Trigg Mining Limited
Annual Report 2022

Plain-text annual report

2022 Annual Report For the year ended December 2022 02 Strategic Report 02 18 20 24 30 31 32 33 Group at a Glance Non-Executive Chair's statement Chief Executive's review Chief Financial Officer's review Aims and Ambition Principal Risks and Uncertainties Stakeholder Engagement ESG Considerations 36 Corporate Governance 36 38 43 The Board Directors’ Report Corporate Governance Report 48 Financial Statements 48 54 89 92 Independent Auditor's Report Consolidated Financial Statements & Notes Independent Auditor's Report: Company Company Financial Statements & Notes 102 Additional Information 102 Notice of AGM Annual report for the year ended December 2022 1 Strategic Report Group at a glance Too much work disappears. This isn’t a big secret, but it does seem careless. Our approach is different. Everything we do is designed to get to work that makes the difference Clients are looking for, whatever their ambition. We call it Work That Counts™. So we collaborate because it does good, not because it looks good. (That means we listen, before we talk). We provide everything our Agencies need to give their Clients an advantage with services and innovations under one roof. We delve deep for insights that are all the stronger for not leaping off the page. We eschew safety first, because that kind of work is always the first to be ignored. We create and share innovation not as a means to impress, but for the benefit of our Clients. And we stay close to our Clients, regardless of distance and circumstance. Our approach has helped us become the kind of long term creative partner that consistently delivers real, sustainable growth, and we’re delighted to say that our Clients seem happy to have us around. That counts, big time. USA UK Germany China Malaysia Singapore Vietnam A collective of Agencies that cover all touchpoints and disciplines supported by centrally developed capabilities and incremental services to widen and deepen Client relationships. Over 1,100 people Over 19 Agencies 28 locations 3 Continents 2 Annual report for the year ended December 2022 Annual report for the year ended December 2022 3 Building lasting relationships Our Agencies pride themselves on building strong, productive partnerships with Clients. That’s why so many brands have stayed with them for years – or even decades. As well as strong track records in retention, we’re also welcoming exciting new Clients. Across the year, our Agency acquisitions brought in some well-known and loved household names. Client retention Proportion of revenue earned from long-standing Clients. 47%+ 5 years or more 29% 10 years or more 19% 20 years or more 4 Annual report for the year ended December 2022 Annual report for the year ended December 2022 5 The MISSION Our Agencies TO be the preferred creative partner for real business growth BY delivering Work that CountsTM Our Agencies are home to a rich and varied mix of talented thinkers and doers. All highly skilled in delivering hugely successful campaigns across every platform. T E C H N O LO GY & M O B I LI T Y H E A LT H & W E LLN E S S B U S I N E S S & C O R P O R AT E C O N S U M E R & LI F E S T Y LE S P O R T S & E N T E R TA I N M E N T M I S S I O N ADVAN TAGE M I S S I O N C O M M ER C IAL Bringing brands to life in the real world, through meaningful brand building and experiences. Delivering strategic marketing for leading technology and automobile brands. A brand-building pioneer, operating from Devon, Bristol and Asia. Creators of world-class live experiences for over 30 years. Growing customer engagement through audience and brand interaction. A global commercial, communications and content Agency specialising in Formula 1 and leading high-performance sports. A psychological insights and behavioural solutions consultancy. A full service creative powerhouse with four UK offices. A creative business that works hand in hand with brands and the next generation to build the future better. A leading integrated sports, fitness and entertainment marketing Agency. An industrial internet of things provider specialising in real-time asset intelligence. A social media Agency dedicated to delivering results and pushing boundaries through a 'no-fluff' approach to social media marketing. Providing market access support to pharma and medical brands. An innovative specialist medical communications Agency. Customer relationships built on psychological insight. Creating effective promotions and new revenue streams through brand partnerships. An ambitious, creative and commercially-minded PR Agency. Award-winning integrated creative Agency in three locations. We make believers of your brand. The UK’s leading integrated property marketing Agency. 6 Annual report for the year ended December 2022 Annual report for the year ended December 2022 7 Our People We are over 1,100 dedicated people, in 28 different locations, reaching across three continents. However, we share our primary goal: producing Work That Counts™ for each Client. Whatever their ambitions. Our approach to our people is focused on the 8 areas set out below, with several of these also forming key parts of our ESG strategy which you can read more about in this report. Achieving sustainable progress in these ways is important to us. We’re proud of the steps we’ve taken, and will continue to take, together. What our People Say… “Our team is great – everyone is so supportive and nurturing, always willing to help and teach each other. I’ve learnt a lot really quickly, and have built up confidence in my abilities. I love having a job where I do not do the same thing day in, day out.” Tash, Bray Leino 1 2 3 Growing Together Diversity & Inclusion Community Action At MISSION, we are committed to creating a respectful and inclusive environment; one where our people can be themselves. We also believe in the power of personal growth; so, we listen, learn and support them in developing their skills and achieving their goals. We’re passionate about attracting, cultivating and growing with the best talent from all backgrounds. To achieve this, we work closely with trusted diversity partners and more. We’re an international Group, but we believe strongly in local action. As such, all our UK Agencies actively support local charities and communities in their towns – from fundraising and volunteering to pro-bono work, putting our communications skills to good use. 4 New Talent To foster fresh talent, our Agencies open their doors to local schools, colleges and universities; offering internships and an Apprenticeship programme. 5 6 Taking Care of You Flexible for All We believe that life, and being happy, is more than the job you do. To best support our people with the ups and downs of life, we have devised our Employee Assistance Programme to help with financial, family, health and wellbeing issues. People are at their best when their home life doesn’t suffer. That’s why we offer over 150 different flexible working patterns across the Group. Plus, parental return to work schemes and a supportive approach when our People need time out for life’s big moments. 7 Health & Wellbeing 8 Socials Our Agencies take a proactive approach to health and wellbeing, with free mental health support and educational life balance activities overseen by trained mental health first aiders. “All work and no play” is a thing of the past. Therefore, each Agency maintains a busy social scene, with everything from dining events, beer fridge Fridays, summer sports days, picnics and end-of-year parties. 8 Annual report for the year ended December 2022 Annual report for the year ended December 2022 9 What Drives Us Not values set in stone, but a living commitment to make a difference every day. A Culture of Collaboration At MISSION, we don’t talk about having a set of values. Instead, we live them. Working together, exchanging ideas and doing our best at every opportunity to elevate our Clients and each other, while supporting the communities and environment around our Agencies. A Shared Commitment We also don’t force a code of values on our Agencies. They’re all independently minded (that’s what we liked about them in the first place) and they all have their own values and personalities. But what we do share is an entrepreneurial mindset, a passion for positive sustainable growth and a commitment to Work That Counts™. Together, we aim to make a difference in everything we do. Our Purpose “We look for solutions where others see problems. We are connected by the ambition to deliver real impact for our Clients, People and Communities. We celebrate, value and respect diversity, treating others as we wish to be treated ourselves. What we do matters, and it needs to make a positive difference.” Making a Positive Change We believe MISSION should make a positive impact on the world, always. The Way We Treat The World Around Us Counts At MISSION, we want every interaction we have with people, communities and the wider environment to make a positive difference, always. Ultimately, what we do needs to matter, and it needs to support positive change. That is absolute. ESG in Action In pursuit of our ambition to become the UK’s leading, most respected Agency Group, we need to do just that – lead. And committing to positive change requires real action. This is never truer than when applied to our environmental, social and governance responsibilities. That’s why, at MISSION, we’ve set a series of goals spanning our environmental impact, social inclusion and diversity. 10 Annual report for the year ended December 2022 Annual report for the year ended December 2022 11 “Joining The MISSION Group is an exciting prospect. The Group has some terrific talent and great potential, and I look forward to working with them to deliver growth for both our Clients and the Group" Mark Lund, Deputy Chair MISSION welcomes new Deputy Chair Mark Lund OBE We are proud to announce that Mark Lund has joined the Board as a Non-Executive Director and Deputy Chair. Recognised widely as an industry leader, Mark has a real reputation for delivering serious success and growth. With over 25 years leading and founding successful companies, he joins MISSION to support further innovation and growth. Mark was President of McCann Worldgroup UK and Europe from 2014-2022, leading a 5,000+ strong organisation across 45 countries. Before this, he co-founded two independent advertising businesses, one of which, Delaney Lund Knox Warren, became a top 10 UK agency (Mullen Lowe). Mark has also been Chairman of the Advertising Association and served on the councils of both ISBA and the IPA, as well as Chair of the Advertising Association's Media Smart and Children's Panel. He still sits on the Advertising Association council. MISSION acquires youth focussed creative Agency Livity Based in Brixton, with over 20 years experience Livity is the market leader in its space. Livity works with leading brands to help them understand youth culture and enable them to engage with the next generation. Blue-chip Clients include Nike, Google, Media Smart, Footlocker, YouTube, Speedo and NSPCC Childline. The acquisition enhances our brand, strategy, creative and content capabilities, underpinning the Gen Z marketing offering across the Group. Livity also provides a new route to next generation talent for MISSION. The Agency champions early-stage careers through its own network and by running talent programmes across the creative industries. “This acquisition is testament to our continued strategy of focussing on opportunities that further enhance our compelling infrastructure. Our Clients are acutely aware of the growing influence of Gen Z and how they can successfully engage with a youth audience in the most meaningful way.” John Quarrey, Group CEO of krow “I am incredibly proud of the