity and Race. Employees across the UK and US are invited to join and discuss these topics. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 50 ESG: Social Continued As a Employer Diversity and inclusion • Diversity Working Groups were set up for Menopause, LGBTQIA+, Neurodiversity and Race. Employees across the UK and US are invited to join and discuss these topics. • At Kooth, we are proud of the female representation throughout our business: – Board Level: 33% of our Board is female. – Management Level: 73% of women in management positions. – Workforce Level: 76% of 2023’s workforce was female (2022: 79%). 33% of our Board is female. Male Female 73% of women in management positions. 76% of 2023’s workforce was female (2022: 79%). See comparatives below. 2023 24% 76% 2022 21% 79% Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 51 ESG: Social Continued Company culture • UK and US Koolaboration Groups are in place to provide feedback and employee representation on company projects and increase communication around all areas of the business. These meetings are held monthly and minutes are shared more widely. • Company All Hands: Company wide meetings are held on average twice a month to foster transparency and engagement across the business. • Department Town Halls are held to understand the departments and how they function collectively. • Regular department bulletins are sent to ensure ongoing communication around achievements and celebrations. Recognition and feedback • Appraisals: We conduct mid-year and annual appraisals allowing us to focus on career development and training on a greater holistic level. It enables us to share feedback, offer a clear career pathway, discuss training and development objectives and ensure everyone is aware of how their goals fit with the broader aims of the business. • Officevibe: We utilise an online tool to capture anonymous feedback from our people across the business, on a regular basis. – 97% say the work they do is impactful on Kooth’s mission (2022 was 96%) – Score of 8.5/10 for relationship with manager (8.2 in 2022) • KooMA (Kooth management): Training was launched to support and empower our managers. This streamlined training gives clarity on roles and expectations of a manager and clearer processes to help guide employees. • Long Term Incentive Plan: All employees are annually awarded nominal cost share options. These options can be exercised after three years of service. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 52 ESG: Social Continued Physical and mental health • Wellbeing Champions: This initiative, started in 2023, is run by employees who have received mental health training. These volunteers are there to lend an ear and support to any other employees who are going through a rough time or simply want to chat. • Healthcare schemes: – Kooth is committed to supporting our people with their physical and mental health. We subsidise membership for all employees to a healthcare scheme once they successfully pass their probation period. – Our healthcare schemes help with budgeting for everyday health needs, give people access to a range of treatment and provide cover for the unexpected. Eligible employees can use the scheme to access healthcare services, such as osteopathy, chiropody and counselling, as well other specialist consultations. Employees can also extend cover to additional family members. There are no referrals needed to receive treatment and pre-existing conditions are covered, which gives staff peace of mind. – Staff benefit from free access to virtual GP services through Doctor@Hand, an online, private GP that people can access at their convenience and outside of usual working hours. – All staff also have access to an Employee Assistance Programme (EAP). This service is available 24 hours a day, 365 days a year to offer practical, impartial support on everyday matters. This ranges from financial and legal matters (such as debt, buying a house and consumer rights) to home and family issues (for example finding childcare, divorce and coping with elderly relatives). The EAP also provides mental health support, offering up to eight counselling sessions for employees who require it. • Wellness days: Kooth recognises that providing support for wellness is a key part of caring for our people. For every year of service, our front-line staff gain one wellness day (up to a maximum of five) annually for use when they please. These days are designed to be flexible and support employees in managing their own wellbeing, energy levels and work-life balance. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 53 ESG: Social Continued Gender pay gap Our 2023 gender pay gap (GPG) analysis shows our statutory gender pay gap in comparison to our 2022 GPG. It also provides insight into how we are addressing our gender balance. Please refer to the definitions below when reading about our pay gap metrics: Median GPG: the difference between the median hourly rate of pay of male full-pay regular employees and that of female full-pay relevant employees. Mean GPG: the difference between the mean hourly rate of pay of male full-pay relevant employees and that of female full-pay relevant employees. 2021 2022 2023 Mean 32.8% 34.8% 31.8% Median 11.6% 15.4% 30.5% This year our female workforce, as a proportion of total employees, decreased 3.5% to 75.7%. Kooth employs more women than men, which reflects the gender imbalance in the healthcare sector. We are aligned with the high percentage of female employees in the NHS (69% as of 20227) and in the US healthcare sector (76%). In 2023, our mean gender pay gap decreased 3% to 31.8% and our median pay gap widened to 35%. The decrease in mean indicates that the average pay of men and women has become more aligned, reflecting the increased female pay across the business. As expected, the median pay gap widened as a result of a large increase in practitioner hiring due to our US expansion, with the largest proportion being female, reflecting the industry in both the UK and the US. ― 7: https://www.england.nhs.uk/long-read/gender-pay-gap-report-2022/#:~:text=As%20of%2031%20March%20 2022%2C%20NHS%20England%20and%20NHS%20Improvement’s,compared%20to%20the%20 previous%20year. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 54 ESG: Social Continued The gender pay gap shows the difference in pay between men and women across the business, irrespective of job similarities and seniority. It is not symptomatic of unequal pay, as a number of complex factors play a role. The distribution of male and female employees across the business and the type of roles they fill are both key contributors to the gender pay gap. Men and women are paid equally for doing equivalent jobs across the firm and we continue to monitor this regularly to ensure that this remains the case. We continue to be committed to reducing our pay gap in the following ways: • Offering flexible working policies. • Company-wide campaigns to ensure employees feel informed and connected. • Our counsellors are paid the same regardless of gender within the industry; this is also true of our management team. • We make an effort to understand our gender gap to analyse and assess where more focus is required. • We partake in blind recruitment of our practitioners and our recruitment process includes panel interviews to ensure a more inclusive approach to hiring. • Our Diversity and Inclusion Council and Kooth Employee Voice Group ensure employees have an outlet to raise concerns and give feedback. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 55 ESG: Social Continued Ethnicity pay gap Of our 423 employees who have disclosed their ethnicity, 64.5% were white and 35.5% were from ethnic minorities. Our employees from ethnic minorities increased 20% throughout 2024, reflecting the strong efforts to recruit a diverse workforce at Kooth. In 2023, our mean ethnicity pay gap widened to 3.1% and our median ethnicity pay gap shrank to -12.5%. Fluctuations like these are not unexpected, particularly in a rapidly growing company like Kooth. 2022 2023 Mean -9.2% 3.1% Median 5.8% -12.5% We are committed to understanding and addressing our ethnicity pay gap by increasing focus on diversity and inclusion efforts across the business. We do this in the following ways: • A specific diversity working group on race, supporting employees to meet on a regular basis to discuss ideas for projects and initiatives and to build on policies and guidelines for the whole company. • Our Diversity Council has representatives from all departments to ensure policies and initiatives are embedded across the company. • The Kooth Employee Voice Group ensures employees have an outlet to raise concerns and give feedback. • Within hiring, we have launched an Equality, Diversity and Inclusion monitoring form through our Applicant Tracking System so we can make sure we are visible to minority groups. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 56 ESG: Governance The Board provides oversight while ensuring decisions are made to promote Kooth’s success for • Audit Committee: The Audit Committee has the primary responsibility of monitoring the quality the long term benefit of its shareholders. It does of internal controls to ensure that the financial this while preserving the interests of its other performance of Kooth is properly measured and key stakeholders ― our service users, customers, reported. It receives and reviews reports from colleagues and the communities in which we Kooth’s management and external auditors operate. Effective governance facilitates the relating to the interim and annual accounts delivery of Kooth’s mission and strategy. and the accounting and internal control Kooth seeks to conduct all of its operating and business activities in an honest, ethical and socially responsible manner. These values underpin our business model and strategy. We are committed to acting professionally, fairly and with integrity in all of our business dealings systems in use throughout Kooth. The Audit Committee meets a minimum of three times in each financial year and will have unrestricted access to Kooth’s external auditors. The Audit Committee comprises Simon Philips and Susan Bailey and is chaired by Peter Whiting. and relationships, with consideration for the • Remuneration Committee: The Remuneration needs of all of our stakeholders, including service Committee reviews the performance users, investors, suppliers and employees. Kooth of the Executive Directors and makes endeavours to conduct its business in accordance recommendations to the Board on matters with established best practice, to be a responsible relating to their remuneration and terms of employer and to adopt values and standards service. The Remuneration Committee meets as designed to help guide staff in their conduct and and when necessary, but a minimum of three business relationships. times each year. In exercising this role, the Directors have regard to the recommendations Our governance framework Kooth is a growing organisation. The Board is put forward in the QCA Code and, where appropriate, the Remuneration Committee committed, through its governance model, to Guide for Small and Mid-Size Quoted Companies driving purpose-led decision making and to published by the QCA and associated guidance. delivering accountability to our stakeholders. We have an Audit Committee and a Remuneration Committee with formally delegated duties and responsibilities and with written terms of reference. Each of these committees meet regularly at frequencies set out below. From time to time, separate committees may be set up by the Board to consider specific issues when the need arises. The Remuneration Committee does, where possible, adhere to the Remuneration Committee policy document, which includes, inter alia, a requirement for executive directors of the Company to hold shares with a value at least equal to their annual salary, with a tapering post employment shareholding requirement. The Remuneration Committee comprises Peter Whiting and Susan Bailey and is chaired by Simon Philips. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 57 ESG: Governance Continued Our business ethics In 2023, Kooth remained a UN Global Compact During 2023, Kooth did not meet the threshold required to make Non-Financial and Sustainability Signatory, ensuring that our business ethics align reporting disclosures. We do believe we will meet to the Ten Principles of the United Nations Global the disclosure requirements during 2024 and we Compact (UNGC) in the following areas: human will fully report against these in our 2024 Annual rights, labour, environment and anti-corruption. Report at the group level. While our impact on This commitment involves an independent the environment is minimal due to the size, scale Commitment of Progress to the UNGC annually. and nature of our operations (see “Environment”), Kooth’s learning and development platform, Litmos, holds mandatory training and voluntary guides for all employees to access. We have materials on Safeguarding, GDPR policies, and mandatory training on Cyber Security. Our training platform offers content to support Kooth employees, for example bullying and harassment in the workplace, anti-fraud, bribery and corruption and diversity and inclusion. We also offer content aimed at those working directly with our users, such as recognising child abuse, sexual exploitation and equality and diversity, alongside a robust programme of ongoing clinical training and development. we are committed to mitigating any long-term climate-related risks in line with emerging climate science as our business continues to expand. Modern slavery We recognise that all businesses have a key role to play in preventing all types of modern slavery in their own business and supply chains. We have published a Modern Slavery Statement on our website. This statement sets out our commitment to improving our practices to ensure that slavery and human trafficking are not taking place in any part of our business or supply chain. We circulate and share our Modern Slavery Statement with employees. We do this to make sure everyone We have specific staff policies in the following understands the risks of modern slavery and areas: Health & Safety, Information Security, human trafficking in our business and supply GDPR and Environmental. Each policy has chain. In addition, we require all new starters to an individual owner and is revised annually. review and confirm their understanding of our Every change to a policy is tracked to ensure Modern Slavery Statement as part of their online transparency and accountability. induction process. Non-Financial and Sustainability Report (TCFD aligned) acknowledgement The TCFD was established in 2015 and is based on a set of 11 recommendations from the UK Financial Stability Board (FSB) detailing how organisations should disclose their climate-related financial risks and opportunities in a clear and consistent way. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 58 ESG: Governance Continued Bribery and corruption Our Anti-corruption and Anti-bribery Policy Information security We have a Data Protection Office, headed sets out our responsibilities in observing and up by the Data Protection Officer and Head upholding a zero-tolerance position on bribery of Information Security, which monitors our and corruption. The policy applies to all compliance with international data, security employees who work for Kooth. We require all and privacy standards such as SOC 2 and team members to read, understand and comply ISO 27001. Kooth was awarded the ISO with the information contained within the policy. 27001:2022 certification in October 2023 and Accreditations Kooth’s CYP platform has recently become has successfully renewed the Cyber Essentials certification. Kooth has successfully completed a rigorous audit process covering security and DTAC (Digital Technology Assessment Criteria) has received a SOC 2 Type II attestation report. Compliant. The DTAC is a framework for Management carries out diligence to ensure assessing digital health tools built by NHS that third party suppliers are maintaining England and conducted for Kooth by ORCHA. good standards of security. Kooth continues to The DTAC consists of five components: Clinical ensure that all members of staff receive annual Safety, Data Protection, Technical Security, mandatory cyber security training. Kooth takes Interoperability and Usability and Accessibility. the threat of a cyber incident very seriously Additionally, Kooth is the longest standing and endeavours to mitigate the risk wherever digital mental health provider to hold a UK- possible, although it is recognised by the Board wide accreditation from the British Association and management that it will never be possible of Counselling and Psychotherapy (BACP). This to fully mitigate cyber risk. demonstrates that we offer an accountable, ethical, professional and responsive service to all of our stakeholders as assessed by the BACP through the submission of evidence via annual review. Specifically, there are a number of benefits to this accreditation. For example, in the face of a growing number of new digital service providers, our accredited status with the UK’s leading governing body provides reassurance for new and existing users of Kooth that we are safe. It also enhances recognition and credibility with employers and funding bodies as well as helping with the acquisition of new contracts and supporting our recruitment and retention programmes. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 59 Section 172 statement The Directors have acted in a way that they consider, in good faith, to be most likely to promote the long-term success of the Company and to deliver long-term shareholder value, while having regard for all individual stakeholders. The Board and its Committees consider who its key stakeholders are, and the potential impact of decisions made on them, taking into account a wide range of factors including the impact on the Group’s operations and the likely consequences of decisions made in the long term. The Directors must consider the following in meeting the requirements of Section 172 (1) of the Companies Act 2006: • The likely consequences of any decision in the long-term. • The interests of the company’s employees. • The need to foster the company’s business relationships with suppliers, customers and others. • The impact of the company’s operations on the community and the environment. • The desirability of the company maintaining a reputation for high standards of business conduct. • The need to act fairly as between members of the company. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 60 Section 172 statement Continued Stakeholder engagement We have identified our key stakeholders as follows: Employees We understand that our Surveys In 2021 we introduced an online tool called OfficeVibe that employees are at the core of allows us to capture and report on valuable feedback from everything we do and maintain our people across the business, on a regular basis. This tool a focus on their interests and ensures we act in a true and fair manner across all members wellbeing. of our company. 97% of our employees say the work they do is impactful on Kooth’s mission (2022 was 96%). A score of 8.5/10 was obtained for employees’ relationships with their manager (8.2 in 2022). We use this tool to gather feedback on company decisions affecting the long term development of our employees. Training Employee development is actively encouraged through learning and development budgets which are allocated to all departments, in addition to our learning management portal which provides employees with training materials and content. Share scheme Long term nominal cost share options are awarded to all of our employees on an annual basis in a fairly distributed manner. Flexible working We have continued to support employees by implementing remote and hybrid-working for our office-based staff when possible and in addition 45% of employees work flexible hours. This allows our employees to fairly balance their personal and work commitments. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 61 Section 172 statement Continued Customers Customer base Communication with our customers is fundamental to understanding how we can UK business Kooth continues to meet increasing demand from children and young people for fast and effective access to mental continue to add value through health support. As of the end of 2023, Kooth is available to our digital mental health approximately 60% of 10-25 year olds in the UK. Our ambition, services. and strategy, is to expand to become a nationwide service, accessible to all. Momentum for Kooth Adult (known as Qwell) continues, with focus on providing support to the whole adult population within a region, providing early intervention support to help tackle problems before they escalate. In 2023 we have focused on population-health, with an aim to reach and support underserved groups that may be less likely to use established NHS services e.g., ethnic minority groups and LGBTQIA+ communities. US business 2023 was a monumental year for Kooth’s ambition of expanding our leading digital health platform to the US. In April 2023, the California Department of Health Care Services (DHCS) selected Kooth as its platform of choice to deliver free behavioural health care support to the State’s population of 13-25 year olds. In September 2023 we successfully piloted our next generation platform in two counties with a further successful full launch taking place in January 2024. 2023 also saw a strong uptake of our Pennsylvania pilot contract, with over 95,000 students having access to Kooth through partnerships within School Districts and 1-in-10 high school students accessing the service. Based on the success of the pilot, we are finalising discussions with the State of Pennsylvania regarding an extension of its current service contract. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportSection 172 statement Continued Customers Continued Investors The Board maintains strong relationships with investors and supports open channels of communication. Page 62 We have embarked on an innovative partnership with Aetna Better Health of Illinois to pilot Kooth within the Chicago area to expand access to mental health support to the Medicaid population. As part of this initiative we will make Soluna available to students in the Chicago area to expand access and provide early help. Outcome measures Communication with our customers and users facilitates research and outcome measures to evidence the impact of our platform, leading to the development of new theories and the ability to provide users with the support and services they require. Service reviews Regular service reviews with customers are held to ensure we continue to add value across our customer and user base. Investor meetings Regular meetings are held between the Chief Executive Officer, Chief Financial Officer and institutional investors and analysts at investor roadshows and industry-specific bank conferences to ensure that the Company’s strategy, financial performance and business developments are communicated effectively. Investor presentations The CEO and CFO regularly provide live presentations relating to investing in the future of mental healthcare. Presentations are open to all existing and potential shareholders. There is a dedicated contact (investorrelations@kooth.com) for investor questions and comments. In this forum we would discuss the consequences of any decisions affecting long term success of the company. Investor communications The Group communicates with all shareholders through a mix of formal and less formal communication tools and media, including the Annual Report and financial statements; the Annual General Meeting (AGM) and; the release of news via the London Stock Exchange Regulatory News Service (RNS). Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportSection 172 statement Continued Investors Continued Page 63 Less formal communication methods utilised by the Group include social media such as LinkedIn and YouTube with the latest updates provided on the Soluna launch and UK initiatives. Investor website Kooth’s investor relations website is updated on a regular and timely basis. More information on the Board’s relationships with investors is provided in the next section of the report. Communities Kooth is committed to Content We are aware that mental health affects different communities providing an accessible and in different ways and are actively and continuously creating diverse service to all. content targeted towards all communities. Diversity Kooth aims to remove barriers and ensure all individuals ― regardless of race, age, gender, disability, sexuality or socio-economic background ― have access to effective mental health services. We are aware that mental health affects different communities in different ways, as well as acknowledging health inequalities between communities. In 2023, our marketing, engagement and content teams focused on strengthening relationships with certain ethnic minority communities. These partnerships enable us to create content with specific audiences, ensuring Kooth is a space where everyone is seen, heard and represented. Two of our 2023 UK partnership highlights include the Muslim community and new mothers. Access Accessibility is at the forefront of Kooth’s mission. We have created our platforms to be accessible by removing potential barriers. Confidentiality is at the heart of its design. We allow users to access help while choosing their level of disclosure. Our solution is provided at no cost to the end user. Our service By nature of being a digital service provider, the Group’s operations are deemed to have low environmental impact. Our impact is discussed further in the ESG report on pages 42 to 58. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 64 Section 172 statement Continued Suppliers The relationship we have Partnerships The Board is committed to building trusted partnerships with our suppliers is crucial with the Group’s suppliers, which is crucial to ensuring to ensuring the smooth-running the smooth-running of our business and its operations. of our business and its operations. The Group has a policy of treating all suppliers Key suppliers Our key suppliers are predominantly software technology fairly and in accordance with providers and, given the nature of our service, strong high standards of business relationships with these suppliers are fundamental to its conduct and ethics. successful delivery. Communication We encourage an honest dialogue with all suppliers and ensure regular engagement and communication with all key strategic partners and suppliers. This enables us to maintain a reputation for high standards of business conduct. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 65 Principal risks and uncertainties Kooth is exposed to a variety of risks and actively manages them through risk management procedures, which are overseen by Kooth’s Legal and Risk team. While risk cannot be eliminated altogether, actions are taken to mitigate risk wherever possible. Details of Kooth’s financial risk management objectives and policies, and exposure to foreign exchange risk, market risk, credit risk and liquidity risk are given in note 22 to the consolidated financial statements. The material business and operational risks that the Directors consider Kooth to be exposed to include, but are not limited to, the following: System outages Kooth requires stable and robust systems and hosting services to enable the service to function. The access of Kooth’s users and its customers to its digital platforms and the ease with which customers can use and navigate these, along with the broad range of functionality and services that are available, are key features that affect the attractiveness of Kooth’s services. Any disruption to this could result in compromised Service User experience and/ or reputational damage. To prevent this Kooth has regular testing on its systems in addition to active monitoring and a specific recovery plan. Safeguarding incidents Kooth is not a crisis service, however, the core component of our business is providing counselling services to children and young people and to adults, some of whom are vulnerable. Therefore, given the nature of Kooth’s activities, it is necessary to have significant procedures in place to ensure that our most vulnerable users are prioritised and supported appropriately, and to mitigate any potential reputational damage/adverse litigation in the event of a serious safeguarding incident. Changes in laws and regulations Kooth’s business and its counsellors are subject to regulation and so our business may be adversely affected by changes in government legislation, guidelines and/or regulations. It is not always possible to predict future changes to laws and regulations as they may relate to the services Kooth offers, and any changes could have a material adverse effect on our business operation and financial condition. Any changes to the prominent areas of the Kooth’s business resulting from changes in laws, regulations or guidelines may cause Kooth to incur significant costs in respect of implementing necessary changes required and may severely restrict aspects of our business, leading to an impact on revenue and its financial condition. Kooth is ensuring compliance with the recent introduction of the Online Safety Act 2023 and monitoring developments closely between the Safeguarding and Legal teams. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 66 Principal risks and uncertainties Continued Cyber security and data protection Kooth must ensure ongoing compliance with various data protection laws, including the retained EU law version of the General Data Protection Regulation (Regulation (EU) 2016/679) (“UK GDPR”), Data Protection Act 2018 and the retained Privacy and Electronic Communications (EC Directive) Regulations 2003. Kooth is under an obligation to protect the private and personal data that it holds, including that of its employees. Further, as Kooth expands its footprint in the United States of America, it will ensure continued compliance with key federal privacy and security laws, such as Health Insurance Portability and Accountability Act of 1996 and the Children’s Online Privacy Protection Act of 1998 (“COPPA”) in addition to local state laws. Kooth is required to take steps to ensure compliance with the UK GDPR and relevant laws and to ensure the security of any personal data that Kooth holds in respect of its employees and Service Users. There is an inherent risk such data could be processed in a manner which is in direct breach of the relevant data protection legislation, the consequence of which would not only be a potentially significant fine but may also result in damage to Kooth’s reputation, further impacting Kooth’s revenue. The nature of the service means that the data that Kooth collects from its Service Users is typically anonymised and collected with explicit consent, but it is possible that identifiable data from Service Users may be collected during the course of the provision of services; no financial information is collected, and all data is encrypted in compliance with NHS data standards. Nevertheless, there is a risk that any data breach within Kooth could have significant reputational impact, given the nature of the services we offer. In the United States, there is continued focus on Kooth’s SOC2 type II compliance to ensure we have sufficient controls with the management of data and ISO 27001 certification to ensure we meet international standards around information security. Kooth is subject to annual audits on SOC2 and ISO 27001 to ensure ongoing compliance. As much of our service focuses on children and young people, we are ensuring compliance with COPPA, to protect the data of children and obtaining the appropriate parental consent for those under the age of 13 to access our services. The Board considers that Kooth has in place adequate procedures to ensure compliance with UK GDPR and US laws and controls to ensure the security of the data collected. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 67 Principal risks and uncertainties Continued Kooth has a Data Protection Officer and a Head of Information Security in the United Kingdom and a senior Privacy Officer in the United States to oversee data protection compliance and data security through Kooth’s Data Protection Office, which draws together relevant expertise across our company, including the company’s legal and clinical teams in the United Kingdom and the United States of America. Our people It is critical to our ongoing success that we retain and attract a skilled, engaged and motivated workforce in both the United Kingdom and United States. Failure to do so may negatively impact our ability to deliver on performance targets and strategic priorities. Software development and counselling are areas of strong competition for talent and are subject to cost inflation like all jobs. Kooth is committed to being a leading employer that cares for its employees, by providing an optimum work environment. Our people team has developed and manages a wide range of policies, procedures and practices designed to support all employees — spanning Diversity, Equity and Inclusion; Gender Pay Gap; Ethnicity Pay; Physical and Mental Health; and Recognition and Feedback. Competition for talent and wage expectations continues to be a challenge which we review and monitor on an ongoing basis. Economic environment Whilst the ongoing challenges around the cost of living will impact government bodies and could impact public sector spend and in particular the NHS, we do not anticipate significant near-term funding changes for digital mental health support given the critical nature of — and demand for — these services. We will, however, adapt to an evolving commissioning environment within the NHS in the United Kingdom and continue to invest in our products so that we remain best in class for the delivery of mental health services. The Strategic Report has been approved by the Board of Directors and signed on its behalf. Tim Barker Chief Executive Officer 25 March 2024 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Kooth plc Annual report 2023 Strategic report Corporate governance Financial statements 68 Corporate governance Page 69 Chair’s introduction to governance Dear Shareholder, As Chair of the Board of Directors of Kooth plc, I am pleased to present this year’s Corporate Governance Statement. As Chair, it is my responsibility to ensure that Kooth has both sound corporate governance and an effective Board. Since the Company listed on AIM, it has chosen to adopt the Quoted Companies Alliance’s Corporate Governance Code for Small and Mid-Size Quoted Companies (the “QCA Code”). During the year, the Board has constructively and proactively challenged management on Group strategies, proposals, operating performance and key decisions, as part of its ongoing work to assess and safeguard the position and prospects of the Group. Board discussions are conducted openly and transparently, which creates an environment for rigorous and robust debate. Of particular note this year, the Board has focused on the challenges of significant expansion in the US and the more difficult operating environment in the UK. The Directors of Kooth recognise the value of good corporate governance in every part of the business. The Board considers that compliance with the QCA Code enables us to serve the interests of all our key stakeholders, including our shareholders, and promotes the maintenance and creation of long-term value in the Company. This report describes our approach to governance, including information on relevant policies, practices and the operation of the Board and its Committees. Peter Whiting Non-Executive Chair 25 March 2024 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 70 The Board Peter Whiting Independent Chair Joined May 2020 – Committee Membership: • Audit Committee (Chair) • Remuneration Committee Peter had a twenty-five year career as an investment analyst in equity capital markets, and has spent the past ten years as a non-executive director on the boards of several public and private companies (currently including FDM Group plc and Celebrus Technologies plc). He has experience in a broad range of sectors, but has focused on technology, and on software in particular. Susan Bailey Independent Non-Executive Director Joined August 2020 – Committee Membership: • Audit Committee • Remuneration Committee Professor Susan Bailey OBE worked as a Child and Adolescent Psychiatrist for over 30 years. Susan’s national health policy work and research centres on how to improve healthcare delivery and training of all health practitioners to enable them to best meet the needs of any patient in the context of the unique circumstances of the individual’s life. Simon Philips Non-Executive Director Joined October 2015 – Committee Membership: • Audit Committee • Remuneration Committee (Chair) Simon is Chief Executive of Scaleup Capital, a specialist investor that provides growth capital and expertise to scale-up stage businesses with revenues in the range of £1 million to £20 million in the technology, digital, business services and information sectors. Tim Barker Chief Executive Officer Joined January 2020 Sanjay Jawa Chief Financial Officer Joined March 2020 Kate Newhouse Chief Operating Officer Joined May 2020 With over 30 years of experience in the B2B software industry, Tim has helped build and scale SaaS industry leaders. In his journey from Software Engineer to CEO, Tim founded Koral, a pioneer in online collaboration (acquired by Salesforce), led EMEA Marketing at Salesforce to scale them to become a billion-dollar business, and was previously CEO of DataSift, a privacy-by-design analytics and AI platform, acquired by Meltwater in 2018. Before joining Kooth from Scaleup Capital, where he was an Operating Partner, Sanjay previously held senior finance positions at public and private equity backed technology and services businesses, including QualiTest, Barclays and FTI Consulting. Sanjay, qualified as a Chartered Accountant and was an audit manager at PwC. Kate is COO and a former member of the government’s Healthtech Advisory Board. Kate was previously CEO at leading venture builder, Blenheim Chalcot and at Doctor Care Anywhere, taking it from digital health concept to global business, serving over 140 corporate clients at the time of leaving. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 71 The Board Continued As at the date of this report, the Board comprises the Independent Non-Executive Chair, two Non- Board meetings The Board meets on a regular basis throughout Executive Directors and three Executive Directors. the financial year and as required on an ad- Short biographical details are set out in the hoc basis. Its mandate is to consider strategy, previous section. In carrying out its governance role, the main task of the Board is to drive the performance of the Group. The Board must also ensure that the Group complies with all its contractual, statutory and any other obligations, as well as the requirements of any regulatory body. operational and financial performance, and internal controls. In advance of each meeting, the Chair of the Board sets the agenda, with the assistance of the Company Secretary. Directors are provided with appropriate and timely information, including board papers distributed in advance of the meetings. Those papers include reports from the executive team and other The Board has the ultimate responsibility for operational heads. the successful operations of the Group and meets at least eight times per year to set the overall direction and strategy of the Group. Almond CS Limited is the Company Secretary and attends all Board meetings as well as advising on corporate governance matters. The Company The Board annually reviews, and takes Secretary produces full minutes of each meeting, appropriate action to ensure, orderly including a log of actions to be taken. The Chair succession for appointments to the Board of the Board then follows up on each action at and to senior management, with the goal of the next meeting, or before if appropriate. maintaining an appropriate balance of skills and experience to facilitate growth and help the Company meet its long-term objectives. Directors are expected to attend Board and Committee meetings and to devote enough time to the Company and its business in order to fulfil their duties as Directors. Board and committee attendance The attendance of the Board and the Committees is as follows: Board Meeting Audit Committee Remuneration Committee Director Position Max possible attendance Meetings attended Max possible attendance Meetings attended Max possible attendance Meetings attended Tim Barker Chief Executive Officer Sanjay Jawa Chief Financial Officer Kate Newhouse Chief Operating Officer Peter Whiting Independent Non-Executive Chairman Susan Bailey Independent Non-Executive Director Simon Philips Non-Executive Director 12 12 12 12 12 12 12 12 12 12 12 11 — — — 4 4 4 — — — 4 4 3 — — — 3 3 3 — — — 3 3 3 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 72 The Board Continued Matters reserved for the Board Matters reserved for the decision of the Board include, but are not limited to: • Approving Kooth’s strategic aims and objectives. • Reviewing performance against Kooth’s strategic aims, objectives and business plans. • Overseeing Kooth’s operations. • Approving changes to Kooth’s capital, corporate, management or control structures. • Approving results announcements and the annual report and financial statements. • Approving the dividend policy. • Declaring the interim dividend and recommending the final dividend and any special dividend. • Approving any significant changes in accounting policies. • Approving the treasury policy. • Approving Kooth’s risk appetite and principal risk statements. • Reviewing the effectiveness of Kooth’s risk and control processes. • Approving major capital projects and material contracts or arrangements. • Approving all circulars, prospectuses and admission documents. • Ensuring a satisfactory dialogue with shareholders. • Establishing Board committees and approving their terms of reference. • Approving delegated levels of authority. • Approving changes to the Board and its committees. • Determining the remuneration policy for the Directors and other senior executives. • Providing a robust review of Kooth’s corporate governance arrangements. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 73 The Board Continued Board evaluation In March 2023, a formal external board Audit Committee The Audit Committee comprises three Non- evaluation was carried out by Almond CS Limited, Executive Directors, namely; Peter Whiting who have experience in evaluating Boards of AIM (Committee Chair), Susan Bailey (INED) listed companies. Evaluation based questionnaires and Simon Philips (NED), two of whom are were circulated and completed by all members, independent. At the discretion of the Committee and a thorough analysis of the responses Chair, Executive Directors were invited to attend was conducted. meetings of the Audit Committee during the year. The evaluation was designed to give an The Audit Committee is responsible for the overview of the Board’s performance based on annual and half-yearly reports to shareholders, its alignment with the QCA Code and served to other public announcements of a financial support the Board in identifying challenges and nature, reviewing the likelihood of any fraud implementing change. As the business expands, the executive directors will be challenged to identify internal candidates who could potentially occupy board positions and risks, reviewing the effectiveness of Kooth’s internal controls and risk management systems and overseeing the relationship with the external auditors. set out development plans for these individuals. The Audit Committee also reviews the The Chief Financial Officer is the primary contact for Shareholders and there is a dedicated email address (investorrelations@kooth.com) for appointment of the external auditor, their independence, the audit fee, and any questions of resignation or dismissal. shareholder questions and comments. The Audit Committee met four times during Regular meetings are held between the Chief Executive Officer, Chief Financial Officer and institutional investors and analysts to ensure that the Company’s strategy, financials and business developments are communicated effectively. The Board intends to engage with any shareholders who do not vote in favour of resolutions at annual general meetings to understand their motivation. the year. In the meetings the Committee considers key risk areas for the financial statements such as revenue recognition, capitalised development costs, going concern and internal controls. Remuneration Committee The Remuneration Committee comprises Simon Philips (Chair), Susan Bailey (INED) and Peter Whiting (INED). Only members of the committee The Chairs of the Board and Committees are have the right to attend meetings, however other available to meet with shareholders if requested. individuals such as the CEO, the Chief People Officer and external advisors may be invited to attend at different points during the year at the discretion of the Chair. No individual was present for any discussion on their own remuneration. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 74 The Board Continued The role of the Remuneration Committee includes responsibility for all aspects of the remuneration Risk management and internal controls The Board acknowledges its responsibility for of Executive Directors, including salary, annual establishing and maintaining Kooth’s system of bonus and share-based payments, and an internal controls and will continue to ensure that awareness of remuneration within the wider management keeps these processes under regular workforce and the administration of all share- review and improves them where appropriate. based remuneration plans within the organisation. The Board’s financial risk management The Remuneration Committee met three times objectives involve safeguarding Kooth’s assets by during the year. identifying, managing, monitoring and reporting the critical risks across the business. As part of Relationships with stakeholders The Board is committed to open and ongoing the admission to AIM, Kooth has set up a risk register which identifies, monitors and reports engagement with the Company’s Shareholders. on the critical risks of the business. The risk The Board will communicate with Shareholders register covers commercial, financial, operational, through: competitive, technological and other risks. • The annual report and accounts. The Board has delegated the maintenance of • The interim and full-year results announcements. its risk management and internal controls to the Audit Committee, who work alongside the Head of Information Security and the Head of Legal • Trading updates (where required or appropriate). and Risk to regularly review and update risks • The annual general meetings. • The Company’s investor relations website (in particular, the “RNS News” and “AIM Rule 26” pages). and ensure that they are being addressed. A review of the effectiveness of these systems is included in the Board’s informal Board evaluation process and the Audit Committee provides the Board with regular updates on any significant Further details on the actions taken to engage changes to risks. with stakeholders and respond to their feedback can be found in the s.172 statement on page 60. Election and re-election of the Directors In accordance with the Company’s Articles of Association, each of the directors will retire and stand for re-election at the forthcoming AGM. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 75 Compliance with the QCA Code The Chairman’s role is to lead the Board of Directors and to be responsible for ensuring that the Company adheres to and applies the standards of corporate governance. The Board and Committees meet regularly as described in the Corporate Governance Report on page 71. The executive team are directed to the day- to-day management and are accountable to the rest of the Board. The Directors support a high standard of corporate governance and have decided to comply with the QCA Corporate Governance Code 2018 (“QCA Code”). The Directors believe that the QCA Code provides the Company with the framework to help embed the governance culture that exists within the organisation as part of building a successful and sustainable business for all of its stakeholders. A summary of how the Company currently complies with the QCA Code is set out below and is updated at least annually in the manner recommended by the QCA Code. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportCompliance with the QCA Code Continued Page 76 Principle 1 Establish a purpose, strategy and business model which promotes long-term value for shareholders Principle 2 Promote a corporate culture that is based on ethical values and behaviours Kooth’s platform and growth strategy is focused around four key pillars that represent a £1 billion+ international addressable market and £500 million UK addressable market, with a platform and operating model that can scale into all markets to tackle the global mental health challenge. The four pillars being US Youth, UK Children and Young People, Adults, and International. Full disclosure of our Company purpose, strategy and business model can be found in pages 11 to 25 of the Annual Report which is also available on the Company’s website. The Directors intend to subject the purpose and strategy to ongoing review and will provide an update on it from time to time in the strategic report that forms part of the Annual Report. The Board places significant importance on the promotion of ethical values and good behaviour within the Company and takes ultimate responsibility for ensuring these are promoted and maintained throughout the organisation. The Company’s culture and values, which are highlighted on pages 47 to 55 of the Annual Report, reflect the Board’s dedication to promote an ethical culture. In addition, the Company has documented procedures with respect to its responsibilities regarding ethical behaviour, specifically whistleblowing, social media, anti-bribery and corruption, communication, and general conduct of employees. This is reviewed annually to ensure it remains relevant and up to date. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportCompliance with the QCA Code Continued Page 77 Principle 3 Seek to understand and meet shareholder needs and expectations The Board is committed to an open and ongoing engagement with its shareholders. The main methods of communication with shareholders are the Annual Report and Accounts, the annual and half-year results announcements, capital markets day, trading updates, the Annual General Meeting and the Company’s website. In addition, the Chief Executive Officer and Chief Financial Officer meet regularly with institutional investors and analysts to ensure that objectives and any business developments are clearly communicated, and that they are available to respond to any enquiries following Company announcements, together with other Company advisers and the Non-Executive Directors. In the last year the Company has presented through Investor Meets Company to reach a wider shareholder audience. Details of the quantitative and qualitative metrics surrounding the Company’s environmental and social matters can be found in the ESG report on pages 45 to 55 of this report. The Annual General Meeting of the Company gives the Directors the opportunity to meet with shareholders and the ability to give an update on the Company’s performance. It also provides the shareholders the opportunity to ask questions of the Directors, either in advance of or during the meeting. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportCompliance with the QCA Code Continued Page 78 Principle 4 Take into account wider stakeholder interests, including social and environmental responsibilities, and their implications for long-term success Principle 5 Embed effective risk management, internal controls and assurance activities, considering both opportunities and threats, throughout the organisation The Company takes Environmental Social and Governance (ESG) issues very seriously and the Board is conscious of the impact that the Company’s business activities may have in these areas. The Board recognises that its long-term success will necessitate the maintenance of effective working relationships across a wide range of stakeholders as well as its shareholders; being primarily its employees, customers, and suppliers. A detailed report on how the Company has taken into account wider stakeholders and the various environmental & social issues surrounding them, can be found in the ESG report and s172 statement in the Annual Report on pages 42 to 58 and 59 to 64. The associated KPIs for these matters can be found on pages 45 to 55. The Board has ultimate responsibility for the Company’s system of internal controls and for reviewing its effectiveness. Such systems are designed to manage risk of failure to achieve business objectives. The Board meets frequently during the year during which business and other risks are assessed. The Directors have identified the risks and uncertainties which they consider to be the most significant for investors, which are summarised on page 65, alongside disclosure of the company’s appetite for risk and its risk identification and management systems. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportCompliance with the QCA Code Continued Page 79 Principle 6 Establish and maintain the board as a well-functioning, balanced team led by the Chair The Board comprises six directors: the Independent Chairman, two Non-Executive Directors and three Executive Directors. Further details of the Directors, their experience, independence, diversity and time commitments are set out on page 70 of the Annual Report and the AIM 26 section of the website. The Board meets regularly, with processes in place to ensure that each Director is always provided with such information as is necessary to discharge their duties. The Board is also supported by the Committees (Audit and Remuneration) each with specific remits. The detail of the number of meetings and attendance by Directors is noted on page 71. Details on the performance-related remuneration of the directors can be found on page 88. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportCompliance with the QCA Code Continued Page 80 Principle 7 Maintain appropriate governance structures and ensure that individually and collectively the Directors have the necessary up- to-date experience, skills and capabilities The Company Secretary works closely with the Chairman and the Chairs of the Board Committees to ensure that Board procedures, including setting agendas and the timely distribution of papers, are complied with and that there are good communication flows between the Board and its Committees, and between senior management and Non-Executive Directors. There is a formal agenda at each Board Meeting, which includes operational updates from the Chief Executive Officer, financial and risk updates from the Chief Financial Officer and commercial updates from the Chief Operating Officer. All reports cover different areas within the Company and cover new business opportunities. Board papers are circulated to the Directors in advance of meetings to enable proper consideration of the content of the papers. During the course of the year, other matters considered by the Board include annual and half-year results announcements, principal risks and uncertainties, ESG, AGM resolutions, shareholder communications and management incentivisation. The Chairman maintains regular contact with the Non- Executive Directors outside of formal Board meetings and works with the Company secretary to provide regular training materials to keep the Directors’ skill sets up-to-date. All Directors have access to the support and advice of the Company Secretary as required. The Board has established a sub-committee for the approval of share issuances concerning their long-term incentive plan. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportCompliance with the QCA Code Continued Page 81 Principle 8 Evaluate board performance based on clear and relevant objectives, seeking continuous improvement Principle 9 Establish a remuneration policy which is supportive of long-term value creation and the company’s purpose, strategy and culture In March 2023, a formal Board evaluation process was carried out by Almond CS Limited, which has experience in evaluating Boards of AIM listed companies. Evaluation-based questionnaires were circulated and completed by all members, and a thorough analysis of the responses was conducted. The evaluation was designed to give an overview of the Board’s performance, based on its alignment with the QCA Code and served to support the Board in identifying challenges and implementing change. As this was the Company’s first formal Board evaluation process, there are no previous results to compare against. The Directors discuss the use of a formal evaluation process annually and will disclose the results of the next evaluation with reference to the steps taken to action any previous evaluation points. Details of the Board’s succession planning process can be found on page 71. The Board is committed to implementing a remuneration structure which rewards management for their work and aligns their vision with the Company’s long-term success. Details of the remuneration structure and how it supports the Company’s purpose, business model, strategy and culture can be found in the Remuneration Committee report on page 87. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportCompliance with the QCA Code Continued Page 82 Principle 10 Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other key stakeholders The Company places a strong emphasis on the standards of good corporate governance and maintaining an effective engagement with its shareholders and key stakeholders, which it considers to be integral to longer- term growth and success. Details of the challenges faced in the previous year and how they were addressed at the Board level can be found on page 69. The Company’s Annual reports and accounts and its half year report are key communication channels through which stakeholders are informed of how the Company is governed, updates to its strategic targets and how the Company is progressing in meeting its objectives. Reports on the structures and activities of the Board’s committees can be found in the Audit Committee Report on page 83 and the Remuneration Committee Report on page 86. The ‘Investor Hub’ section of Company’s website is also an avenue which the Company uses to communicate directly with shareholders. This can be found at https://investors.kooth.com Approved by order of the Board Almond CS Limited Company Secretary 25 March 2024 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 83 Report of the Audit Committee Committee Chair’s introduction As the Chair of the Audit Committee of Kooth (‘the Committee’), I present the Committee Report for the year ended 31 December 2023, which has been prepared by the Committee and approved by the Board. Committee meetings and attendance The Committee’s terms of reference require a minimum of three members. The Committee currently comprises Susan Bailey, Simon Philips and me. The Board considers that I have sufficient, relevant financial experience to chair the Committee, given that I have over 25 years’ experience as an investment analyst and currently hold four other listed company Board and Audit Committee positions including one other Audit Chair role. During the year ended 31 December 2023, the Committee met four times with attendance noted above. The Committee is required by its Terms of Reference to meet as frequently as the Committee Chair shall require, and also at regular intervals to deal with routine matters and, in any event, at least three times in each financial year. Committee activities The Committee is responsible for reviewing and reporting to the Board on the Company’s financial performance, monitoring the integrity of the Company’s financial statements (including Annual and Interim Accounts and results announcements), reviewing internal control and risk management, and reviewing/monitoring the performance, independence and effectiveness of the Company’s external auditors. The Committee’s primary activities included meeting with the external auditors, considering the audit approach, scope and timetable, and reviewing the key audit matters for the financial year 2023 audit. In addition, the Committee reviewed the audit provided by Grant Thornton UK LLP, Kooth’s external auditors for the financial year ended 31 December 2023 which is the fourth consecutive year end for the firm. The Committee has agreed with Grant Thornton UK LLP that they will continue in post for the next financial year and that a new audit partner has taken on the lead partner role on the Group’s audit for the year ended 31 December 2023. This is consistent with the FRC’s requirements around the rotation of the audit partner. The Committee concluded that Grant Thornton UK LLP is delivering the necessary audit scrutiny. Accordingly, the Committee recommended to the Board that Grant Thornton UK LLP be reappointed for the next financial year. As part of the year end audit, the Committee: • Met with the external auditors to review and approve the annual audit plan and receive their findings and report on the annual audit. • Considered the integrity of the published financial information and whether the Annual Report and Accounts taken as a whole are fair, balanced and understandable and provide the information necessary to assess Kooth’s position and performance, business model and strategy. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 84 Report of the Audit Committee Continued • Considered significant issues and areas of judgement with the potential to have a material impact on the financial statements. • Reviewed and approved the year end results and accounts. • Considered significant issues and areas of judgement with the potential to have a material impact on the financial statements. Committee objectives and responsibilities The Committee’s main responsibilities can be summarised as follows: • To report on and review the Company’s financial performance. • To monitor the integrity of the Company’s financial statements and any formal announcements relating to Kooth’s financial performance. • To review the Company’s internal financial controls and risk management systems. • To review any changes to accounting policies. • To make recommendations to the Board in relation to the appointment of the external auditors. • To make recommendations to the Board concerning the approval of the remuneration and terms of engagement of the external auditors. • To review and monitor the external auditors’ independence and objectivity. • To consider any matter specifically referred to the Committee by the Board. • The Terms of Reference are reviewed annually and are available on the Company’s website. Financial reporting At the request of the Board, the Committee concluded that the Annual Report and Financial Statements, taken as whole, were fair, balanced, and understandable, and provided the information necessary for shareholders to assess the Group’s business model, strategy and performance. The Committee considered the budget for 2024 as well as financial projections into 2025 and concluded that the going concern basis is appropriate. The Committee also reviewed the Strategic Report and concluded that it presented a useful, fair, balanced, and understandable review of the business. Auditor independence To ensure auditor independence, consideration is given to their integrity and the objective approach of the audit process. The use of non-audit services is not considered to be significant and amounts paid in respect of these are disclosed in note 21. I am satisfied that the Committee has satisfactorily discharged its duties in the year in accordance with its terms of reference. Peter Whiting Chair of the Audit Committee 25 March 2024 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 85 Report of the Remuneration Committee Committee Chair’s introduction As the Chair of the Remuneration Committee of Kooth (‘the Committee’), I present the Remuneration Committee Report for the year ended 31 December 2023, which has been prepared by the Committee and approved by the Board. Committee meetings and attendance The three members of the Committee are Susan Bailey, Peter Whiting and me. The Board considers that I have sufficient relevant experience to chair the Committee, given the number of Board level positions currently and previously held (including the Remuneration Committee Chair of another listed company). During the year ended 31 December 2023, the Committee met three times with all members attending all meetings. The Committee is required by its Terms of Reference to meet as frequently as the Committee Chair shall require and also at regular intervals to deal with routine matters and, in any event, at least three times in each financial year. Remuneration policy for the year ended 31 December 2023 The Remuneration Committee determines the Company’s policy on the structure of Executive Directors’ and if required, senior management’s remuneration. The objectives of this policy are to: • Reward Executive Directors and senior management in a manner that ensures that they are properly incentivised and motivated to perform in the best interests of shareholders. • Provide a level of remuneration required to attract and motivate high-calibre Executive Directors and senior management. • Encourage value creation through consistent and transparent alignment of incentive arrangements with the agreed company strategy over the long term. • Ensure the total remuneration packages awarded to Executive Directors, comprising both performance-related and non-performance-related remuneration, is designed to motivate the individual, align interests with shareholders and comply with corporate governance best practice. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 86 Report of the Remuneration Committee Continued Committee objectives and responsibilities The Committee’s main responsibilities can be summarised as follows: • To determine the framework or broad policy for the remuneration of the Chair, the Executive Directors, and such other senior executives as it is requested by the Board to consider. The remuneration of Non-Executive Directors shall be a matter for the Chair and the Executive Directors of the Board. No Director shall be involved in any decisions as to their own remuneration. • To determine such remuneration policy, taking into account all factors which it deems necessary (including relevant legal and regulatory requirements). • To review the ongoing appropriateness and relevance of the remuneration policy, including policy comparisons with market competitors. • To design and determine targets for any performance related pay schemes operated by the Company and approving any annual payments made under such schemes. • To review the design of, and any changes to, all share incentive plans. • To review the structure, size and composition of the Board, including the skills, knowledge and experience. • To give consideration to succession planning. • To recommend new Board appointments. • To consider any matter specifically referred to the Committee by the Board. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 87 Report of the Remuneration Committee Continued Director’s remuneration: salary Salaries are normally reviewed annually with effect from 1 January, taking into account inflation, salaries paid to directors of comparable companies as well as Group and personal performance. Salaries of Executive Directors are determined by the Remuneration Committee. The Board as a whole decides the remuneration of the Chair and Non-Executive Directors. As covered extensively in our annual report, the success of Kooth in winning contracts in the US, and the California contract in particular, has transformed the scale and complexity of the business. In addition to a significant expansion purely in terms of scale, in comparison to working only in the UK, the management team now has to deal with multiple currencies, jurisdictions and a number of different and potentially conflicting demands in terms of the nature of the services provided. As a result of these changes, the Remuneration Committee undertook a fundamental review of the remuneration arrangements of the executive team, to ensure that they remain appropriate given the significant changes to the business. This was done in part by a comparison with pay levels in the industry both in the UK and in the US. The Committee notes that, while benchmark data was not used as a primary point of reference in this exercise, the CEO and CFO base salaries in particular, and remuneration structure in general, remain below the median for UK public companies of a similar size. Salaries and fees for directors effective from 1 January 2024 are as follows: Name Susan Bailey Tim Barker Sanjay Jawa Kate Newhouse Simon Philips Peter Whiting £’000 65 360 300 300 65 109 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 88 Report of the Remuneration Committee Continued Director’s remuneration: long term incentives The Group adopts a Long Term Incentive Plan with all employees of the Group eligible to receive awards under the share plans. In line with the terms of the scheme, the awards granted to Directors are subject to performance criteria, with 50% being linked to adjusted EBITDA growth (ARR growth for grants prior to 2023) and 50% linked to comparative total shareholder return (TSR), with both elements being measured over a three year period. TSR is measured by the aggregate of dividends declared and paid, and average share price over the applicable period. The TSR of the Group is compared to the TSR of companies constituting 101-200 of the FTSE AIM All-share Index. The percentage of shares vesting increases from nil at a TSR below the median of the comparator group and rising to 100% at a TSR in the top quartile of the comparator group. The Remuneration Committee considers that the targets are appropriate and are aligned with shareholder interests. The fair value of the employee services received in exchange for these grants is recognised as an expense on a straight-line basis over the vesting period. The total amount to be expensed is determined by reference to the fair value of the options or shares determined at the date of grant. The fair value of the awards was calculated using a Stochastic simulation model for options with Y+TSR performance conditions. Non-market based vesting conditions are included in assumptions about the number of options that are expected to become exercisable or the number of shares that the employee will ultimately receive. This estimate is revised at each balance sheet date to allow for options that are not expected to vest and the difference is credited to the Consolidated Statement of Comprehensive Income with a corresponding adjustment to reserves. A breakdown of the Directors’ current interests in the long term incentives awards is set out below. Long term incentives Name Title Number of options Exercise price (£) Tim Barker Chief Executive Officer Sanjay Jawa Chief Financial Officer Kate Newhouse Chief Operating Officer 298,476 230,390 242,398 0.05 0.05 0.05 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportReport of the Remuneration Committee Continued Director’s remuneration: interests According to the register of Directors’ interests maintained under the Companies Act, the following interests in shares of Group companies were held by the Directors in office at the Page 89 year end: Name Susan Bailey Tim Barker Sanjay Jawa Kate Newhouse Simon Philips* Peter Whiting Number of shares — 841,692 353,981 520,966 12,996,540 44,000 *Simon Philips is one of the beneficial owners of the shares held by Root Capital LP Funds. Executive Directors’ remuneration: current year Executive Directors’ remuneration for the years ended 31 December 2023 and 31 December 2022 was as follows. 2023 (£’000) Name Tim Barker Sanjay Jawa Kate Newhouse Total 2022 (£’000) Name Tim Barker Sanjay Jawa Kate Newhouse Total Base salary and fees Bonus Pension Gain on exercise of share options 320 255 266 841 417 315 346 1,078 9 8 8 25 — — — — Base salary and fees Bonus Pension Gain on exercise of share options 265 200 244 709 - - - - 8 6 7 21 — — — — Total 746 578 620 1,944 Total 273 206 251 730 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 90 Report of the Remuneration Committee Continued Implementation of policy in 2024 As a part of the strategic review of our remuneration policy in the previous year a bonus scheme has been implemented for Executive Directors to reward performance against annual targets which support the strategic direction of the Group. Awards are up to 100% of salary, based on annual Group performance (e.g., adjusted EBITDA performance) and will normally be paid in cash. We continue to have in place a long term incentive plan under which the Remuneration Committee has discretion to make option grants to executive directors and other staff, subject to the scheme rules, and to determine appropriate performance conditions as noted above. Remuneration policy for Non-Executive Directors Susan Bailey, Peter Whiting and I each receive a fee for our services as Directors, which is approved by the Board, mindful of the time commitment and responsibilities of our roles and of current market rates for comparable organisations and appointments. Non-Executive Director fees for the year commencing 1 January 2024 are noted above. Simon Philips Chair of the Remuneration Committee 25 March 2024 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 91 Directors’ report The Directors present their report and the audited financial statements of Kooth plc for the year ended 31 December 2023. Principal activity The principal activity of the Group is the provision of online counselling, coaching and support to children, young people, and adults in need. A description and review of the Group’s performance during the financial year and indications of future development are set out within the Strategic Report, and this also incorporates the requirements of the Companies Act 2006. Further details on how the Directors have had regard to the need to foster the company’s business relationships with suppliers, customers and other key stakeholders, and their effects on the principal decisions taken by the company during the year can be found in the s.172 statement on pages 59 to 64. Share capital At the time of this report, the Company’s share capital comprises 36,480,873 ordinary shares of £0.05 each. The Company has been notified of the following interests in 3% or more of the issued ordinary share capital of the Company: Name % of issued share capital Root Capital Fund II LP trading as Scale Up Capital Cannacord Genuity Group Inc LF Gresham House UK Micro Cap Stancroft Trust Limited BGF J O Hambro Capital Management Limited 35.6% 7.5% 6.6% 6.6% 6.1% 5.1% There are currently no restrictions on the voting rights or transfer of the Company’s AIM securities. The Directors have the authority to issue shares up to one-third of the Company’s issued share capital. This authority is given on an annual basis by shareholders at the Company’s annual general meeting. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 92 Directors’ report Continued Dividends The Directors do not recommend the payment of a dividend (2022: £nil). Disabled employees Applications for employment by disabled persons are always fully considered, bearing in mind the abilities of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group and the Company that the training, career development and promotion of disabled people should, as far as possible, be identical to that of other employees. Directors The directors who held office during the year and up to the date of signing these financial statements were as follows: • Tim Barker, Chief Executive Officer • Sanjay Jawa, Chief Financial Officer • Kate Newhouse, Chief Operating Officer • Peter Whiting, Chair and Non-executive director • Simon Philips, Non-executive director • Susan Bailey, Independent Non-executive director Political contributions The Group made no political donations during the year (2022: nil). Directors’ insurance The Group maintains appropriate insurance cover in respect of any legal action against its directors. Payment of suppliers It is the Group’s policy to pay suppliers in accordance with the terms and conditions agreed in advance, providing all trading terms and conditions have been met. All payments are made in the ordinary course of business and the Group expects to pay all supplier debts as they become due. Our approach to engagement with suppliers is detailed further in the Section 172 Statement on page 64. Research and development During the year the Group invested £3.8 million in Research and Development. More information on this is provided in the Strategic Report on pages 26 to 33. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 93 Directors’ report Continued Financial instruments The principal financial instruments comprise cash and short-term deposits and trade receivables. Details of the Group’s exposure to financial risks are set out in note 22 to the financial statements. Anti-bribery It is our policy to conduct all our business in an honest and ethical manner. We take a zero- tolerance approach to bribery and corruption and are committed to acting professionally, fairly and with integrity in all our business dealings and relationships. Going concern The Directors have a reasonable expectation that the Group as a whole has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis continues to be adopted in the accounts. The company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic report on pages 8 to 25. In addition, note 22 to the financial statements include the company’s objectives, policies and processes for managing its capital; its financial risk management objectives; and its exposures to credit risk and liquidity risk. During the 2023 financial year the Group generated a loss of £0.2 million (2022: £0.7 million loss). Adjusted EBITDA is £2.3 million (2022: £1.6 million). The Group is in a net asset position of £20.8 million (2022: £10.5 million). The Group generated an inflow of £2.5 million in cash in 2023 (2022: £1.4 million) and ended 2023 with a cash balance of £11.0 million (2022: £8.5 million). Management has performed a going concern assessment for a period up to 31 May 2025, which indicates that the Group will have sufficient funds to trade and settle its liabilities as they fall due. This assessment takes into account a number of sensitivities, including a downside scenario and a reverse stress test, which models the scenarios that would lead to a default by the Group. Both the downside scenario and reverse stress test reflect lower activity levels than both the Group forecast and 2023 actual results. The key assumption used in the assessment is revenue and Management has analysed the impact of reduced revenue on the Group’s performance. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 94 Directors’ report Continued Whilst Management has concluded that the possibility of the downside scenario occurring is remote, the Group would still have adequate resources to be able to trade and settle its liabilities as they fall due in this scenario. Management deemed the combination of factors occurring as set out in the default model to be implausible. The Directors have considered the impact of the current climate of increased inflation and interest rates and do not expect this to have a material adverse impact on the Group. Consequently, the directors believe that the company is well placed to manage its business risks successfully despite the current uncertain economic outlook. A list of all non-UK based Company subsidiaries can be found on page 143. Employee involvement The Group continues to attract and retain key talent and places considerable value on the involvement of employees. Employees are regularly consulted regarding matters affecting them through channels such as company-wide briefings, employee engagement software and email announcements, and their interests are taken into account in making decisions that are likely to affect their interests. The Group is committed to providing equality of opportunity to all existing and prospective employees without discrimination through channels such as our Diversity and Inclusion Council and our Employee Voices Group. As a result of the IPO in 2020, we are able to offer our staff long term, annual incentives to reward their hard work, passion and impressive results. Further details on employee engagement is provided in the Section 172 statement on page 60. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 95 Directors’ report Continued Environment The Group adheres to all environmental regulations and has, where possible, utilised environmental-sustaining policies such as recycling and waste reduction. Further details of the Group’s Environmental, Social and Governance strategy and SECR disclosures are provided on pages 42 to 46. Future business developments Details of these are provided in the Strategic Report, and the Chief Executive Officer’s Report on pages 8 to 25. Notice of Annual General Meeting Details of business to be conducted at this year’s AGM are contained in the Notice of the Annual General Meeting, which will be communicated to shareholders separately. It is the opinion of the Directors that the passing of these resolutions are in the best interest of the shareholders. In accordance with the Company’s articles of association, each of the Directors will retire and stand for re-election at this year’s annual general meeting. Any amendments to the Company’s articles must be approved by shareholders at the annual general meeting. Significant events after year end In January 2024, the Group entered into a working capital credit facility with Citibank of $9.5 million that remains undrawn at the time of issuing this report. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 96 Directors’ report Continued Auditor Grant Thornton UK LLP was re-appointed as auditor in the year. A resolution to re-appoint Grant Thornton UK LLP as auditor and to authorise the Directors to determine their remuneration will be proposed at the forthcoming AGM. 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. • The Directors have taken all the steps that they ought to have taken as Directors information and to establish that the company’s auditor is aware of that information. The Directors’ Report was approved by the Board of Directors and signed on its behalf by: Sanjay Jawa Chief Financial Officer 25 March 2024 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 97 Directors’ responsibilities statement In respect of the Annual Report and the financial statements The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to prepare the group financial statements in accordance with UK- adopted international accounting standards and the company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law). 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. • State whether applicable UK-adopted international accounting standards have been followed for the group financial statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the company financial statements, subject to any material departures disclosed and explained in the financial statements; • Prepare the financial statements on the going concern basis, unless it is inappropriate to presume that Kooth and 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 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 98 Directors’ responsibilities statement Continued To the best of our knowledge: • The group financial statements, prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and • The Strategic Report and Directors’ Report include a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Sanjay Jawa Chief Financial Officer 25 March 2024 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportKooth plc Annual report 2023 Strategic report Corporate governance Financial statements Page 99 Page 99 Independent auditor’s report to the members of Kooth plc 25 March 2024 Page 100 Independent auditor’s report Continued Opinion Our opinion on the financial statements is unmodified We have audited the financial statements of Kooth plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2023 which comprise the Consolidated statement of profit and loss and other comprehensive loss, the Consolidated statement of financial position, the Consolidated statement of changes in equity, the Consolidated cash flow statement, the Parent company statement of financial position, the Parent company statement of changes in equity and notes to each of the financial statements and 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 December 2023 and of the group’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. Annual report 2023Kooth plcPage 101 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. Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis of accounting included: • Considering the current cash resources of the Group, in the context of the forecast cash requirements during the forecast period. • Challenging the key assumptions in the forecasts and the scope of scenario planning undertaken, given current social and economic conditions. Key management assumptions included revenue growth rate, new business wins, contract renewal rate, growth rates in the underlying forecasts, and net working capital structure of the Group. • Critically assessing both the outcomes of reverse stress testing and the availability of controllable mitigating future actions within the going concern assessment. • Assessing management’s historical forecasting accuracy. • Assessing the suitability of the models used to forecast cash flows, including testing of the mathematical accuracy. • Assessed the appropriateness of the disclosures relating to the use of going concern in the financial statements. Annual report 2023Kooth plcIndependent auditor’s report ContinuedPage 102 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 inflation and the cost of living crisis, we assessed and challenged the reasonableness of estimates made by the 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 Materiality Key audit matters Overview of our audit approach Overall materiality: Group: £500,000, which represents 1.5% of the group’s forecast total revenue. Prior year £400,000. Parent company: £360,000, which represents 1.5% of the parent company’s total assets at the planning stage Scoping of the audit. Prior year £250,000. Key audit matters were identified as: • Revenue recognition from the significant contract; and • Accounting for capitalised internal development costs. Our auditor’s report for the year ended 31 December 2022 included no key audit matters that have not been reported as key audit matters in our current year’s report. We performed audits of the financial information of the significant Group components: Kooth plc, Kooth US LLC and Kooth Digital Health Limited using component materiality (full scope audit procedures). We performed specified audit procedures on Kooth Group Limited. In the prior period a full scope component audit was performed on Kooth Group Limited, whilst specific procedures were performed on Kooth USA LLC. This change is due to larger revenues in Kooth USA LLC which has made the component more significant to the group. In contrast, Kooth Group Limited now has less financial significance within the group. Annual report 2023Kooth plcIndependent auditor’s report ContinuedPage 103 Audit response Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial Description 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. KAM Disclosures Our results In the graph below, we have presented the key audit matters and significant risks relevant to the audit. This is not a complete list of all risks identified by our audit. Revenue recognition from significant contracts Valuation of investments in subsidiaries and intercompany receivables (parent company) Management overide of controls Capitalised Internal development costs Revenue recognition (excl. significant contracts) High Potential financial statement impact Low Low Extent of management judgement High Key audit matter Significant risk Annual report 2023Kooth plcIndependent auditor’s report ContinuedPage 104 Independent auditor’s report Continued Key Audit Matter – Group How our scope addressed the matter – Group Revenue recognition from the significant In responding to the key audit matter, we contract (£33.3m, 2022: £16.7m) We have identified revenue recognition from the new US contract as one of the most significant assessed risks of material misstatement due to fraud and error. performed the following audit procedures: • Assessing the significant judgements and estimates made by management in identifying performance obligations and determining the method of revenue recognition for the contract. In the year, a significant contract was undertaken This included an assessment of contract in the US. The revenue recognition for this terms and mapping them to management’s contract contained significant judgements and identified performance obligations. We have estimates in the application of IFRS 15 ‘Revenue also considered the pattern of flow of economic from Contracts with Customers’, particularly benefit to the customer over the life of the in identifying performance obligations and contract, with reference to signed contractual determining the transaction price. This is terms, to determine the correct method of due to the contract having multiple complex revenue recognition against the requirements performance obligations, combined with a of ‘IFRS 15 ‘Revenue from Contracts with milestone payment billings schedule, generating Customers’. complexity in allocating transaction price as well as the timing of revenue recognition. This leads to an opportunity to fraudulently recognise revenue in advance of performance obligation satisfaction also leading to incomplete deferred revenue. The level of judgement and complexity of required estimates also creates an opportunity for material errors to occur. • To allocate the transaction price to performance obligations, the cost-plus margin method was utilised for the contract. We therefore tested forecast costs to complete, as well as costs incurred to date in fulfilling the contract. We challenged management on their accuracy in estimating forecast costs to complete and considered the impact of changes to forecast Revenue forms the basis for some of the Group’s costs on revenue recognised. key performance indicators, both for reporting to external stakeholders and for management incentives. This contract is the largest to date for the group, representing a significant proportion of their revenue and is the first of its kind. • Assessing whether the performance obligation related to the revenue recognised was satisfied, ensuring that all invoiced amounts were billed to the contract and tracing all payments made to the bank statements and remittances received. • Testing the accuracy of deferred income by agreeing the payment received to the bank statements and reviewing supporting documentation for work performed by the business. This was done to confirm whether the business has satisfied the performance obligations or not. For completeness, testing was performed by sampling after-date revenue and cash transactions. Annual report 2023Kooth plcPage 105 Independent auditor’s report Continued Key Audit Matter – Group How our scope addressed the matter – Group Relevant disclosures in the Annual Report 2023 • Financial statements: Strategic report • Financial statements: Note 2.3, Revenue Recognition • Financial statements: Note 4, Revenue and segmental analysis Our results Based on the procedures performed, we did not identify any material misstatements in relation to the revenue recognised during the year or the deferred income recognised at year-end for the new US contract. Accounting for capitalised internal In responding to the key audit matter, we development costs (£8.7m, 2022: £3.0m) We identified accounting for capitalised internal development costs as one of the most significant assessed risks of material performed the following audit procedures: • Assessing the accounting policy and disclosure for compliance with IAS 38. misstatement due to error. • Obtaining and assessing management’s The Group capitalises costs associated with development of their online platforms, which judgements on the level of employee costs to be capitalised across the year, by project. are developed internally. • Performing a test of details on a sample of these The costs associated with the time spent on this development are capitalised in the Statement of Financial Position at the year end. costs, agreeing amounts to underlying payroll information or external invoices. Where external invoices were capitalised, we corroborated the nature of the work to assess whether any Costs must be capitalised when they meet research elements had been inappropriately the criteria under International Accounting been capitalised. (‘IAS’) 38 ‘Intangible Assets’. This involves management judgement in determining the distinction between research and development costs. Given the existence of management judgement, there is an opportunity for error leading to an incorrect capitalisation of costs. • For a sample of capitalised costs, making enquiries with employees in the development team to gain an understanding of the nature of the work they had performed which had been capitalised and the proportion of their time which was spent on qualifying development costs. This included assessing whether the nature of the costs capitalised met the criteria as set out in IAS 38. • Obtaining the budget for the projects capitalised as developments in the year and assessing how the project was progressing against this, including whether the necessary resources were in place to complete the project. Annual report 2023Kooth plcIndependent auditor’s report Continued Key Audit Matter – Group How our scope addressed the matter – Group Page 106 • Discussing the overall projects in the year directly with the Chief Technology Officer. This enabled us to consolidate our understanding of whether management’s assessment of whether the costs met the criteria for capitalisation was appropriate. • Assessing the amortisation policy used by management for appropriateness, considering the underlying development projects and their anticipated useful life. We also performed an amortisation recalculation based on management’s accounting policy. • We assessed related disclosures in the financial statements to ensure these were sufficient and appropriate in line with IAS 38. Our results Our testing did not identify any material misstatements in the accounting for capitalised internal development costs. Relevant disclosures in the Annual Report 2023 • Financial statements: Strategic report • Financial statements: Note 2.3, Intangible Assets • Financial statements: Note 3, Significant accounting judgments, estimates and as-sumptions. • Financial statements: Note 11, Development costs We did not identify any key audit matters relating to the audit of the financial statements of the parent company only. Annual report 2023Kooth plcPage 107 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 Materiality for We define materiality as the magnitude of misstatement in the financial statements financial statements that, individually or in the aggregate, could as a whole 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. Materiality threshold £500,000, which represents £360,000, which represents 1.5% of the group’s forecast total 1.5% of the parent company’s revenue at the planning stage of total assets at the planning stage the audit. of the audit. Significant judgements In determining materiality, we In determining materiality, we made by auditor in determining materiality made the following significant made the following significant judgements: judgements: • we considered the financial • Total assets was considered the measures which we believed most appropriate benchmark to be most relevant to the because the Parent company shareholders in assessing the does not trade and holds performance of the Group. Profit material investments in before tax is a generally accepted subsidiary companies. benchmark for a profit-orientated business. We concluded that, in isolation, this metric did not appropriately reflect the scale of the Group’s ongoing operations or its underlying performance. As a result, revenue was considered the most appropriate metric. Annual report 2023Kooth plcIndependent auditor’s report ContinuedIndependent auditor’s report Continued Materiality measure Group Parent Continued • 1.5% of revenue has been • 1.5% of total assets is at the Page 108 selected as it is in the middle upper end of our acceptable of our acceptable range. This is range and has been selected to lower than the 2% of revenue reflect the lack of complexity in used in determining materiality the transactions it undertakes. for the year ended 31 December 2022. This reflects the significant increase in revenue from a new significant contract in the period in the US. Materiality for the current year is higher than the level that we determined for the year ended 31 December 2022, reflecting an increase in the total assets held Materiality for the current year by Kooth plc. is higher than the level we determined for the year ended 31 December 2022, reflecting an increase in group revenue, despite a reduction in benchmark percentage. 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 £350,000, which is 70% of £252,000, which is 70% of materiality threshold financial statement materiality. financial statement materiality. Annual report 2023Kooth plcIndependent auditor’s report Continued Materiality measure Group Parent Significant judgements In determining performance In determining performance Page 109 made by auditor in determining performance materiality materiality, we considered the materiality, we considered the following matters: following matters: • Whether there were changes to • Whether there were changes to the business in their operations the business in their operations and in their business strategy and in their business strategy • Whether there were changes to • Whether there were changes to our risk assessment, including our risk assessment, including our assessment of the group’s our assessment of the group’s overall control environment. overall control environment. • Consideration of the number • Consideration of the number and individual magnitude of and individual magnitude of audit adjustments observed audit adjustments observed in the previous period. in the previous period. • We concluded that an amount • We concluded that an amount at the upper end of our normal at the upper end of our normal range was appropriate on the range was appropriate on the basis of the above considerations. basis of the above considerations. Specific materiality 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. Specific materiality We determined a lower level We determined a lower level of specific materiality for the of specific materiality for the following areas: following areas: • Identified related party • Identified related party transactions outside of the transactions outside of the normal course of business. normal course of business. • Director’s remuneration • Director’s remuneration • Auditor’s remuneration • Auditor’s remuneration • Key management personnel • Key management personnel Annual report 2023Kooth plcPage 110 Independent auditor’s report Continued Materiality measure Group Parent Communication of We determine a threshold for reporting unadjusted differences to the misstatements to the audit committee. audit committee Threshold for communication £25,000 and misstatements £18,000 and misstatements below that threshold that, in below that threshold that, in our view, warrant reporting our view, warrant reporting on qualitative grounds. 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 Expected Revenue at the planning stage £33.3m FSM £500k, 1.5% PM £350k, 70% Total Total Assets at the assets at the planning stage planning stage £24m £24m FSM £360k, 1.5% PM £275k, 70% TFPUM £150k, 30% TFPUM £108k, 30% FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements Annual report 2023Kooth plcPage 111 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 • The engagement team obtained an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level. Identifying significant components • The engagement team evaluated the identified components to assess their significance and to determine the planned audit response based on a measure of materiality, considering the relative size of each component as a percentage of total Group revenue, total assets, and loss before tax. Type of work to be performed on financial information of parent and other components (including how it addressed the key audit matters) • Audit of the financial information of the component materiality (full-scope audit) procedures were performed on the financial information of three components, being Kooth plc, Kooth USA LLC and Kooth Digital Health Limited. These procedures included a combination of tests of details, including addressing key audit matters stated above and analytical procedures. • Audit of one or more account balances, classes of transactions or disclosures of the component (specific-scope audit) procedures were carried out on a further one component using group materiality, being Kooth Group Limited. These procedures included a combination of tests of details, including addressing key audit matters stated above and analytical procedures and were designed to increase coverage of the group’s financial statement line items. • No component auditors were involved in performance of the audit with the Group engagement team performing all audit procedures. Performance of our audit For significant components we evaluated the design and implementation of controls over the financial reporting systems identified as part of our risk assessment and addressed critical accounting matters such as those related to the key audit matters as identified above. With respect to revenue recognition, we evaluated the design and implementation of relevant controls and performed data analytics alongside substantive procedures. Audit approach Full-scope audit Specific-scope audit No. of components % coverage total assets % coverage revenue % coverage LBT 3 1 64 36 100 0 60 40 Annual report 2023Kooth plcIndependent auditor’s report ContinuedPage 112 Changes in approach from previous period • Kooth Group Limited has been scoped for specific procedures, rather the full-scope audit undertaken for the audit of the year ended 31 December 2023 due to its lower financial significance in context of the group as a whole. • Kooth USA LLC has been scoped for a full-scope audit due to increased revenue and overall contribution to the group as a whole. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of 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. Annual report 2023Kooth plcIndependent auditor’s report ContinuedPage 113 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 75, 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. Annual report 2023Kooth plcIndependent auditor’s report ContinuedPage 114 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 obtained an understanding of the legal and regulatory frameworks applicable to the parent company, the group and the industry in which they operate. We determined that the following laws and regulations were most significant: UK-adopted international accounting standards, Financial Reporting Standard 101 ‘Reduced Disclosure Framework’, the Companies Act 2006, the Quoted Companies Alliance Corporate Governance Code, tax compliance regulations in the US and tax compliance regulations in the UK, which are the principal jurisdictions in which the Group operates; • We understood how the parent company and the group are complying with applicable laws and regulations, through discussions with the Audit Committee and we corroborated our understanding through our review of board minutes, and papers provided to the Audit Committee; • In assessing the potential risks of material misstatement, we obtained an understanding of the parent company’s and the group’s operations, including the nature of its revenue sources, products and services and of its objectives and strategies to understand the classes of transactions, account balances, expected financial statement disclosures and business risks that may result in risks of material misstatement; • Based on the results of our risk assessment we designed further audit procedures to identify non-compliance with such laws and regulations identified above. These procedures were performed at all components within the scope of our audit. Our procedures involved journal entry testing, with a focus on journals meeting our defined risk criteria based on our understanding of the business; enquiries of legal counsel and group management at locations where full scope audit procedures and specified audit procedures were performed. • 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; Annual report 2023Kooth plcIndependent auditor’s report ContinuedPage 115 • Engagement partner’s assessment of the appropriateness of the collective competence and capabilities of the engagement team including consideration of the engagement team’s: – 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 client operates – understanding of the legal and regulatory requirements specific to the entity including: • the provisions of the applicable legislation • the regulators rules and related guidance, including guidance issued by relevant authorities that interprets those rules • the applicable statutory provisions A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the 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. Christopher Raab, ACA Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London, UK 25 March 2024 Annual report 2023Kooth plcIndependent auditor’s report ContinuedKooth plc Annual report 2023 Strategic report Corporate governance Financial statements Page 116 Financial statements Consolidated statement of profit and loss and other comprehensive loss For the year ended 31 December 2023 Revenue Cost of sales Gross profit Administrative expenses Operating loss Analysed as: Adjusted EBITDA Depreciation & amortisation Share based payment expense Operating loss Interest income Loss before tax Tax Loss after tax Note 4 5 5 11, 12, 13 6 7 8 Other comprehensive (expense)/income Items that are or may be reclassified subsequently to profit or loss: Foreign currency translation differences Total comprehensive loss for the year Loss per share — basic and diluted (£) 9 2023 £’000 33,337 (7,480) 25,857 (28,119) (2,262) 2,257 (3,775) (744) (2,262) 298 (1,964) 1,795 (169) (161) (330) (0.00) Page 117 2022 £’000 20,120 (6,265) 13,855 (14,767) (912) 1,612 (2,232) (292) (912) 81 (831) 115 (716) — (716) (0.02) Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Consolidated statement of financial position As at 31 December 2023 Page 118 Note 31 December 2023 £’000 31 December 2022 £’000 Assets Non-current assets Goodwill Development costs Right of use asset Property, plant and equipment Deferred tax Total non-current assets Current assets Trade and other receivables Contract assets Cash and cash equivalents Total current assets Total assets Liabilities Current liabilities Trade payables Contract liabilities Lease liability Accruals and other creditors Tax liabilities Deferred tax Total current liabilities Net current assets Net assets Equity Share capital Share premium account P&L reserve Share-based payment reserve Capital redemption reserve Merger reserve Translation reserve Total equity 10 11 12 13 14 15 16 17 18 19 12 18 18 14 20 20 20 20 20 20 20 511 8,750 42 304 2,649 12,256 7,174 251 11,004 18,429 30,685 (1,555) (5,156) (44) (2,521) (651) — (9,927) 8,502 20,758 1,825 23,444 (2,503) 2,142 115 (4,104) (161) 20,758 511 3,681 68 122 — 4,382 2,618 649 8,492 11,759 16,141 (680) (2,583) (68) (977) (967) (348) (5,623) 6,136 10,518 1,653 14,229 (2,595) 1,221 115 (4,104) — 10,518 The financial statements of Kooth plc (Company registration number 12526594) were approved by the Board of Directors and authorised for issue on 25 March 2024. They were signed on its behalf by: Sanjay Jawa Chief Financial Officer 25 March 2024 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Consolidated statement of changes in equity For the year ended 31 December 2023 Page 119 Share capital Share premium Share based payment reserve Capital P&L re demption reserve reserve Merger Translation reserve reserve Total equity Balance at 1 January 2022 Loss for the year 1,653 — 14,229 — 959 — (1,879) (716) 115 — (4,104) — — 10,973 (716) — Total comprehensive income 1,653 14,229 959 (2,595) 115 (4,104) — 10,257 Transactions with owners: Share based payments — — 262 — — — — 262 As at 31 December 2022 1,653 14,229 1,221 (2,595) 115 (4,104) — 10,519 Balance at 1 January 2023 Loss for the year Other comprehensive income 1,653 — — 14,229 — — 1,221 — — (2,595) (169) — 115 — — (4,104) — — — 10,519 (169) — (161) (161) Total comprehensive income 1,653 14,229 1,221 (2,764) 115 (4,104) (161) 10,189 Transactions with owners: Share options exerciseed Share based payment charge Shares issued Deferred tax 7 — 165 — — — 9,215 — (261) 766 — 416 261 — — — — — — — — — — — — — — — 7 766 9,380 416 As at 31 December 2023 1,825 23,444 2,142 (2,503) 115 (4,104) (161) 20,758 The notes on pages 121 to 144 form part of the financial statements. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Consolidated cash flow statement For the year ended 31 December 2023 Cash flows from operating activities Loss for the year Adjustments: Depreciation & amortisation Income tax received Share based payment expense Income tax recognised Interest income Note 11, 12, 13 8 6 8 7 Movements in working capital (Increase)/decrease in trade and other receivables Increase in trade and other payables 15 18, 19 Net cashflow from operating activity Cash flows from investing activities Purchase of property, plant and equipment Additions to intangible assets Interest income Net cash used in investing activities Cash flows from financing activities Proceeds from issue of share capital Costs incurred from the issue of share capital Net cash from financing activities 13 11 5 20 20 Net increase in cash and cash equivalents Exchange adjustments Cash and cash equivalents at the beginning of the year 17 2023 £’000 (169) 3,775 569 744 (1,795) (298) (4,158) 3,199 1,867 (291) (8,713) 298 (8,706) 9,923 (536) 9,387 2,548 (36) 8,492 Cash and cash equivalents at the end of the year 17 11,004 Page 120 2022 £’000 (716) 2,232 330 292 (115) (81) 78 2,408 4,428 (100) (2,952) 81 (2,971) — — — 1,457 (44) 7,079 8,492 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 121 Notes to the financial statements 1. Corporate information Kooth plc is a company incorporated in England and Wales. The address of the registered office is 5 Merchant Square, London, England, W2 1AY. 2. Significant accounting policies 2.1. Basis of preparation The consolidated financial statements of Kooth plc and its subsidiaries (collectively, the Group) for the year ended 31 December 2023 have been prepared and approved by the directors in accordance with UK‑adopted International Accounting Standards. The Company’s UK subsidiaries listed below are exempt from the requirements to audit their accounts under section 479A of the Companies Act 2006: • Kooth Digital Health Limited 04154208 • Kooth Group Limited 09795273 Under section 479A of the Companies Act 2006, Kooth Plc, being the parent undertaking of these entities, has given a statutory guarantee of all the outstanding liabilities to which the companies are subject to as at 31 December 2023. Measurement convention The financial statements are prepared on the historical cost basis. These policies have been consistently applied to all years presented unless otherwise stated. All values are presented in Sterling and rounded to the nearest thousand pounds (£’000) except when otherwise indicated. Going concern The Directors have a reasonable expectation that the Group as a whole has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis continues to be adopted in the accounts. The company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic report on pages 8 to 25. In addition, note 22 to the financial statements include the company’s objectives, policies and processes for managing its capital; its financial risk management objectives; and its exposures to credit risk and liquidity risk. During the 2023 financial year the Group generated a loss of £0.2 million (2022: £0.7 million). Adjusted EBITDA is £2.3 million (2022: £1.6 million). The Group is in a net asset position of £20.8 million (2022: £10.5 million). Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 122 Notes to the financial statements Continued Management has performed a going concern assessment for a period of 12 months from signing, which indicates that the Group will have sufficient funds to trade and settle its liabilities as they fall due. This assessment takes into account a number of sensitivities, including a downside scenario and a reverse stress test, which models the scenarios that would lead to a default by the Group. Both the downside scenario and reverse stress test reflect lower activity levels than both the Group forecast and 2023 actual results. The key assumption used in the assessment is revenue and Management has analysed the impact of reduced revenue on the Group’s performance. Whilst Management has concluded that the possibility of the downside scenario occurring is remote, the Group would still have adequate resources to be able to trade and settle its liabilities as they fall due in this scenario. Management deemed the combination of factors occurring as set out in the default model to be implausible. The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and as such continue to adopt the going concern basis of accounting in preparing the financial statements. 2.2. Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2023, with the comparatives presented for the previous 12 months being the Group’s combined activities for the 12 months ended 31 December 2022. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: • Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee). • Exposure, or rights, to variable returns from its involvement with the investee. • The ability to use its power over the investee to affect its returns. Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: — The contractual arrangement(s) with the other vote holders of the investee — Rights arising from other contractual arrangements — The Group’s voting rights and potential voting rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 123 Notes to the financial statements Continued A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision‑maker. The chief operating decision‑maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Directors that make strategic decisions. Kooth plc’s operations take place in the UK and the US. 2.3. Summary of significant accounting policies The following are the significant accounting policies applied by the Group in preparing its consolidated financial statements: Revenue Recognition The Group applies IFRS 15 “Revenue from Contracts with Customers”. To determine whether to recognise revenue, the Group follows the five step process as set out within IFRS 15. 1. Identifying the contract with a customer. 2. Identifying the performance obligations. 3. Determining the transaction price. 4. Allocating the transaction price to the performance obligations. 5. Recognising revenue as/when performance obligation(s) are satisfied. Provision of online counselling contracts Revenue arises from the provision of counselling services and mental health support services under fixed price contracts. Contracts are typically for a 12 month period and are fixed price based on the population covered and an expected number of hours of counselling provided. Contracts with customers take the form of signed agreements from customers. There is one distinct performance obligation, being the provision of counselling services, to which all the transaction price is allocated. Revenue from counselling services is recognised in the accounting period in which the services are rendered. The contracts are satisfied monthly over the contract term for an agreed level of support hours. Revenue is recognised over‑time, on a systematic basis over the period of the contract, which reflects the continuous transfer of the service to the customer throughout the contracted service period. In certain circumstances the number of hours of counselling provided may surpass the expected number of hours within the contract. In this circumstance, Management does not recognise additional revenue during the period, as contractually the Group has no right to demand payment for additional hours. In some instances, the Group has recovered additional fees post year end for the additional hours incurred; this additional revenue is recognised at a point in time when the Group has agreed an additional fee and has a right to invoice. At each reporting date there was no significant overprovision of hours noted. In instances where the number of counselling hours provided is less than the contracted number of hours, the full fixed fee is still payable by the customer. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 124 Notes to the financial statements Continued Platform build and behavioural support services contracts Revenue arises from the provision of a digital mental health platform alongside supporting behavioural healthcare services, promotional campaigns, reporting and analysis and technical support. The contracts have fixed and variable pricing elements which depend on platform utilisation, with a service period of more than one year. Contracts with customers take the form of signed agreements from customers. The contracts include an enforceable right by either party to terminate the contract without penalty with a fixed notice period. The contract term is therefore limited up to the end of the notice period. The transaction price is determined as all consideration due within the contract period. The contract term is modified each month if the termination clause is not enacted with the modification being treated on a prospective basis as the incremental transaction price does not reflect the standalone selling price for the additional distinct services. Under IFRS 15, five distinct performance obligations have been identified for these contracts: • Providing access to a digital mental health platform. • Customer contact services to resolve technical issues. • Collection and analysis of data and reporting. • Providing on-platform behavioural healthcare services. • Conducting promotional campaigns to spread awareness. Revenue from the first three performance obligations is recognised evenly over time using the output method. This is to reflect the continuous consumption of the service by the customer over the contracted service period. For the last two performance obligations revenue is recognised using the input method. This is to reflect how much of the service the customer has used by comparing the actual costs incurred to the total projected costs that are expected to be incurred in delivering the service. These costs include directly attributable labour and external marketing and promotion costs. The allocation of the transaction price between the five performance obligations included in the contract is based on an expected cost plus margin approach as the standalone selling price is not observable. The transaction price is determined at contract inception as being the most likely amount of consideration in which the Group is entitled to, including any variable consideration. This has been determined through an expected value calculation modelling various utilisation rate projections against their likely achievement. The variable consideration has been appropriately constrained as the Group has limited historical experience to ensure it can be virtually certain there will be no material reversal of revenue. The Group typically receives cash from customers 38 days after invoicing a customer. Revenue to come from contracts entered into with performance obligations not fulfilled or only partially fulfilled amounted to £35.5m as at 31 December 2023, all of which is expected to be recognised within one year. Contract assets and liabilities The Group recognises contract assets in the form of accrued revenue when the value of satisfied or part satisfied performance obligations is in excess of the payment due to the Group, and contract liabilities in the form of deferred revenue when the amount of unconditional consideration is in excess of the value of satisfied or part satisfied performance obligations. Once a right to receive consideration is unconditional, that amount is presented as a trade receivable. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 125 Notes to the financial statements Continued Tax Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. Current tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except: • When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. • In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except: • When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. • In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available, against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re‑assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 126 Notes to the financial statements Continued Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognised in profit or loss. The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. Sales tax Expenses and assets are recognised net of the amount of sales tax, except: • When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable • When receivables and payables are stated with the amount of sales tax included The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Research and Development tax claims Where Kooth plc has made Research and Development tax claims under the Small and Medium Enterprise scheme and tax losses have been surrendered for a repayable tax credit, a current tax credit is reflected in the income statement. Property, plant and equipment Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The cost of property, plant and equipment includes directly attributable incremental costs incurred in its acquisition and installation. Depreciation is charged so as to write off the cost of assets over their estimated useful lives, as follows: Computer and office equipment 33.33% straight line Goodwill and intangibles Goodwill Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non‑controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re‑assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 127 Notes to the financial statements Continued After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash‑generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss within administrative expenses. An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss. Expenditure on internally developed software products and substantial enhancements to existing software product is recognised as intangible assets only when the following criteria are met: • The technical feasibility of completing the intangible asset so that the asset will be available for use or sale. • Its intention to complete and its ability and intention to use or sell the asset. • How the asset will generate future economic benefits. • The availability of resources to complete the asset. • The ability to measure reliably the expenditure during development. Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in the Statement of Profit and Loss. During the period of development, the asset is assessed for impairment annually. Amortisation is charged on a straight line basis over the estimated useful life of three years. Expenditure on research activities as defined in IFRS is recognised in the income statement as an expense. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 128 Notes to the financial statements Continued Impairment testing of intangible assets and property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately independent cash inflows (CGU). Those intangible assets including goodwill and those under development are tested for impairment at least annually. All other individual assets or CGUs are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment charge is recognised for the amount by which the asset or CGUs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use. All assets, with the exception of goodwill, are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Financial instruments The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the underlying contractual arrangement. Financial instruments are recognised on the date when the Group becomes a party to the contractual provisions of the instrument. Financial instruments are initially recognised at fair value except for trade receivables which are initially accounted for at the transaction price. Financial instruments cease to be recognised at the date when the Group ceases to be party to the contractual provisions of the instrument. Financial assets are included on the balance sheet as trade and other receivables or cash and cash equivalents. Trade receivables Trade receivables are amounts due from customers for services performed in the ordinary course of business. They are generally due for settlement within 30 days and are therefore all classified as current. Trade receivables are recognised initially at the transaction price. The Group holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. The Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from the initial recognition of the receivable. To measure expected credit losses, trade receivables are analysed based on their credit risk characteristics to determine a suitable historic loss rate. The historical loss rates are adjusted to reflect current and forward looking information on macroeconomic factors that the Group considers could affect the ability of its customers to settle the receivables. Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if the company does not have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least twelve months after the reporting date. If there is an unconditional right to defer settlement for at least twelve months after the reporting date, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and all are repayable within one year and hence are included at the undiscounted amount of cash expected to be paid. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that have a maturity date of three months or less from the date of acquisition, are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 129 Notes to the financial statements Continued Leases Short term leases or leases of low value are recognised as an expense on a straight-line basis over the term of the lease. The Group recognises right-of-use assets under lease agreements in which it is the lessee. The underlying assets mainly include property and office equipment and are used in the normal course of business. The right‑ of-use assets comprise the initial measurement of the corresponding lease liability payments made at or before the commencement day as well as any initial direct costs and an estimate of costs to be incurred in dismantling the asset. Lease incentives are deducted from the cost of the right-of-use asset. The corresponding lease liability is included in the consolidated statement of financial position as a lease liability. The right-of-use asset is depreciated over the lease-term and if necessary impaired in accordance with applicable standards. The lease liability shall initially be measured at the present value of the lease payments that are not paid at that date, discounted using the rate implicit in the lease. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (application of the effective interest method) and by reducing the carrying amount to reflect the lease payments made. No lease modification or reassessment changes have been made during the reporting period from changes in any lease terms or rent charges. Employee benefit plans Defined contribution plans The Group operates a defined contribution pension plan. Payments to defined contribution pension plans are recognised as an expense when employees have rendered services entitling them to the contributions. Share-based payment Benefits to employees are provided in the form of share‑based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity settled transactions’). The fair value of the employee services rendered is measured by reference to the fair value of the shares awarded or rights granted, which takes into account market conditions and non‑vesting conditions. This cost is charged to the income statement over the vesting period, with a corresponding increase in the share based payment reserve. The cumulative expense recognised at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the company’s best estimate of the number of shares that will ultimately vest. The charge or credit to the income statement for a period represents the movement in the cumulative expense recognised at the beginning and end of that period and is recognised in share based payment expense. Alternative performance measures Adjusted results are prepared to provide a more comparable indication of the Group’s core business performance by removing the impact of certain items including exceptional items, and other, non-trading, items that are reported separately. The Group believes that EBITDA before separately disclosed items (“adjusted EBITDA”) is the most significant indicator of operating performance and allows a better understanding of the underlying profitability of the Group. The Group defines adjusted EBITDA as operating profit/loss before interest, tax, depreciation, amortisation, exceptional items and share based payments. The Group also measures and presents performance in relation to various other non-GAAP measures, such as gross margin, annual recurring revenue and revenue growth. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 130 Notes to the financial statements Continued Adjusted results are not intended to replace statutory results. These have been presented to provide users with additional information and analysis of the Group’s performance, consistent with how the Board monitors results. 3. Significant accounting judgements, estimates and assumptions In the application of the Group’s accounting policies, management is required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. No significant estimates have been identified. Judgements The areas of judgement which have the most significant impact on the amounts recognised in the financial statements are as follows: Revenue recognition Judgements have been taken in the application of IFRS 15 “Revenue from Contracts with Customer”. The determination of the transaction price included judgement as to how much variable consideration was expected to be received across the contract and how much those considerations should be constrained based on projected contract performance. There was judgement taken in allocating the transaction price to the identified performance obligations based on the relative stand‑alone selling price (SSP) of each distinct service or item within the contract. An observable SSP was not available, therefore judgement was used to estimate the SSP considering all reasonably available information using an expected cost‑plus margin approach. Deferred tax In assessing the requirement to recognise a deferred tax asset, management carried out a forecasting exercise in order to assess whether the Group and Company will have sufficient future taxable profits on which the deferred tax asset can be utilised. This forecast required management’s judgement as to the future performance of the Group and Company. Capitalisation of development costs The Group capitalises costs associated with the development of the Kooth platform. These costs are assessed against IAS 38 Intangible Assets to ensure they meet the criteria for capitalisation. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired. Capitalised development expenditure is analysed further in note 11. Development costs largely relate to amounts paid to external developers, consultancy costs and the direct payroll costs of the internal development teams. Any internal time capitalised is the result of careful judgement of the proportion of time spent on developing the platform. Capitalised development expenditure is reviewed at the end of each accounting period for indicators of impairment. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportPage 131 Notes to the financial statements Continued 4. Revenue and segmental analysis In accordance with IFRS 8 “Operating Segments”, the Group requires consideration of the Chief Operating Decision Maker (“CODM”) within the Group. In line with the Group’s internal reporting framework and management structure, the key strategic and operating decisions are made by the Executive Directors, who review internal monthly management reports, budgets and forecast information as part of this. Accordingly, the Executive Directors are deemed to be the CODM. Accordingly, the CODM determines the Group currently operates under one reporting segment. There are no individual groups of assets generating distinct and separately identifiable cashflows. The total turnover of Kooth plc has been derived from its principal activity undertaken in the UK and the US. A geographical analysis of revenue by customer location is provided below: Provision of online counselling contracts — UK Provision of online counselling contracts — US Platform build and behavioural support services contracts — US 2023 £’000 19,143 1,466 12,728 33,337 2022 £’000 18,648 1,472 — 20,120 The group had one customer (2022: none) that accounted for more than 10% of total revenue in 2023. This customer accounted for 38% of group revenue (2022: 0%) Segmental reporting of assets and liabilities has not been provided as the information is not available, and the cost to develop it would be excessive. 5. Operating loss Labour costs Share based payment expense Travel and subsistence Total cost of sales Employee costs Rent and rates IT hosting and software Professional fees Marketing Depreciation & amortisation Share based payment expense Other costs Total administrative expenses Total cost of sales and administrative expenses 2023 £’000 7,354 100 26 7,480 15,855 492 1,450 3,948 1,650 3,775 644 305 28,119 35,599 2022 £’000 6,150 65 50 6,265 8,701 316 963 1,307 490 2,236 292 462 14,767 21,032 Cost of sales represent the costs of our service user facing employees including external contractors. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Notes to the financial statements Continued 6. Employee remuneration Salaries Pensions Social security costs Other staff benefits Share based payments 2023 £’000 20,669 529 2,325 479 744 24,746 Employee remuneration is presented in the financial statements in the following locations: Cost of sales Administrative expenses Statement of financial position Employee numbers Direct Indirect Developers 2023 £’000 6,837 14,988 2,921 24,746 2023 £’000 259 183 36 478 Page 132 2022 £’000 12,033 317 1,189 207 304 14,050 2022 £’000 4,763 8,539 748 14,050 2022 £’000 234 139 33 406 Employee numbers disclosed represent the average number of employees, including directors, for the year. The Directors’ remuneration and share options are detailed within the Report of the Remuneration Committee on pages 85 to 90. This includes detail of the total Directors’ remuneration, including bonuses and pension contributions and remuneration of the highest paid Director. No directors exercised share options in the year. The Executive Directors of the Company control 4.7% of the voting shares of the Company (2022: 4.8%). Share based payment Long term incentive awards 2023 £’000 744 2022 £’000 304 An element of long term incentive awards are capitalised accounting for the difference in long term incentive awards shown in this note compared to the amount disclosed as an expense in the Statement of Profit and Loss. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 133 Notes to the financial statements Continued Long term incentive awards Long term incentive awards have been issued to all staff. Performance conditions are attached to the incentive awards of Executives, with 50% linked to adjusted EBITDA growth (ARR growth for grants prior to 2023) and 50% linked to comparative total shareholder return (TSR). Vesting conditions require that all staff remain employed by the business for three years. The shares vest over a three year period with a maximum term of 10 years. Outstanding at the beginning of the year Granted Forfeited Exercised Number of options 2023 Weighted average exercise price 2023 1,873,356 882,989 (311,520) (105,808) £0.05 £0.05 £0.05 £0.05 Number of options 2022 1,080,066 1,096,464 (303,174) — Outstanding at the end of the year 2,339,017 £0.05 1,873,356 Weighted average exercise price 2022 £0.05 £0.05 £0.05 £0.05 £0.05 The share options outstanding at the end of the year have a weighted average remaining contractual life of 8.6 years (2022: 9.0 years). Fair value of options granted: The fair value of the awards has been calculated using the Black Scholes option pricing model and using a Stochastic simulation model for options with TSR performance conditions. The following assumptions were used on options granted in the year: Options granted on 15/03/2023 24/05/2023 02/09/2023 14/09/2023 27/10/2023 16/11/2023 Share price at date of grant Exercise price Vesting period (years) Expected volatility Option life (years) Expected life (years) Risk‑free rate Expected dividends expressed as a dividend yield Fair value of options granted 171.5p 5.0p 2.8 38.50% 10 10 4.40% 247.0p 5.0p 2.6 38.50% 10 10 4.40% 329.0p 5.0p 3 38.50% 10 10 4.40% 323.0p 5.0p 2.4 38.50% 10 10 4.40% 300.0p 5.0p 2.9 38.50% 10 10 4.40% 301.0p 5.0p 2.7 38.90% 10 10 4.50% 0.00% 137.5p 0.00% 199.7p 0.00% 318.1p 0.00% 262.6p 0.00% 234.4p 0.00% 241.5p The expected volatility is based on the historical volatility of the Company’s share price. An assessment of the likelihood of market conditions being achieved is made at the time that the options are granted. 7. Interest Interest income on cash deposits 2023 £’000 298 2022 £’000 81 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Notes to the financial statements Continued 8. Taxation Current tax UK corporation tax Foreign tax Adjustments in respect of prior years Deferred tax Current year Adjustments in respect of prior years Tax credit on losses 2023 £’000 — 336 451 787 (1,756) (826) (2,582) (1,795) 2023 £’000 2023 % Profit/(loss) before tax for the period (1,964) Tax charge/(credit) at standard rate of 23.5% (2022: 19%) (462) 23.5 Effects of: Permanent items/additional relief under R&D scheme Difference between UK CT & DT rates Losses surrendered at 14.5% under SME tax relief scheme Prior year adjustments Other differences Tax credit for the year (782) (160) — (375) (16) (1,795) 39.8 8.2 0.0 19.1 0.8 91.4 Page 134 2022 £’000 (438) — (308) (746) 9 622 631 (115) 2022 % 19.0 47.9 (0.4) (16.5) (37.7) 1.4 13.8 2022 £’000 (831) (158) (398) 3 137 313 (12) (115) Tax rate An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. This increases the Group’s current tax charge accordingly to a weighted average standard tax rate of 23.5% Prior year adjustment The prior year adjustment reflects a decision that was made subsequent to the finalisation of the 2022 annual report not to surrender losses and claim an R&D tax credit and instead carry forward those losses to be offset against expected future taxable profits. The net impact of the rate used in calculating the deferred tax balance on carried forward losses of 25% (opposed to the tax credit at 14.5%) has resulted in this difference. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Notes to the financial statements Continued 9. Earnings per share Earnings used in calculation of earnings per share: On total losses attributable to equity holders of the parent Page 135 2022 £’000 (716) 2022 2023 £’000 (169) 2023 Weighted average no. of shares (Basic) 34,768,325 33,055,776 Shares in issue Ordinary shares in issue 36,480,873 33,055,776 Loss per share (basic and diluted, £) On total losses attributable to equity holders of the parent (0.00) (0.02) While there are options and potentially dilutable instruments, they have not been included due to a loss in the year making them anti‑dilutive. The earnings per share figures above are therefore both basic and diluted. 10. Goodwill Goodwill as at 1 January and 31 December 2023 £’000 511 2022 £’000 511 Management has established counselling services as the one CGU during the relevant periods. All goodwill is attributable to this CGU. The Group tests annually for impairment or more frequently if there are indications that it might be impaired. There were no indicators of impairment noted during the periods presented. The Group tests goodwill for impairment by reviewing the carrying amount against the recoverable amount of the investment. Management has calculated the value in use using the following assumptions: Discount rate Growth rate 8% 2% Forecasts are based on past experience and take into account current and future market conditions and opportunities. Using alternative discount (increase to 10%) and growth rates (decrease to nil) as sensitised assumptions does not result in any impairment. The Group prepares forecasts based on the most recent financial budgets approved by the Board. The forecasts have been used in the value in use calculation along with the assumptions stated above. The forecasts used are consistent with those used in the going concern review and discussed in note 2. The forecasts extended for a period of 12 months from the date of signing. There were no impairments in the years ended 31 December 2023 and 31 December 2022. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Notes to the financial statements Continued 11. Development costs Cost Balance as at 1 January Additions Balance as at 31 December Amortisation Balance as at 1 January Amortisation Balance as at 31 December Carrying amount 31 December Page 136 2022 £’000 7,363 2,952 10,315 (4,496) (2,138) (6,634) 3,681 2023 £’000 10,315 8,713 19,028 (6,634) (3,644) (10,278) 8,750 The US Soluna platform has a carrying value of £5.4m and a remaining amortisation period of between 2 and 3 years. The UK platform has a carrying value of £2.8m and a remaining amortisation period of between 1 and 3 years. The US Klassic platform has a carrying value of £0.6m and remaining amortisation period of between 1 and 2 years. 12. Leases Right of use asset As at 1 January Additions Depreciation Disposal Currency revaluation As at 31 December Lease liability As at 1 January Additions Interest charge Cash payment Disposal Currency revaluation As at 31 December 2023 £’000 2022 £’000 68 — (22) — (4) 42 68 — 5 (25) — (4) 44 — 68 — — — 68 — 68 — — — — 68 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Notes to the financial statements Continued 13. Property, plant and equipment Cost Balance as at 1 January Additions Balance as at 31 December Depreciation Balance as at 1 January Depreciation Balance as at 31 December Carrying amount 31 December Page 137 2022 £’000 451 100 551 (335) (94) (429) 122 2023 £’000 551 291 842 (429) (109) (538) 304 Property, plant and equipment refers to computer and office equipment. 14. Deferred tax assets and liabilities At 1 January 2022 — asset/(liability) Movement — (charge)/credit At 1 January 2023 — asset/(liability) Movement — (charge)/credit Amounts recognised in equity Fixed asset temporary differences Other temporary differences (458) (119) (577) (643) — 323 (98) 225 503 416 Tax losses Total 570 (566) 4 2,721 — 435 (783) (348) 2,581 416 At 31 December 2023 — asset/(liability) (1,220) 1,144 2,725 2,649 Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. 15. Trade and other receivables Trade receivables Prepayments Other receivables 2023 £’000 5,801 1,084 289 7,174 2022 £’000 1,110 504 1,004 2,618 All amounts shown above are short term. The net carrying value of trade receivables is considered a reasonable approximation of fair value. Included within prepayments are £0.3m of contract costs related to the California contract which will be amortised in line with revenue recognition to be released in 2024. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Notes to the financial statements Continued Page 138 16. Contract assets Accrued income 17. Cash and cash equivalents Cash and cash equivalents 18. Trade and other payable Trade payables Accruals and other creditors Tax liabilities 2023 £’000 251 2023 £’000 11,004 2023 £’000 1,555 2,521 651 4,727 The Group recognises a provision for an obligation when there is a probable outflow of resources and an amount can be reliably estimated. This includes legal disputes the estimated costs of which are provided for in other creditors. Disclosure of the exact details of these claims could prejudice the financial position of the Group and accordingly further information is not disclosed in this report. 19. Contract liabilities Contract liabilities — current 2023 £’000 5,156 2022 £’000 649 2022 £’000 8,492 2022 £’000 680 977 967 2,624 2022 £’000 2,583 Revenue recognised in the reporting period that was included in the contract liability balance at the beginning of the year totalled £2.5m (2022: £0.8m). The following table shows the movement in contract liabilities: Contract liabilities recognised at start of the year Amounts invoiced in prior year recognised as revenue in the current year Amounts invoiced in the current year which will be recognised as revenue in the later years Balance at the end of the year 2023 £’000 2,583 (2,525) 5,098 5,156 2022 £’000 797 (754) 2,540 2,583 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Notes to the financial statements Continued 20. Equity Ordinary A shares Number of shares Ordinary A shares Page 139 2022 £’000 1,653 2022 2023 £’000 1,825 2023 36,480,873 33,055,776 The share capital of Kooth plc consists of fully paid ordinary shares with a nominal value of £0.05 per share. The A ordinary shares have attached to them full voting, dividend and capital distribution rights (including on winding up). They do not confer any right of redemption. The following share transactions have taken place during the year ended 31 December 2023: At the start of the year Share placement Exercise of share options At the end of the year 2023 Number 33,055,776 3,305,577 119,520 36,480,873 2022 Number 33,055,776 — — 33,055,776 Share capital increased from the prior year following the successful share placement in July 2023 and the exercise of staff share options. Share premium 2023 £’000 23,444 2022 £’000 14,229 Share premium represents the funds received in exchange for shares over and above the nominal value. Share premium increased from the prior year following the successful share placement in July 2023. The movement in the reserve represents the amounts received from the placement less the costs incurred. Share based payment reserve 2023 £’000 2,142 The share based payment reserve represents amounts accrued for equity settled share options granted. Merger reserve 2023 £’000 (4,104) 2022 £’000 1,221 2022 £’000 (4,104) The merger reserve was created as a result of the share for share exchange during the year ended 31 December 2020. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Notes to the financial statements Continued Capital redemption reserve Page 140 2022 £’000 115 2023 £’000 115 The capital redemption reserve was established as a result of the deferred share buyback during the year ended 31 December 2020. Translation reserve 2023 £’000 161 The translation reserve represents differences on translation of balances in Kooth USA LLC which has a functional currency of USD. 21. Auditor’s remuneration Fees payable to the auditor for the audit of the Company and Consolidated financial statements Fees payable to the auditor and its associates for other services: Other audit related services 22. Financial assets and liabilities Financial assets Trade receivables Cash and cash equivalents Financial liabilities Trade and other payables 2023 £’000 130 5 2023 £’000 5,801 11,004 4,120 The carrying amount of trade receivables are denominated in the following currencies: GBP USD Total 2023 £’000 931 4,870 5,801 2022 £’000 — 2022 £’000 85 5 2022 £’000 1,110 8,492 1,725 2022 £’000 1,100 10 1,110 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Notes to the financial statements Continued The carrying amount of cash and cash equivalents are denominated in the following currencies: GBP USD EUR Total 2023 £’000 6,463 4,508 33 11,004 The carrying amount of trade and other payables are denominated in the following currencies: GBP USD Total 2023 £’000 1,579 2,541 4,120 Page 141 2022 £’000 6,916 1,576 — 8,492 2022 £’000 857 868 1,725 Management has assessed that the fair values of cash, trade receivables, trade payables, and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. The Group’s principal financial liabilities comprise trade and other payables. The Group has no debt facility as at 31 December 2023 (2022: £nil). The main purpose of these financial liabilities is to finance the Group’s operations. The Group’s principal financial assets include trade receivables and cash that derive directly from its operations. The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management of these risks. The Group’s senior management is supported by the Board of Directors who advise on financial risks and the appropriate financial risk governance framework for the Group. The Board provides assurance to the Group’s senior management that the Group’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group’s policies and risk objectives. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Market risk is deemed to be immaterial to the Group given that the Group has no debt facilities in place at the year ended 31 December 2023 (2022: £nil) that would cause interest rate risk. Credit risk The Group’s principal financial assets are cash and trade receivables. The credit risk associated with cash is limited, as the counterparties have high credit ratings assigned by international credit-rating agencies. The credit risk associated with trade receivables is also limited as customers are primarily government backed organisations such as the NHS or State governments. Credit losses historically incurred have been negligible. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 142 Notes to the financial statements Continued Liquidity risk The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs by closely managing its cash balance. As at the year ended 31 December 2023 the Group is solely funded by equity and as a result liquidity risk is deemed to be immaterial. The Group monitors its risk of a shortage of funds through both review and forecasting procedures. Foreign currency risk The Group is exposed to the US Dollar through the US subsidiary, Kooth USA LLC, which raises its sales invoices to customers in US Dollars and incurs costs in US Dollars. With the Group reporting in Sterling, any change to the GBP/USD exchange rate could increase the Group’s foreign currency risk. The Group deems the UK and US to be stable economies, thereby significantly reducing foreign currency risk. If the exchange rate between sterling and the US dollar had been 10% higher/lower at the reporting date, the effect on profit would have been approximately (£635,000)/£780,000 respectively (2022: (£65,000)/80,000). If the exchange rate between sterling and euro had been 10% higher/lower at the reporting date the effect on profit would have been approximately (£3,000)/£4,000 respectively (2022: (£0)/£0). 23. Related party transactions Note 25 provides information about the Group’s structure, including details of the subsidiaries and the holding company. The Group has taken advantage of the exemption available under IAS 24 Related Party Disclosures not to disclose transactions between Group undertakings which are eliminated on consolidation. Key management personnel are the executive members of the Board of Directors. Remuneration applicable to the Company is disclosed below, with further information disclosed in the Remuneration Committee report. Salaries and bonuses Pension costs Share based payment charges 2023 £’000 1,919 25 227 2,171 2022 £’000 709 21 147 877 The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year. Monitoring fees — ScaleUp Capital Limited 2023 £’000 58 2022 £’000 50 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 143 Notes to the financial statements Continued 24. Capital management policies and procedures The Group’s capital management objectives are: • To ensure the Group’s ability to continue as a going concern. • To provide an adequate return to shareholders by pricing products and services in a way that reflects the level of risk involved in providing those goods and services. The Group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented in the statement of financial position. The Group has no debt facilities in place as at 31 December 2023 (2022: £nil). Management assesses the Group’s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. The amounts managed as capital by the Group for the reporting periods under review are summarised as follows: Total equity Cash and cash equivalents Capital Total equity Lease liability Financing 2023 £’000 20,758 11,004 31,762 20,758 (44) 20,714 2022 £’000 10,518 8,492 19,010 10,518 (68) 10,450 25. Subsidiaries and associated companies Name Country of Incorporation Proportion held Activity Kooth Group Limited UK 100% Platform development Kooth Digital Health Limited UK 100% Kooth USA LLC US 100% Provision of online services to children, young people and adults in the UK Provision of online services to children, young people in the US Registered address 5 Merchant Square, London, England, W2 1AY 5 Merchant Square, London, England, W2 1AY 167 North Green Street, Chicago, IL, 60607 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 144 Notes to the financial statements Continued 26. Standards issued but not yet effective At the date of authorisation of these consolidated 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. 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 consolidated financial statements. 27. Ultimate controlling party No shareholder owns a majority of shares. The directors do not consider that there is one ultimate controlling party. 28. Events after the reporting date In January 2024, the Group entered into a working capital credit facility with Citibank of $9.5 million that remains undrawn at the time of issuing this report. 29. Capital commitments The Group’s capital commitments at 31 December 2023 are £nil (FY22: £nil). Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportParent company statement of financial position Note 31 December 2023 £’000 31 December 2022 £’000 Page 145 Assets Non-current assets Investments Intercompany receivables Total non-current assets Current assets Trade and other receivables Cash and cash equivalents Tax receivable Total current assets Total assets Liabilities Current liabilities Trade payables Intercompany payables Tax liabilities Total current liabilities Net current assets Net assets Equity Share capital Share premium account P&L reserve Share-based payment reserve Capital redemption reserve Merger reserve Total equity 1 2 5 3 7 6 2 7 8 8 8 8 8 8 4,414 15,150 19,564 206 5,331 49 5,586 25,150 (74) (717) — (791) 4,795 24,359 1,825 23,438 943 2,142 115 (4,104) 24,359 4,414 6,970 11,384 56 6,046 — 6,102 17,486 (54) (2,523) (53) (2,630) 3,472 14,856 1,653 14,222 1,749 1,221 115 (4,104) 14,856 As permitted by section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part of the financial statements. The parent company’s loss for the financial period was £1,067k (2022: £482k). The financial statements of Kooth plc (Company registration number 12526594) were approved by the Board of Directors and authorised for issue on 25 March 2024. They were signed on its behalf by: Sanjay Jawa Chief Financial Officer 25 March 2024 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 146 Parent company statement of changes in equity Share capital Share premium Balance at 1 January 2022 Loss for the year 1,653 — 14,222 — Total comprehensive income 1,653 14,222 Share based payment reserve 959 — 959 P&L reserve 2,231 (482) 1,749 Capital redemption reserve Merger reserve Total equity 115 — 115 (4,104) — 15,076 (482) (4,104) 14,594 Transactions with owners: Share based payments — — 262 — — — 262 As at 31 December 2022 1,653 14,222 1,221 1,749 115 (4,104) 14,856 Balance at 1 January 2023 Loss for the year 1,653 — 14,222 — 1,221 — 1,749 (1,067) Total comprehensive income 1,653 14,222 1,221 682 115 — 115 (4,104) — 14,856 (1,067) (4,104) 13,789 Transactions with owners: Shares options exercised Share based payment charge Shares issued Deferred tax 7 — 165 — — — 9,216 — (261) 766 — 416 As at 31 December 2023 1,825 23,438 2,142 The notes on pages 147 to 149 form part of these financial statements. 261 — — — 943 — — — — — — — — 7 766 9,381 416 115 (4,104) 24,359 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Page 147 Notes to the parent company financial statements Basis of preparation The Financial Statements are presented in pound sterling, rounded to the nearest thousand, unless otherwise stated. They are prepared under the historical cost basis and in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and the Companies Act 2006. As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to share‑based payments, financial instruments, capital management, presentation of comparative information in respect of certain assets, presentation of a cash flow statement, standards not yet effective, impairment of assets and certain related party transactions. Where required, equivalent disclosures are given in the Consolidated Financial Statements. As permitted by section 408(4) of the Companies Act 2006, a separate income statement and statement of comprehensive income for the Company has not been included in these Financial Statements. The principal accounting policies adopted are described below. They have all been applied consistently to all years presented. Amounts receivable by the Company’s auditor and its associates in respect of services to the Company and its associates, other than the audit of the Company’s Financial Statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis in the Consolidated Financial Statements. The following are key accounting policies for the Company: • Basis of preparation. • Going concern. • Trade receivables and payables. • Cash and cash equivalents. These policies of the company are consistent with those adopted by the Group and disclosed in note 2 to the consolidated financial statements. The following are additional accounting policies that relate to the Company. Investments Investments are stated at their cost less impairment losses. Intercompany Intercompany balances are intercompany loans and comprise of amounts owed to/owing from subsidiaries. IFRS 9 expected credit losses have been assessed as immaterial in relation to these balances. Any key judgements or estimates are consistent with those adopted by the Group. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic reportNotes to the parent company financial statements Continued 1. Investments Investment in subsidiaries 2. Intercompany Intercompany receivable balances Kooth Group Limited Kooth Digital Health Limited Intercompany payable balances Kooth Digital Health Limited Kooth USA LLC 3. Cash and cash equivalents Cash and cash equivalents 4. Related parties 2023 £’000 4,414 2023 £’000 9,635 5,515 — (717) 2023 £’000 5,331 Key management personnel are the executive members of the Board of Directors. Remuneration applicable to the Company is disclosed below, with further information disclosed in the Remuneration Committee report. Salaries and bonuses Pension costs Share based payment charges 5. Trade receivables Prepayments and other receivables 6. Trade payables Trade payables 2023 £’000 1,919 25 227 2,171 2023 £’000 206 2023 £’000 74 Page 148 2022 £’000 4,414 2022 £’000 6,970 — (2,523) — 2022 £’000 6,046 2022 £’000 709 21 147 877 2022 £’000 56 2022 £’000 54 Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Notes to the parent company financial statements Continued 7. Tax assets/(liabilities) VAT receivable/(payable) 8. Equity Ordinary A shares Number of shares Ordinary A shares Page 149 2022 £’000 (53) 2022 £’000 1,653 2022 2023 £’000 49 2023 £’000 1,825 2023 36,480,873 33,055,776 The share capital of Kooth plc consists of fully paid ordinary shares with a nominal value of £0.05 per share. Share capital increased from the prior year following the successful share placement in July 2023 and the exercise of staff share options. The A ordinary shares have attached to them full voting, dividend and capital distribution rights (including on winding up). They do not confer any right of redemption. Share premium 2023 £’000 23,438 2022 £’000 14,222 Share premium represents the funds received in exchange for shares over and above the nominal value. Share premium increased from the prior year following the successful share placement in July 2023. Share based payment reserve 2023 £’000 2,142 The share based payment reserve represents amounts accrued for equity settled share options granted. Merger reserve 2023 £’000 (4,104) The merger reserve was created as a result of the share for share exchange during the year ended 31 December 2020. Capital redemption reserve 2023 £’000 115 2022 £’000 1,221 2022 £’000 (4,104) 2022 £’000 115 The capital redemption reserve was established as a result of the deferred share buyback during the year ended 31 December 2020. Annual report 2023Kooth plcFinancial statementsCorporate governanceStrategic report Kooth plc Annual report 2023 XyzCompany secretary Almond CS Limited Peter’s House, Oxford Road, Manchester M1 5AN. Nominated adviser and Broker Stifel Nicolaus Europe Limited 150 Cheapside, London EC2V 6ET. Registrars Equiniti Limited Aspect House, Spencer Road Lancing, West Sussex BN99 6DA. Auditors Grant Thornton (UK) LLP 30 Finsbury Square, London EC2A 1AG. PR advisers FTI Consulting LLP 200 Aldersgate, Aldersgate Street, London EC1A 4HD. Legal advisers Squire Patton Boggs (UK) LLP 7 Devonshire Square, London EC2M 4YH. Page 78 Kooth plc Company registered office: 5 Merchant Square, London W2 1AY. Company number: 12526594 W: koothplc.com E: investorrelations@kooth.com Annual report 2023Kooth plcXyz

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