journey Livity has been on. We have spent 20 years innovating in culture and driving positive change for the next generation. The MISSION Group’s focus on creativity, innovation, entrepreneurialism and purpose makes it a natural fit for Livity.” Alex Goat, Chief Executive Officer of Livity 12 Annual report for the year ended December 2022 Annual report for the year ended December 2022 13 MISSION acquires Influence Sports & Media and Populate Social The MISSION Group continues its investment in sports marketing and social media. Our leading entertainment, sports, lifestyle and marketing Agency Mongoose, recently acquired Influence Sports & Media and Populate Social. “Over the last 10 years we have continued to build our presence in sport, delivering best-in-class services for leading global brands, teams and properties. We are delighted to be joining the newly formed Mongoose Group to drive international opportunities.” Alistair Watkins, Founder & CEO of Influence Sports & Media The two Agencies retain their individual brands and identities, whilst forming an integral part of the newly created Mongoose Group, joining Mongoose Sports & Entertainment and ALIVE Brand Experience. London-based Influence Sports & Media, with a strong presence in the US, is a specialist sports marketing agency offering strategic consultancy, commercial sales, partnership activation, PR & communications and content creation. The team has a wealth of experience and long-standing relationships in motor sport, sailing and pro-cycling bringing expertise from the highest echelons of world sport to the Group – including the flagship events of Formula 1, the America’s Cup and the Tour de France. Cardiff-based Populate has a 20-strong team of social media experts that pride themselves on forward-thinking, full transparency and data-driven results. The Agency has a strong track record of pushing boundaries with paid media campaigns, organic social media management, social strategy, content creation, messenger bots and TikTok/social content packages. Clients include England Rugby, Live Nation and Paris Fashion Week. “After seven years of growing Populate, I am delighted to have found the right partner in Mongoose Group to help elevate our offering and bring our social media expertise to a global roster of brands and rights holders.” Dan Simmons, Founder of Populate Social “Populate will transform our social delivery as part of our integrated Client campaigns. Influence Sports & Media will lead on all projects ‘on track and water’ and Mongoose Sports & Entertainment will continue driving on ball sports, outdoor sports, venues and charities.” Chris O’Donoghue, CEO at Mongoose Group “In challenging times, MISSION continues to make good progress against our strategic priorities. Our latest investment is yet another example of our commitment to developing our capabilities and client service offering, ensuring we are well placed for long-term growth.” James Clifton, Chief Executive Officer of MISSION Group plc 14 Annual report for the year ended December 2022 Annual report for the year ended December 2022 15 MISSION ADVANTAGE is a portfolio of strategic services built to drive positive MISSION COMMERCIAL is an array of cost-effective, shared provisions designed change and dramatically extend the scale and scope of our offer. to deliver scalable, best-in-class support services and expertise to our Agencies. Comprising teams of experts in HR, global digital production, data science and research, regional expansion and promotion – our teams are positioned around the globe and ready to mobilise in support of our Agencies. MISSION ADVANTAGE complements the strategic and creative strength of our Agencies allowing them to offer wider, deeper, and highly credible services in support of their own unique propositions and aspirations. ADVANTAGE is built as the platform for change, operating on a cost only basis to ensure the profitability, relationships and opportunity remain with our Agencies. MISSION COMMERCIAL incorporates teams across Facilities management & administration, IT & systems, Accounting services, Financial reporting, Governance & compliance and Commercial partnership. Our people are experts in their fields and are driven to provide value, safety and security across the Group. MISSION COMMERCIAL supports the wider Group endeavour, ensuring that every Agency team is dedicated to delivering Work that CountsTM. New Agency additions to the Group are able to quickly focus directly on growth and opportunity whilst handing off their own support services safely and securely. By simplifying and sharing these services and creating scalable centres of excellence the Group is well positioned to delivery sustainable margin growth as revenues rise. Facilities management & administration IT & systems Commercial partnership Financial reporting & treasury Accounting services Governance & compliance 16 Annual report for the year ended December 2022 Annual report for the year ended December 2022 17 Strategic Report Non-Executive Chair statement In 2022 MISSION showcased its ability to adapt to the well documented macro-economic uncertainties, and to inflationary and wage pressures. This combination of challenges created real pressures, some out of our control, but the Group adapted quickly and continued to make progress against our strategic goals. In a resilient performance, MISSION delivered 10% year on year revenue improvement with all business segments achieving growth, and in line with industry norms. Importantly we continued to build, refine and restructure the core areas of our business. Investments were made in growth sectors using a combination of ‘buy and build’, expanding our capabilities in data and analytics, creative and customer experience, and performance media. All this activity ensured MISSION remains competitive and best positioned to meet the evolving business needs of our clients. The operational improvements made in 2021 and 2022 underpinned headline operating profit growth of 8.0% to £8.7m (2021: £8.0m). A focus on cost management in response to significant cost and wage inflationary pressures resulted in an improvement in headline PBT to £7.8m (2021: £7.5m). Operating profit of £1.6m was significantly down (2021: £7.3m), reflecting a series of one-off adjustments relating to the strategic review of non-core operations, including the Group’s Asian operations and Industrial IoT solutions business Pathfindr. Following the launch of our ESG strategy, Making a Positive Change, in 2020, we were clear that we wanted to challenge ourselves with a series of ambitious commitments to make a positive difference. Thanks to the efforts of the entire Group, I’m very pleased to be able to report good progress across a number of key areas, outlined in our first ESG Report (see page 33). Board Outlook The progress made in 2022 has ensured MISSION now has the right platform in place to support the next phase of our growth, delivering Work That CountsTM as the preferred creative partner for real business growth. Our sharpened strategic plan aims to deliver an operating income target of c. £100m by 2025, with higher margin performance across our areas of strength. I would like to thank all of our colleagues across the Group for their commitment to progressing our plans for MISSION. Julian Hanson-Smith Non-Executive Chair March 2023 We continued to restructure our Board. In September 2022 Mark Lund joined MISSION as Non-Executive Director and Deputy Chair. Mark has spent over 25 years leading and founding marketing and advertising organisations, and his experience is already proving invaluable as we implement our growth plan. Executive Director Sue Mullen retired from the Board in January 2023 but remains with the Group as Chair of Story. Andy Nash, a Non-Executive Director, retired from the Board in September. On behalf of the Group, I would like to thank both Sue and Andy for their contribution during their respective tenures. Dividend In line with our progressive dividend policy, and MISSION’s sustained progress, the Board is recommending a final dividend of 1.67 pence per share for shareholders on the register as at 14 July 2023. Combined with the half year dividend, this brings the total dividend for the year to 2.50p, representing a 4% increase on the prior year (2021: 2.40 pence per share). 47% of Group revenue was generated from Clients of 5 years or more. Total dividend for 2022 4% on the total dividend declared in 2021. “Investments were made in growth sectors using a combination of ‘buy and build’.” 18 Annual report for the year ended December 2022 Annual report for the year ended December 2022 19 Strategic Report Chief Executive’s review MISSION delivered a resilient performance in 2022. Whilst the macro-economic environment has continued to pose challenges for all businesses and constrained growth across the majority of sectors and markets, we have remained focused on our strategic growth plans, building on the strong momentum achieved in the previous years. In these challenging times, brands expect total commitment and smart thinking from their Agencies, continuing to prioritise investment in creative partnerships that can drive real business growth. Despite the headwinds of 2022, MISSION has demonstrated the strong entrepreneurial culture of this business. The investments we have made in recent years across the Group to expand our capabilities and services, strengthen our teams and improve our operational practices and processes, have stood the Group in strong stead to capitalise on the opportunities available to us. This has underpinned a robust revenue performance, with operating income of £79.8m now broadly recovered to pre pandemic levels (2019: £81.0m). Despite the significant inflationary pressures, careful management of costs has seen the Group protect margin and deliver year on year headline operating profit growth. Whilst profit at a reported level was impacted by the exceptional costs primarily associated with the strategic restructuring of our Asian operations and Pathfindr business, these decisions ensure these areas of our business are best positioned for long term growth. “We have remained focused on our strategic growth plans, building on the strong momentum achieved in the previous years.” “All business segments achieved growth over the course of the year.” operating income £79.8M 10% growth on 2021 Whilst our creative Agency krow experienced a more challenging year than originally forecast, February saw the successful launch of krow-x, which better embeds CX insight into their creative process. We also continued to see good trading recovery from our Agencies who were most exposed to sectors impacted by the pandemic including property-specialist ThinkBDW. In May 2022, we took the decision to merge Story and Chapter to create Story Group, uniting these two Agencies with similar Client relationships and cultures to offer better scale, geographic reach and broader sector experience, enhancing their collective reputation. We saw a significant uplift in new business enquiries generated by the launch of the enhanced profile over the course of H2. Client retention has continued to be strong throughout the year. 47% of our Clients have been retained by the Group for more than 5 years and 29% for more than 10 years. It is particularly pleasing to see that the growing breadth of capabilities and services which we are able to offer our Clients through the MISSION family has played a critical role in growing some of these Client relationships with our expanding remits for Phihong Tech, Macmillan Cancer and Simplyhealth being important examples of this. New Business acquisition gathered momentum over the course of the year with new client wins including Westmill Foods, BAM Clothing, McCarthy Stone and Croda. The strength of the MISSION Group capability was integral to our appointment to new Client Taiwanese electrical group Phihong, now working with three of our Agencies as part of a new Group mandate. Work That CountsTM – evolving our business model to better support our vision 'Work That Counts,' articulates the Group’s vision to be the preferred creative partner for real business growth, with a clear mission to ensure that everything we do is designed to deliver work that makes the difference our Clients are looking for, whatever their ambition. Building on the momentum achieved across the business in recent years, we are now evolving our strategy to better support this vision, with a focus on driving profitable growth through the expansion of an Agency Driven business model. This will see us move away from an ‘Agency-First’ approach to leverage our Client specialisms across Sports & Entertainment, Health & Wellness, Business & Corporate, Consumer & Lifestyle and Technology and Mobility, enhancing margin through the centralised support we can offer through MISSION Advantage, our portfolio of specialist services which underpin the strategic and creative strengths of our Agencies and MISSION Commercial which provides centralised operations, HR and business support. Performance and Progress All business segments achieved growth over the course of the year – testament to the underlying resilience of our business model. Our exposure to higher growth B2B sectors such as Technology and Healthcare continues to underpin this performance with strong year on year growth once again from April Six (Technology) and Solaris Health (Healthcare). New Client wins throughout the year include: 20 Annual report for the year ended December 2022 Annual report for the year ended December 2022 21 Strategic Report Chief Executive’s review The entrepreneurial nature of the MISSION approach means that our Agencies are empowered to respond quickly to the trends they are seeing in their markets, drawing on the Group’s central offering and driving cross-Agency collaboration to bring new capabilities and services to address evolving Client need and demand. Over the course of the year this included a collaboration between Speed Communications and Bray Leino to launch a new consultancy ‘Anything But Grey’- specifically to cater for businesses and brands seeking to engage a 50 plus audience, with subsequent new Client wins including Saga Media. In response to market trends ThinkBDW also launched Think Digital, a proposition that will better virtually showcase housing development projects to customers. As previously announced, in the second half of the year we took the decision to fundamentally restructure our Asian operations, where performance has been impacted by the extended effect of COVID-19 on the region. Our operations are now streamlined and centred on Singapore & Malaysia. In order to support international expansion in new regions, we have created MISSION Hubs to sit as part of MISSION Advantage which will offer a more structured approach to the Group’s international expansion going forward. We have also reviewed the progress and potential of Pathfindr, the Group's Industrial IoT solutions business. As announced in our trading update on the 12 January 2023, given the supply chain and wider market challenges experienced we now expect growth will be slower in the near term. We remain hopeful about the long term growth of Pathfindr but have fully impaired the value of our investment to date and deferred further investment in the short term with the team remaining focussed on realising the current live opportunities. Investing for growth Over the course of 2022 we have continued to make significant progress in building the Group’s capabilities and service offering and have seen the benefit of the investments made both in the current and prior year. These have included: During 2022 • The acquisition of Livity, a youth focussed creative consultancy in February, for a consideration of £0.1m satisfied in cash. Livity works with leading brands to help them understand youth culture and enable them to engage with the next generation with purpose. The acquisition enhances MISSION's brand, strategy, creative and content capabilities, underpinning the Generation Z marketing offering across the Group. • The acquisition of Influence Sports & Media ("Influence") in December for an initial consideration of £1.5m. Influence works with sponsors and brands, rights holders, investors and industry Clients in both the UK and US to deliver marketing communications strategies, commercial programs, and actionable market intelligence. The acquisition strengthens and scales MISSION’s social media and marketing capabilities across the sports and entertainment markets. • The acquisition of social media Agency Populate in October further strengthening MISSION’s social media capabilities. Post Year End Outlook Trading in 2023 has begun well and in line with the Board’s expectations. Whilst revenue generation is customarily weighted towards the second half of the year we have been pleased with the positive new business momentum experienced to date. The investments made throughout the business position us well to capitalise on the growth opportunities that continue to present themselves. Our teams are motivated and energised for the year ahead and we look forward to reporting further progress as the year continues. James Clifton Chief Executive March 2023 “Our teams are motivated and energised for the year ahead and we look forward to reporting further progress as the year continues.” James Clifton, Group Chief Executive • The acquisition of Mezzo Labs, a global data science and digital analytics consultancy in February. Mezzo Labs is a leading provider of innovative data services with over 16-years' experience in data strategy and architecture, web analytics, CX analytics, marketing automation, insights generation, data science, Conversion Rate Optimisation (CRO) and personalisation. The acquisition enhances the Group’s capabilities within the data science and digital analytics space. • The launch of integrated growth digital Agency Turbine in March, which specialises in earned, owned and paid media. The launch is a direct response of the growing demand for an effective solution to the challenges of multi-channel digital marketing, offering a fresh approach to digital growth marketing that focuses on generating the results that really matter to commercial success. Making Positive Change Following the successful launch of our inaugural Environmental, Social and Governance (ESG) manifesto 'Making Positive Change' in 2020, I am delighted that the year has seen us deliver our first ever ESG Report, demonstrating the progress we have made against our commitments. We believe the impact MISSION makes on the world should be positive, always. That our interaction with our People, Clients, Communities, and the wider environment needs to make a difference. Ultimately, what we do needs to matter, and it needs to support positive change. Particular highlights in the report have included the progress we have made in reducing our carbon impact as a Group with a reduction of 40% in 2019-2021 and our commitment to improving Group Diversity and Inclusion through our partnership with Creative Access, the social enterprise working Group. Full details of our progress can be found in our ESG Report which is available on our website within the Culture section under Making A Positive Change. 22 Annual report for the year ended December 2022 Annual report for the year ended December 2022 23 Strategic Report Chief Financial Officer’s review 2022 is characterised by strong revenue growth together with investment, both in our people and in new, margin-enhancing capabilities. Alongside this the Group has taken a cautious view of non-core operations as it renews its strategic focus to deliver sustainable revenue & margin growth through Work That CountsTM. Operating income growth in 2022 of 10% along with the maintenance of headline operating margins at 11% (2021: 11%), ensured good headline operating profit growth of 8% to £8.7m (2021: £8.0m). A review of non-core operations primarily in relation to Asia and Pathfindr resulted in one-off charges of £5.7m (as described more fully below and set out in Note 3) and this, combined with increased borrowing costs led to a reported profit before tax of £0.7m (2021: £6.8m). Billings and revenue Turnover (billings) was 19% higher than the previous year, at £182.7m (2021: £153.3m), but since billings include pass-through costs (e.g. TV companies’ charges for buying airtime), the Board does not consider turnover to be a key performance measure for its Agencies. Instead, the Board views operating income (turnover less third-party costs) as a more meaningful measure of activity levels. Taken as a whole, the Group’s operating income (referred to as “revenue”) for the year increased by 10% to £79.8m (2021: £72.5m), with growth delivered across all reported business segments. Of this £7.3m growth in revenue, £4.5m (6%) was organic, reflecting the continued growth across a number of MISSION Agencies. April Six, our specialist technology and mobility Agency that grew strongly during the pandemic continued to out-perform and the Group also benefited from strong performances in our Think BDW, Solaris Health and Spark Agencies. The remaining £2.8m of growth came in part from the benefit of a full year of Soul trading (acquired October 2021) and supplemented by the revenue impact of new MISSION agencies Livity (acquired February 2022) and Influence (acquired December 2022). £m Headline Reported 2022 2021 Movement 2022 2021 Movement Operating income ('revenue') 79.8 72.5 10% 79.8 72.5 10% Operating profit 8.7 8.0 8% 1.6 7.3 -78% Operating margin % 10.9% 11.1% -0.2pts 2.0% 10.1% -7.9pts Profit before tax Earnings per share 7.8 6.7 7.5 6.5 4% 4% 0.7 0.0 6.8 5.9 -90% -100% Tax rate 21% 22% -1pt 95% 21% 74pts The majority of our businesses have now recovered well if not fully from the disruption of COVID-19. Both our Asian operation, Bray Leino Splash, and Asset Tracking IOT investment Pathfindr were significantly affected by the continued prevalence of the pandemic in China and the region. Each business has fundamentally reviewed and restructured its operations in light of this and the Board has taken a view on the subsequent impact this alongside the short-medium term trading environment has had on the goodwill and other asset values carried by these companies. One of the differentiating features of MISSION is the longevity and loyalty of its Client base. We believe this is due to the dynamic and Agency-driven culture which ensures Clients receive a boutique level of Client service but supported by the resources of a multi-national group. “One of the differentiating features of MISSION is the longevity and loyalty of its Client base.” Profit and margins The Directors measure and report the Group’s performance primarily by reference to headline results in order to avoid the distortions created by the one-off events and non-cash accounting adjustments relating to acquisitions that are detailed above. Headline results are therefore calculated before acquisition adjustments, exceptional items and losses from new ventures as described below and set out in Note 3. Whilst Headline Operating profits grew, reported operating profit fell sharply this year, from £7.3m in 2021 to £1.6m in 2022, a decrease of £5.7m. Reported profit before tax decreased by £6.0m, from £6.7m to £0.7m whilst reported profit after tax reduced by £5.3m from £5.3m to £0.0m. Adjustments to reported profits, detailed further in Note 3, totalled £7.0m (2021: £0.7m) a significant increase on previous years. This was primarily due to one-off adjustments relating to the strategic review of two non-core operations. The first is the fundamental restructure and future valuation of Bray Leino Splash, resulting in a combined £2.4m charge. The second relates to the impairment of Pathfindr, resulting in a £2.9m charge. In addition to this the Group invested £0.8 in new ventures (2021: £0.4m) most notably the Livity youth-marketing offer as well as early-stage foundation of performance marketing and data science capabilities to support future strategic endeavour. Acquisition-related costs of £0.6m compared to £0.2m profit in 2021. The 2022 charge consists primarily of the amortisation of intangibles recognised on acquisitions of £0.5m (2021: £0.4m) as well as professional fees in support of the acquisitions such as Influence made in the year. The 2021 profit was driven by a one-off £0.8m reduction in movement of fair value consideration (2022: £0.3m). The Board engaged in a significant restructuring and resizing in 2021. The resultant one-off costs associated with this restructure last year totalled £0.5m. Adjusting for these items delivers a headline operating profit of £8.7m showing good, 8% growth on 2021 (£8.0m). The headline operating expenditure base increased in the year by 10% (from £64.5m in 2021 to £71.2m in 2022) with the Group determined to continue to invest in its most important asset, its people and their wellbeing, even as macro-economic pressures heightened. In spite of - or as a result of - this investment the Group was able to maintain operating margins in line with 2021 at 11%. Interest charges of £1.0m increased significantly on 2021 (£0.7m) driven primarily by considerable interest rate increases globally as central banks sought to curb inflationary pressures. The resultant headline profit before tax for 2022 was £7.8m, a reasonable improvement on 2021 at £7.5m. Taxation The headline tax rate held steady at 21.1% (2021: 22.0%). On a reported basis in 2022 the impact of the large one-off non-deductible expenditure primarily in relation to impairment of goodwill resulted in a tax charge of £0.7m on a reported profit before tax of £0.7m, a rate of 95.2% compared to the more normal level of 21.2% reported in 2021. The tax rate is generally expected to be consistently higher than the statutory rate (of 19.0%, unchanged from 2021) since the amortisation of acquisition-related intangibles is not deductible for tax purposes and tax rates on our US operations are substantially higher that the UK corporation tax rate. 24 Annual report for the year ended December 2022 Annual report for the year ended December 2022 25 Strategic Report Chief Financial Officer’s review Earnings Per Share Dividend Chart showing change in total Acquisition Obligations over time After tax, the reported profit for the year was £0.0m (2021: £5.3m profit) and EPS was 0.0p pence (2021: 6.0 pence). On a diluted basis, EPS was 0.0 pence (2021: 5.9 pence). However, after adjustments, Headline EPS was 6.8 pence (2021: 6.6 pence) and, on a diluted basis, was 6.7 pence (2021: 6.5 pence). The Board adopts a progressive dividend policy, aiming to grow dividends each year in line with earnings but always balancing the desire to reward shareholders via dividends with the need to fund the Group’s growth ambitions and maintain a strong balance sheet and healthy distributable reserves (2022: £36.0m, 2021: £38.7m). A dividend of 0.83 pence per share was paid in December 2022. The Board has proposed a resolution for a final dividend of 1.67 pence per share in its AGM Notice, bringing the total for the year to 2.50 pence per share. This represents a 4% increase on the total dividend declared in 2021 (2.40 pence per share). Chart showing the Dividend Per Share progression over time (pence) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Balance sheet In common with other marketing communications groups the main features of our balance sheet are the goodwill and other intangible assets resulting from acquisitions made over the years and the debt taken on in connection with those acquisitions. The level of intangible assets relating to acquisitions and internal investments increased by £0.8m in the year. This movement being primarily a function of the acquisition of Influence in December netting off against the impairment of the Bray Leino Splash goodwill balance and Pathfindr intangible asset impairment. The level of ‘total debt’ (combined net bank debt and acquisition obligations) increased by £1.9m. The Board undertakes an annual assessment of the value of all goodwill, explained further in Note 11. At 31 December 2022 the Board concluded that, with the exception of a £2.0m write down of the Bray Leino Splash goodwill as described above, no impairment in the carrying value was required. The Group’s acquisition obligations at the end of 2022 were £4.1m (2021: £3.3m), to be satisfied by a mix of shares and cash. All of this is dependent on post-acquisition earn-out profits. £1.4m is expected to fall due for payment in cash within 12 months and a further £0.1m in cash in the subsequent 12 months. The Directors believe that the strength of the Group’s balance sheet can comfortably accommodate these obligations alongside the Group’s commitments to capital expenditure (expected to run at similar levels to recent years) and dividend payments. Consolidated Net Current Assets closed at £7.7m (2021 £10.3m). This was in part the result of the increase in acquisition obligations noted above and in part an increase in trade creditors at the year end of £3.6m in comparison to 2021. 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Acquisition Obligations have increased in 2022 but are still well below the levels of recent years. At the end of the year the Group’s net bank debt stood at £11.4m (2021: £10.3m). On an adjusted basis (pre IFRS16) the leverage ratio of net bank debt to headline EBITDA was x1.2 at 31 December 2022 (2021: x1.2). The Group’s adjusted ratio of total debt, including remaining acquisition obligations, to EBITDA at 31 December 2022 was x1.6 (2021: x1.5). Chart tracking Debt Leverage Ratios over time Bank leverage Total leverage 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 26 Annual report for the year ended December 2022 Annual report for the year ended December 2022 27 Strategic Report Chief Financial Officer’s review Cash flow The closing net bank debt position for 2022 was £11.4m. This represents an increase in net debt of £1.1m on the 2021 year-end net bank debt of £10.3m. Headline operating profit of £8.7m (2021: £8.0m) converted into £6.8m (2021: £1.7m) of ‘free cash flow’ (defined as net cash inflow from operating activities less tangible and intangible capital expenditure). Bank loans increased by £1.0m and this, coupled with the free cash flow provided funding for new acquisitions amounting to £1.9m (2021: £0.7m), the settlement of contingent obligations relating to the profits generated by previous acquisitions totalling £0.8m (2021: £6.7m) and dividends of £2.2m (2021: £2.1m). The working capital movement is defined as the aggregate movement in receivables, stock and payables and was reported as an inflow of £1.1m (2021: £4.8m outflow). Analysis of the movement in Net Debt in 2022 In regard to working capital days, total debtor days decreased, work in progress days decreased very slightly and creditors days increased a small amount. Overall, the Group’s total working capital days of 9.6 represents a significant improvement upon the 2021 equivalent (15.0 days). “Headline operating profit of £8.7m converted into £6.8m of ‘free cash flow'.” Giles Lee, Group Chief Financial Officer 10.3 9.7 1.9 0.5 0.8 11.4 2.9 1.6 0.8 2.2 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2021 Operating cashflow Dividends Paid Prior Acq'ns New Acq'ns Capex Lease payments Own shares purchased Start-ups etc 2022 Chart showing the cash-generative nature of the business Operating Cashflow/Headline Operating Profit as a 3 year MAT 160% 140% 120% 100% 80% 60% 40% 20% 0% Going concern The Directors have considered the financial projections and cash flow projections for the Group alongside the availability of committed bank facilities of £20m (expiring 5 April 2025), the option to increase the facility by £5m, an overdraft facility of £3.0m, and the headroom afforded against Total Debt Leverage and Bank Debt Leverage covenant tests for the coming 12 months. This leads the Directors to become satisfied that, taking account of reasonably possible changes in trading performance, it is appropriate to adopt the going concern basis in preparing the financial statements. Achieve organic revenue growth of at least 5% per year Grow headline profit before tax by 10% year-on-year Increase headline operating profit margins to 14% Key Performance Indicators Outlook We entered the year expecting 2023 to be another year of growth, albeit at a time of increasing global macro- economic and political uncertainty. The year has started well and prospects for organic growth are good. We also expect to make additional margin improvements in spite of the cost pressures impacting our sector and we anticipate reaping the benefits of our strategic review, focus on the core operation and investments made both to our talent base and in new offerings and capabilities. Furthermore and as a result of the actions taken in 2022 this growth is well set to be cash efficient. Giles Lee Group Chief Financial Officer 28 March 2023 KPIs are designed to monitor the Group’s revenue and profit growth, within a safe capital structure. Whilst COVID-19 has interrupted the Group’s consistent track record of growth, the Board has reviewed and reconfirmed the Group’s KPI targets as being appropriate for a post-pandemic environment. The targets, along with the outcome for 2022 are as follows: • Achieve organic revenue growth of at least 5% per year [delivered + 6%]; • Increase headline operating profit margins to 14% [delivered 11%]; • Grow headline profit before tax by 10% year-on-year [delivered 4%]; and • Maintain the ratio of net bank debt to EBITDA* at or below x1.5 [delivered x1.2] and the ratio of total debt (including both bank debt and deferred acquisition consideration) to EBITDA at or below x2.0 [delivered x1.6]. *EBITDA is headline operating profit before depreciation and amortisation charges. At the individual Agency level, the Group’s financial KPIs comprise revenue and controllable profitability measures, predominantly based on the achievement of the annual budget. More detailed KPIs are applied within individual Agencies. In addition to financial KPIs, the Board periodically monitors the length of Client relationships, the forward visibility of revenue and the retention of key staff. 2015 2016 2017 2018 2019 2020 2021 2022 28 Annual report for the year ended December 2022 Annual report for the year ended December 2022 29 Strategic Report Aims and Ambition Strategic Report Principal Risks and Uncertainties Our goal remains simple: to develop MISSION into the UK’s leading, most respected Agency group. In a complex and ever-changing marketing environment, we are constantly evolving to help our Clients navigate through their challenges and opportunities. With a wealth of specialisms and skills, as well as impartial advice, we invest and adapt to deliver the right talents in the most effective ways. With operations in the UK, Europe, Asia and the US, we’re committed to helping our Clients grow and succeed. Fundamental to our continued success is our ability to provide a rewarding, challenging and fun working environment for our staff. Principal Risks and Uncertainties The Group’s principal operating risks and uncertainties are set out below. The management of risk is the responsibility of the Board, assisted where appropriate by the Audit & Risk and Remuneration Committees, as described further in the Corporate Governance Report. The Directors have carried out an assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity. We aim to reward MISSION’s shareholders both through capital growth and dividends. Our focus is first and foremost on organic growth, and in deploying the Group’s capital we always aim to support existing management teams who have demonstrated an ability to grow their businesses and to achieve consistently high margins. We constantly strive to enhance our offer with acquisitions that add new disciplines or improved services to our Agencies, and we also target new high-growth market sectors, along with service or technology opportunities, which meet strict return on investment criteria. As well as acquisitions, we also consider launching new businesses that may require more time to become established, but which will have a smaller investment cost and lower risk profile. We continue to develop our international footprint in response to Client demand and where we see strong opportunities to leverage our well-established UK strengths elsewhere in the world. We look to maintain a balance of equity and debt financing to give shareholders the advantages of financial leverage but without placing the Group at financial risk. Adverse Economic Conditions Loss of Key People The risk with the greatest potential impact on the Group’s financial position is a widespread and dramatic economic downturn, as seen by the impact of COVID-19 and the crisis in the Ukraine as well as the longer term impact these crises have had on the labour market and inflation. The effect is reduced revenues and tighter margins, profitability and cash flows. The entrepreneurial culture that runs through our Agencies means that, while we will inevitably feel the impact of any economic downturn, we adapt quickly to changed circumstances and also seek out opportunities that inevitably emerge in times of economic challenge. Loss of Key Clients The consequence of Client losses is the same as for a general economic downturn, i.e. potential reduction in revenue and profit, but to a lesser degree. Client losses are, to some degree, to be expected. The risk here is that Client losses are not replaced by new business and an agency finds all or part of its offers difficult to sell. The risk of Client loss is mitigated both by our continuous new business activity and also by a constant focus by all Agency CEOs on ensuring that the offers and services we provide to current and prospective Clients are relevant, effective and attractive. In common with all service businesses, the Group is reliant on the quality of its people. The risk is that an Agency loses good, senior talent as a result of out-of-step remuneration packages, lack of progression opportunities or workplace environment and are unable to attract replacements. Strenuous efforts are made to provide a rewarding work environment and remuneration packages to attract, retain and motivate our leadership teams. Two measures of our success are that our staff retention statistics are higher than the industry average and that the vast majority of the core management of our acquired businesses remain in place today. The system of financial rewards is reviewed regularly by the Remuneration Committee and revised where appropriate. An example of this is the innovative Growth Share Scheme, designed to provide a powerful retention incentive for our key business leaders. The Group launched the second iteration of this scheme in 2021. The first scheme, launched in 2017 proved to be a success and can be measured by the fact that, when the scheme matured in April 2020, we had retained all but one of the 17 individuals. 30 Annual report for the year ended December 2022 Annual report for the year ended December 2022 31 Strategic Report Stakeholder Engagement Strategic Report Environmental, Social and Governance (“ESG”) considerations The Board takes its Companies Act Section 172 duty to promote the success of the Group very seriously and considers the Group’s various stakeholders when making decisions Principal decisions Engagement with stakeholders In 2022 the following principal decisions were taken by the Board: 1) the acquisition of Influence Sports Limited (‘Influence’), 2) the fundamental restructure of the Group’s operations in SE Asia and 3) pausing the strategic investment in the Pathfindr operation. Rationale The Board has signalled its intent to invest in businesses that both have the potential to drive cross-sell into high-margin, contemporary offers and have attractive Client lists that can be introduced to existing MISSION services. The acquisition of Influence delivered on this intent with the agency’s Sports Marketing offer adding immediate scale and strength to the Group’s social media and marketing capabilities across the high-growth sports and entertainment markets. The impact of COVID-19 in China and to a lesser extent in SE Asia has caused the Group’s trading in the region to recover far more slowly than has been the case in the US and UK. With the outlook for recovery in the region at best unclear the Group has taken the hard decision to fundamentally restructure its operations there. In a similar vein persistent supply-chain interruptions stemming from COVID-19 related issues in China have hampered progress on the Pathfindr initiative resulting in delays to Client testing and progress. The rationale for restructuring each operation is to ensure that Group resources can be directed to strategic investment priorities more closely associated with the core business when they arise. Prior to the acquisition of Influence, James Clifton and Giles Lee presented the strategic and financial business case to the Bank, Board and to Agency CEOs, assimilated the advice and experience received from these parties and confirmed their full support before proceeding with the transaction. Care was also taken to ensure that key Influence employees were fully supportive of the transaction prior to completion. The Board also confirmed that the acquisition would help the Group deliver against its environmental targets. Prior to the decision to restructure the Group’s Asia operations James Clifton oversaw a full strategic review of the options available. This process was driven by business leaders in the region and supported by Agency CEOs in the UK. The results of this were presented to the Board where the final decision was made. A full strategic review of the Pathfindr business was shared with the Board where once again the final decision was made. In all three cases above care is taken to ensure that the views of Clients and employees were considered wherever it was appropriate to do so. MISSION’s long established communication processes remained in place throughout 2022 to ensure effective interaction with all key stakeholders. Examples of this include the regular investor roadshows led by James Clifton and Giles Lee to accompany the full year and interim results, and also internal ‘Town Hall’ Q&A sessions and Senior Team meetings conducted by James Clifton and Julian Hanson-Smith to discuss major MISSION-led initiatives. Making a Positive Change In our ambition to become the UK’s leading, most respected Agency Group, we need to do just that – lead. This is never truer than when it comes to our corporate, social and environmental responsibility. We believe the impact MISSION makes on the world should be positive, always. That our interaction with our People, Clients, Communities, and the wider environment needs to make a difference. Ultimately, what we do needs to matter, and it needs to support positive change. Environment As a collective of creative Agencies providing a range of marketing, advertising and consultative services, our direct and indirect impact on the environment is low. But we can always do better. We aim to reduce our environmental impact in the resources and energy we use, how and when we travel, the suppliers we select and how we work to create healthy operating models. We also have a responsibility to consider not just how we operate but also to share insight and best practice across our Client base to move the brands and businesses we work with forward. Reaching millions of people through our 600 plus international Client base, that’s a lot of chances to make a big difference every day. Our People are a key part of our environmental journey driving behaviour change in our Agencies to reduce carbon impact, whether through reducing waste and energy consumption, travelling more responsibly or selecting suppliers aligned to our ambitions. Supported through training and partnerships with the likes of Green Element, AdNetZero and Greenshoot we are accelerating change wherever we can. Ultimately, our aim is to be sustainably profitable and do good in the world. Our goals: • Reduce total emissions by 21% for 2024 and 42% for 2029 across Scope 1, 2 and 3 in line with Science-Based Targets* with an aim to achieve net zero emissions by 2050 • Commit to the Business Ambition for 1.5° • Build Environmental Management Systems and action plans across all Agencies to address carbon emission hotspots and drive emissions reduction • Work towards ISO 14001 certification by 2023 for majority of Agencies We have been measuring greenhouse gas (GHG) emissions since 2019 in order to understand, prioritise areas of focus and take action to reduce our impact and achieve our goals. Agencies have captured information covering all activities including our offices, travel, purchases and working from home. 2022 has seen a slight increase in emissions (3%) compared to 2021 but we have still achieved a 40% overall decrease compared to pre pandemic levels in 2019. In 2022, the highest sources of emissions were purchased services, IT hardware, business travel by air, commuting, energy consumption and company fleet vehicles. This has not changed significantly since 2021, though a small rise in emissions related to commuting has occurred with people returning to the office more regularly. We have also added three new Agencies to our Group – Influence Sports & Media, Populate Social and Livity. This has added locations and seen our headcount grow by over 50 people in 2022. A focus on reporting quality has also meant that accuracy has improved, with several Agencies moving from information based on spend to consumption. * Science Based Targets are a set of goals developed by a business to provide it with a clear route to reduce greenhouse gas emissions. An emissions reduction target is defined as ‘science based’ if it is developed in line with the scale of reductions required to keep global warming below 1.5’C from pre-industrial levels. Social Diversity & Inclusion: It’s the people in our business that make it what it is. We’re powered by talented teams who value and respect difference. We’re committed to making sure our people feel valued whatever their background, that they belong, and can be their authentic self at work. Over the past few years, we’ve partnered with Creative Access – a social enterprise working to ensure creative businesses truly reflect society. We’ve introduced a Group Diversity & Inclusion Manifesto, appointed a diversity champion at Board level, put our senior leaders through inclusive leadership training, and all MISSION Group employees have had D&I training. In 2022, we launched MISSION Communities. These community groups are helping create safe spaces for people to talk, providing advice to leaders on D&I policies, and insight into different key areas such as ethnicity, sexuality, age, neurodiversity and faith. These initiatives are helping to evolve our understanding and build an inclusive culture. But what matters is how our people feel. And so, this year we asked them through our Employee Engagement Survey. Our overall Inclusion score was 74% positive across the MISSION Group. 85% of people answered positively about being their authentic self at work (2% above the industry average), and 79% felt they belonged at the company (also 2% above the industry average). Community: With 28 locations and over 1,100 people across the globe it’s important to our team and to us that we connect and support our local communities. We are committed to helping them thrive, boosting the key foundations stones that make them healthy – arts, education, conservation, health & wellbeing and the creation of opportunities for the next generation. 32 Annual report for the year ended December 2022 Annual report for the year ended December 2022 33 Strategic Report Environmental, Social and Governance (“ESG”) considerations Governance Unlike many other groups, our Agencies, which have mainly come into the Group via acquisition, retain their original personnel, cultures and business practices, with MISSION providing the support infrastructure and economies of scale of a multi-national group. This sees a highly personalised and people-centric culture which has led to an expanding and loyal Client base and strong talent retention and attraction. We believe the role of the Board is not to direct these Agencies but ensure they are supported and collaborate to deliver the best work to help our Clients succeed. The MISSION Board and non-executive group have a good balance of sector and financial experience alongside Agency CEOs who provide a ‘front seat’ view of Agency challenges, opportunities and the marketplace as a whole. The Board is responsible for the long–term success and growth of the Group, embedding effective controls which enable risks such as cyber security; data protection; supply chain fragility; market resilience; economic volatility and political instability to be assessed and managed. Held to account by independent Audit & Risk and Remuneration committees, the Board is focused on ensuring that our People, Agencies and the Group are consistently safeguarded. We believe that corporate governance is not the poor cousin of the ESG triplet but an integral part of the Group. It is key to how we interact with our investors, employees, suppliers and other stakeholders and is focused on monitoring progress against our wider ESG commitments making sure we are driving forward positive change. Our very existence as a marketing group is dependent upon our ability to foster strong and mutually beneficial relationships with all Stakeholders. Alongside sustainable growth, we see Client happiness, referral ratings and staff engagement levels as indicators of our collective success and are consistently measured by the Board. Good governance is about transparency, trust and accountability. We believe all stakeholders need to be part of our journey, to share in the highs and lows; so we are committed to being open and transparent, always, on our successes but also areas for growth. • Goal: improve stakeholder advocacy across the board as shown through Client happiness levels, referral ratings and staff engagement levels. • Goal: manage risk effectively ensuring the interests of our People, Agencies, Group and Investors are protected. Our impact is widespread working with 27 national and local charity and community groups from RNLI and Macmillan to North Devon Hospice. We go beyond just donating and put our skills to good use with pro bono work that really makes a difference to the brand awareness of these important causes. And we have continued to invest in the next generation, opening our doors to local schools, colleges, and universities as well as providing mentoring, work experience and paid internship opportunities. Family: We recognise the importance of family. 85% of our people scored us positively in supporting flexible working arrangements, and 86% said they were supported to arrange time out of work when needed. We want our people to have the best home lives whilst pursuing their career. That’s why we have over 140 different flexible working arrangements across the MISSION Group Health & wellbeing: We create an environment where people talk about the things that matter to their health & wellbeing. It is these conversations that change the way we work to create the best environments for our people. We’ve combined free mental health support and educational life balance activities which are overseen by over 40 mental health first aiders. We want to change the way we all think and act about workplace mental health. Our goals and progress to date: • Goal: 16% of employees from under-represented ethnic groups by the end of 2023 and 18% by 2025. Progress: At the end of 2022, 10.6% of our employees were from under-represented ethnic groups. • Goal: 10% of employees with disabilities by the end of 2023 and 12% by 2025. Progress: Currently 3.1% of employees have declared a disability across the Group. We are improving reporting alongside new partnerships in 2023. • Goal: To have 30 apprentices by 2023 and 50 by 2025. Progress: In 2022, we had 21 apprenticeships across the Group which is up 6 from 2021. New schemes are boosting these numbers in 2023. • Goal: 17% of employees from under-represented age groups (below 20 and above 50) by 2023 and 20% by 2025. Progress: In 2022, 15% of our employees were from under-represented age groups. • Goal: An equal gender split between male and female employees whilst recognising those who identify as neither or both Progress: Of our 1057 employees, 51% identify as female and 49% identify as male. We look for solutions where others see problems. We are connected by the ambition to deliver real impact for our Clients, People, Communities and the wider environment. We celebrate, value and respect diversity, treating others as we wish to be treated ourselves. What we do matters, and it needs to make a positive difference. 34 Annual report for the year ended December 2022 Annual report for the year ended December 2022 35 Corporate Governance The Board The following Directors represent the committee responsible for corporate governance compliance: Each of our Executive Directors has had a long career in marketing communications: Julian Hanson-Smith Non-Executive Chair and Senior Independent Director Julian is an entrepreneur and PE investor with significant experience in marketing and consulting services. In 1986 Julian co-founded FTI Consulting, one of Europe’s largest business communications consultancies, and following its sale in 1999 became COO of Lighthouse Global Network. In 2001 he joined US-based PE firm Lake Capital, before co-founding Iceni Capital in 2007, investing in UK-based business services companies. He is Chair of Apella Advisors. He joined the Board in October 2015 and was appointed Non-Executive Chair in October 2021. Giles Lee Group Chief Financial Officer Giles joined Bray Leino in 2005 as Group Finance Director following his successful role in transforming Merrydown plc from its fundamental financial restructure in 1998 to its acquisition in 2005. Giles was appointed Executive Chair of Bray Leino in 2013. He was appointed to the Board in March 2013 and became Commercial Director for MISSION in July 2018. As well as providing commercial support to the Group’s Agencies, Giles has overseen many acquisitions and strategic investments and was the driving force behind the creation of MISSION Shared Services. Giles was appointed Group CFO in April 2021. Mark Lund Non-Executive Deputy Chair Marketing both as entrepreneur and corporate executive. He co-founded independent Top 10 agency DLKW (now Mullen Lowe), was President of McCann UK and Europe and ran the UK Government’s marketing centre, the COI. Mark is Non-Executive Chair of Smart Energy GB and of Asbof which funds the UK’s self- regulation system for Advertising. Mark was appointed to the Board in October 2022 and Chairs the Audit & Risk Committee. Eliza Filby Non-Executive Director Eliza joined MISSION in January 2022 as a Non-Executive Director. A writer, speaker, consultant and podcast host, she is a highly respected expert in ‘Generational Intelligence’. She has been helping companies and services understand generational shifts within politics, society and the workplace, working with organisations from VICE Media and Warner Brothers to the UK’s Ministry of Defence and Royal Household. As well as speaking at the EU’s Human Rights Forum, the Financial Times CEO Forum and the UK’s House of Lord’s Select Committee, she has authored books and written for the Financial Times, Times and City AM. Eliza was appointed to the Board in January 2021 and Chairs the Remuneration Committee. James Clifton Group Chief Executive Fiona Shepherd Chief Operating Officer James started out Client-side before working for various agencies in the UK and internationally, within Omnicom and WPP. He created balloon dog in 2008, having led an MBO of Fox Murphy. Balloon dog was acquired by MISSION and James was appointed to the Board in October 2012. He became CEO of bigdog following the merger of balloon dog with fellow MISSION Agency Big Communications, founded Pathfindr, the Group’s IIoT Asset Tracking business, and chaired the Group’s Integrated Agencies before being appointed Group Chief Executive in April 2019. Fiona is Chief Executive of April Six and has worked in the technology industry for over 20 years, holding both Client and agency positions, with some of the world’s largest technology brands. Fiona was a founder of April Six and has been instrumental in expanding the Agency from its UK origins to its current position as a well-respected global technology and mobility Agency with offices across the world. Fiona joined the Board in April 2010 and has taken on responsibility for MISSION Advantage in 2022. Fiona was appointed COO in March 2023. Dylan Bogg Chief Creative Officer Dylan is Chief Creative Officer of krow and oversees creative output for the Agency. He had built a successful business by the age of 24 and this was used as the bedrock for the launch of Big Communications in 1996 which was acquired by MISSION in 2006. Dylan is a multi-award-winning creative and was appointed to the Board in April 2010. He also chairs the Group-wide Creative Directors’ Forum. Dylan was appointed CCO in March 2023. 36 Annual report for the year ended December 2022 Annual report for the year ended December 2022 37 Corporate Governance Directors' Report – for the year ended 31 December 2022 The Directors have pleasure in presenting their report and the financial statements of The MISSION Group plc (“MISSION”) for the year ended 31 December 2022. The Directors provide a separate Corporate Governance Report, which forms part of this Report of the Directors. Results and Dividends Risks and Uncertainties The Consolidated Income Statement shows the results for the year. The Directors approved a dividend of 0.83 pence per share, paid in December 2022, and have included a proposal for a final dividend of 1.67 pence per share, payable on 28th July 2023, in the Notice of Annual General Meeting. The Strategic Report sets out the Group’s principal operating risks and uncertainties. As a communications Agency group, the main financial risks that arise from day-to-day activities are credit and currency risk. Further details on the Group’s capital and financial risk management are set out in Note 26. Directors The following Directors held office during the year: Dylan Bogg James Clifton Dr Eliza Filby Julian Hanson-Smith Giles Lee Mark Lund – appointed 1 October 2022 Sue Mullen – resigned 12 January 2023 Andy Nash – resigned 30 September 2022 Fiona Shepherd Directors’ Interests in Shares and Options The interests of the Directors and their families in the shares of the Company were as follows: Number of ordinary shares of 10p each. Dylan Bogg James Clifton Dr Eliza Filby Julian Hanson-Smith Giles Lee Mark Lund Fiona Shepherd 31 December 2021 31 December 2022 1,648,185 532,095 - 85,803 1,070,753 - 1,309,932 1,648,185 555,834 - 85,803 1,071,066 - 1,309,932 Growth Share Scheme A Growth Share Scheme was implemented on 25 June 2021, giving participants the opportunity to subscribe for Ordinary B shares in The MISSION Marketing Holdings Limited (the “growth shares”) at a nominal value. These growth shares can, subject to continued employment, be exchanged for an equivalent number of MISSION Ordinary Shares if MISSION’s share price were to equal or exceed 150p for at least 15 days during the period from subscription up to 60 days from the announcement of the Group’s financial results for the year ending 31 December 2023; if not, they would have no value. At the time the scheme was introduced, achieving the target share price of 150p would have resulted in dilution to existing shareholders of less than 4% but would also have represented an increase in market capitalisation of over 105%. A total of 27 individuals were invited to participate in the scheme, of which 5 are board members. Details of growth shares held by the Directors are as follows: Number of Ordinary B shares in The MISSION Marketing Holdings Limited of 0.01p each. Dylan Bogg James Clifton Julian Hanson-Smith Giles Lee Fiona Shepherd 31 December 2021 Awarded in year 31 December 2022 72,727 240,000 100,000 240,000 240,000 - - - - - 72,727 240,000 100,000 240,000 240,000 38 Annual report for the year ended December 2022 Annual report for the year ended December 2022 39 Corporate Governance The Board Share options There were no unexercised options over shares held by Directors: Substantial Shareholdings Share Capital Other than the Directors’ interests disclosed above, as at 28 March 2023, notification had been received of the following interests in 3% or more of the issued share capital of the Company: The issued share capital of the Company at the date of this report is 91,015,897 Ordinary shares. The total number of voting rights in the Company is 91,015,897. Directors Number of shares % Octopus Investments Nominees Ltd 8,883,916 9.8 Herald Investment Management Ltd 5,778,239 6.3 Directors’ Indemnity Insurance The Company purchases insurance to cover its Directors and Officers against costs they may incur in defending themselves in legal proceedings instigated against them as a direct result of duties carried out on behalf of the Company. David Morgan 4,813,053 5.3 Directors’ Responsibilities BGF Investment Management Limited 4,713,501 5.2 Close Asset Management Ltd 4,631,647 5.1 Objectif Investissement Microcaps FCP 4,230,477 4.6 Stellar Asset Management Ltd 2,736,320 3.0 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 prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom and the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards comprising Financial Reporting Standard FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland and applicable law). Under company law the Directors must not approve the financial statements Disclosure of Information to Auditors So far as the Directors are aware, there is no relevant audit information of which the Group’s auditors are unaware. Each of the Directors has taken all 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 Group’s auditors are aware of that information. Events Since the End of the Financial Year There were no material post balance sheet events. Stakeholder Engagement The Company’s Section 172 statement and other details of stakeholder and employee engagement are set out in the Stakeholder Engagement report. Streamlined Energy and Carbon Reporting (“SECR”) SECR is a sustainability regulation that came into force on 1 April 2019. It requires organisations to publicly report on carbon emissions and energy use, including UK energy use, associated greenhouse gas emissions, and an appropriate intensity ratio. SECR is applicable to all quoted companies and large UK incorporated unquoted companies with at least 250 employees or annual turnover greater than £36m and annual balance sheet total greater than £18m (two criteria or more must apply). Accordingly, the 2022 information given below is for The MISSION Group plc and Bray Leino Limited. unless they are satisfied that they give a true and fair view of affairs of the Group and the Company and of the profit or loss of the 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 IFRSs as adopted by the UK have been followed by the Group and FRS 102 by the Parent Company, subject to any material departures disclosed and explained in the financial statements, and • Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s and the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to 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 the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company’s position, performance, business model and strategy. Auditors PKF Francis Clark have indicated their willingness to continue in office and, in accordance with the provisions of the Companies Act 2006, it is proposed that they be re-appointed auditors to the Company for the ensuing year. 40 Annual report for the year ended December 2022 Annual report for the year ended December 2022 41 Corporate Governance Directors' Report - for the year ended 31 December 2022 Corporate Governance Corporate Governance Report Energy consumption: (kWh’000s) - Electricity - Gas - Transport fuel - Fuel for electricity generation 2022 2021 253 207 125 - 176 214 70 - Total energy consumption 585 460 Emissions (tCO2e) Scope 1 Emissions from combustion of gas in buildings Emissions from combustion of fuel for transport purposes Scope 2 Emissions from purchased electricity (location-based method*) Scope 1 & 2 45.2 45.4 1.4 0.4 Total Scope 1+2 emissions 95.4 83.2 Scope 3 Emissions from business travel in rental cars or employee vehicles where company is responsible for purchasing the fuel Emissions from upstream transport and distribution losses and excavation and transport of fuels 30.9 21.4 32.2 19.9 Total emissions for mandatory reporting 158.5 124.5 Intensity (tCO2e / FTE) Full Time Equivalent staff numbers Intensity ratio: tCO2e / FTE 324 0.5 319 0.4 * location-based electricity (Scope 2) emissions use the average grid fuel mix in the region or country where the electricity was purchased and consumed. For SECR, location based is mandatory. The computations above have been calculated and verified as accurate by Green Element Limited and Compare Your Footprint Limited, UK and the methodology used is in accordance with the GHG Protocol Corporate Accounting and Reporting Standard 2014. Employees now work across 11 sites, therefore energy consumption from an additional 7 office sites was included compared to 2021. We see SECR as a wonderful opportunity and not just another compliance exercise. It gives us the chance to assess our current emissions and find ways to reduce them. In 2020 we calculated our carbon footprint for the first time and certified Bray Leino as ISO 14001 compliant. All MISSION companies are signed up to Sustainability Solved (a coaching platform to enable organisations to implement their own environmental management systems) and additional MISSION companies have the aim of achieving ISO 14001 compliance. We will continue to comply with environmental legislation and to monitor and measure our consumption data with a view to reducing our intensity ratio. The Group supports the aims of The Modern Slavery Act 2015 (“the Act”) and will never knowingly deal with any organisation which is connected to slavery or human trafficking. Given the nature of the services we provide and our high standard of employment practices, we consider that we are at low risk of exposure to slavery and human trafficking. We are not aware of any areas of our operations and supply chain likely to lead to a breach of the Act. Annual General Meeting A notice convening the Annual General Meeting to be held on Tuesday 20 June 2023 at 12 noon is enclosed with this report. On behalf of the Board Giles Lee Group Chief Financial Officer 28 March 2023. 48.8 37.4 Slavery and Human Trafficking Statement The Board of The MISSION Group plc (“MISSION”) is collectively accountable to the Company’s shareholders for good corporate governance, under Julian Hanson-Smith as Chair. As an AIM-listed company, MISSION has chosen to apply the Quoted Companies Alliance (“QCA”) Corporate Governance Code for Small and Mid-Size Quoted Companies (“the QCA Code”). MISSION is a collective of creative Agencies led by entrepreneurs who encourage an independent spirit. Our aims and ambitions are set out in the Strategic Report. Unlike many other groups, our Agencies, which have mainly come into the Group via acquisition, retain their original leaders, cultures and business practices. MISSION provides them with the support infrastructure and economies of scale of a multi-national group. We strongly believe that this results in a highly personalised and Client-centric culture which in turn leads to an expanding and loyal Client base. The role of the Board in establishing good corporate governance in the context of this strategy requires making sure not only that individual Agencies are targeted, monitored and supported but, equally importantly, that Agencies cooperate and collaborate with each other to ensure we are providing the best possible range of services to help our Clients succeed. Indeed, it is this sense of cooperation and collaboration which defines the culture of MISSION and much of our time as a Board of Directors is devoted to exploring how this collaboration is optimised. Board of Directors The Board has a balance of sector, financial and public markets skills and experience. Brief profiles of each member of the Board are set out on pages 36 and 37. Each of our Executive Directors has had a long career in marketing communications, and brings strong and up to date sector experience. Our Group Chief Financial Officer and two independent Non-Executive Directors provide industry, financial and public market skills and experience and, together with me, represent the committee responsible for corporate governance compliance and ensuring that a strong independent voice is present during Board discussions. The roles of Chair and Chief Executive are separate, with James Clifton, as Group Chief Executive, having responsibility for implementing the Group’s strategy, driving growth, building our brand and delivering sustainable shareholder value. Giles Lee was appointed Group Chief Financial Officer in 2021 and has also in practice retained much of his previous responsibilities as Group Commercial Director. In accordance with the QCA Code recommendation, the company secretary is not also an Executive Director, with Michael Langford being appointed to the role. Michael is the Group’s Financial Controller. He is a Chartered Accountant with suitable training and has previously assisted the Finance Director in company secretarial matters. Our Non-Executive Directors are Mark Lund and Dr Eliza Filby, both independent by virtue of having no executive responsibilities within the Group. Both Mark and Eliza bring a strong independent voice to Board discussions but also with an insight into our sector. Mark has enjoyed a long career in Advertising and Marketing both as entrepreneur and corporate executive. He co-founded independent Top 10 agency DLKW (now Mullen Lowe), was President of McCann UK and Europe and ran the UK Government’s marketing centre, the COI. Eliza is a writer, speaker, consultant and podcast host, she is a highly respected expert in ‘Generational Intelligence’. She has been helping companies and services understand generational shifts within politics, society and the workplace, working with organisations from VICE Media and Warner Brothers to the UK’s Ministry of Defence and Royal Household. 42 Annual report for the year ended December 2022 Annual report for the year ended December 2022 43 Corporate Governance Directors' Report - for the year ended 31 December 2022 Formal evaluations of Board effectiveness are held on a periodic basis. The most recent evaluation took place during 2022, was conducted by the Chair, and involved a combination of self-evaluation and one-to-one interviews with individual Board members to seek objective feedback on the balance of skills, behaviours and effectiveness of the Board as a whole, the Chair and other Board members. The next evaluation is due to take place during 2023. External counsel is sought when considering best-practice review criteria. The Directors are collectively responsible for the strategic direction, investment decisions and effective control of the Group. As part of its recurring business, the Board receives a financial summary of the Group’s performance early in the month, comparing revenue and profit for each Agency with the prior year and budgets set at the beginning of the year and any subsequent re-forecasts. This summary is supplemented by written monthly reports from the Group CEO and a report from the Group CFO summarising the Group’s balance sheet and working capital performance. Separate reports are received in connection with non-recurring matters, including written strategic and financial appraisals of potential acquisition opportunities. The Board is satisfied that it receives information of a quality and to a timetable that permits it to discharge its duties. All Directors are subject to election by Shareholders at the first opportunity after their appointment and are required to seek re-election every three years. The Board has established three formal committees to deal with specific aspects of the Group’s affairs. Audit & Risk Committee The Audit & Risk Committee consists of two Non-Executive Directors, with Mark Lund as Chair alongside me. The Committee considers matters relating to the reporting of results, financial controls and the cost and effectiveness of the audit process. The terms of reference of the Committee can be found in the Governance section of our website. It aims to meet at least twice a year with the Group’s external auditors in attendance. Other Directors attend as required. The Committee receives from the Group’s auditors and considers two detailed reports: the Audit Planning Report which sets out the auditors’ proposed audit approach, and the Audit Completion Report, towards the conclusion of the audit fieldwork, which highlights the main matters considered and arising from the audit work. The main meeting of the Committee each year reviews the financial results and disclosures in the annual report. This meeting is held shortly before the annual results are published and considers in detail with the Group’s auditors the principal areas of subjective judgement and any other matters brought to the Committee’s attention by the Group’s auditors. The main matters considered each year are any indications of possible goodwill and /or investment impairment, capitalisation of intangible development costs and the application of the Group’s revenue recognition policies. The Committee is satisfied that the Group’s auditors, PKF Francis Clark, have been objective and independent of the Group. The Group’s auditors performed non-audit services for the Group as outlined in Note 6. The nature of this work was again predominantly corporate finance advice and financial due diligence in relation to prospective acquisitions and not related to areas of significant judgement in the accounts. The work was not carried out by the audit team, the value of this work was not significant in relation to the size of the audit fee, the basis for charging was based on hourly involvement and no fees were contingent on outcome. As a consequence, the Committee is satisfied that the auditors’ objectivity and independence was not impaired by their non-audit services. Remuneration Committee As outlined in the Strategic Report, strong Client relationships and quality of staff are key factors in the success of MISSION, and strenuous efforts are made to retain and motivate our leadership teams. The Board maintains a policy of providing executive remuneration packages that will attract, motivate and retain Directors and senior executives of the calibre necessary to deliver the Group’s growth strategy and to reward them for enhancing shareholder value. The Remuneration Committee consists of two independent Non-Executive Directors, with Eliza Filby taking the role of Chair in January 2022 alongside me. The Committee determines the remuneration of the Executive Directors and makes recommendations to the Board with regard to remuneration policy and related matters. Nomination Committee The Nomination Committee consists of me, as the Committee Chairman, and the two Non-Executive Directors. The Committee is responsible for reviewing and making proposals to the Board on the appointment of Directors and meets as necessary. The terms of reference of the Committee are available on request. In 2022 the Committee considered the vacancy created for a Senior Non-Executive Director and Chair of the Audit & Risk Committee by the resignation of Andy Nash and invited Mark Lund to join the Board on this basis. Summary of Directors’ Attendance Executive Directors are expected to make a full-time commitment to the Group, whilst Non-Executive Directors are generally expected to be available to participate in person at Board meetings and meetings of the Remuneration, Audit and Nomination Committees. In addition, they are expected to be available to discuss matters between these formal meetings. Where diary clashes or Client commitments conflict with formal meeting dates, the matters to be addressed during meetings are discussed with the relevant Director both before and after the relevant meeting. We estimate that the time commitment required from our Non-Executive Directors is roughly 3 days per month. The Committee meets as and when required and its terms of reference can be found in the Governance section of our website. The remuneration and terms and conditions of appointment of the Non-Executive Directors are determined by the Board. No Director is involved in setting his or her own remuneration. The Committee reviews the components of each Executive Director’s remuneration package annually. During the year, these packages consisted of four elements: • basic salary and benefits, • performance related bonus linked to the delivery of profit targets • share-based incentives, and • termination packages to outgoing Directors. With regard to remuneration policy, the Committee gives specific consideration each year to the nature and quantum of incentive arrangements to ensure they remain relevant and effective for the retention of key staff, including not just Executive Directors but also senior staff within the Group’s Agencies. This includes setting the profit targets which trigger annual performance-related cash bonuses and approving the allocation of incentives to individuals. The Committee undertook a detailed review of the Group’s incentives during 2018, implementing various changes as a result and no further refinements were considered necessary in 2022. The Remuneration Committee approved the latest Growth Share Scheme in June 2021. The Committee reviews annually whether or not profit targets have been met to trigger performance-related bonuses to Directors and the senior management in individual Agencies. This evaluation considers both the Group’s financial performance and individual Agency performance, and takes place alongside the finalisation of the annual results. Details of Directors’ remuneration are included in Note 7. 44 Annual report for the year ended December 2022 Annual report for the year ended December 2022 45 Corporate Governance Directors' Report - for the year ended 31 December 2022 Board Meetings Remuneration Committee Audit Committee Entitled to attend Attended Entitled to attend Attended Entitled to attend Attended Dylan Bogg James Clifton Eliza Filby Julian Hanson-Smith Giles Lee Mark Lund Sue Mullen Andy Nash Fiona Shepherd 7 7 7 7 7 1 7 6 7 6 7 7 7 7 1 6 4 7 n/a n/a 1 3 n/a n/a n/a 3 n/a n/a n/a 1 3 n/a n/a n/a 3 n/a n/a n/a n/a 3 n/a 1 n/a 2 n/a n/a n/a n/a 3 n/a 1 n/a 2 n/a Shareholder Communication We engage in a dialogue with our shareholders and prospective shareholders via formal meetings and informal telephone and email contact. In addition, we provide comprehensive information to investors on our website, including contact information and answers to frequently asked questions. Formal meetings with institutional fund managers and wealth managers take place throughout the year but are concentrated on the periods following our interim and full year results announcements. We receive collated feedback from these meetings via our NOMAD, Shore Capital. In addition, I speak to representatives of our larger institutional investors between these formal set pieces to make sure the dialogue continues and that we understand their expectations. Private investors don’t have the benefit of regular formal meetings, but we make sure we are available to meet shareholders at our Annual General Meeting and we often continue a dialogue with them via email. The results of proxy votes cast at Annual General Meetings can be found in the Investors section of our website. James Clifton, Giles Lee and I are, between us, the first point of contact for any queries raised by shareholders but, should we fail to resolve any queries, the Senior Independent Director, Mark Lund, is available to meet shareholders. I am encouraged to note that, to date, no such request has been received. Corporate Culture The Group has established a statement of corporate values in order to establish clearly for all stakeholders what we stand for and how we behave. These values are: invested, accountable, connected, progressive and human. However, culture is defined as the internal expression of brand purpose. In the same document we stated our brand purpose or Vision as “the preferred creative partner for real business growth.” This was supported by a summary of our personality: ”We are a challenger brand. So we try harder. We look for solutions where others see problems. We are connected by the ambition to deliver amazing results for our Clients. We are driven by the entrepreneurial spirit that runs through our veins. We celebrate diversity and treat others how we would wish to be treated ourselves.” This is the culture to which we aspire. The formal matters reserved for the Board include certain key internal controls: the specific levels of delegated authority and the segregation of duties; the prior approval of all acquisitions; the review of pertinent commercial, financial and other information by the Board on a regular basis; the prior approval of all significant strategic decisions; and maintaining a formal strategy for business activities. Assurance over risk management is obtained from the establishment of management policies and controls, regular review of individual Agency financial performance, and the external audit process. The Board does not consider it necessary to have a separate internal audit function at the present time; the internal audit of internal financial controls forms part of the responsibilities of the Group’s finance function. On behalf of the board Julian Hanson-Smith Chair 28 March 2023 Risk Management Whilst the Directors are collectively responsible for the effective control of the Group, the Audit & Risk Committee has primary responsibility for the oversight of risk. The principal risks and uncertainties facing the Group are set out in more detail in the Strategic Report and the Non-Executive Directors periodically consider whether or not this remains up to date. Clients and staff represent the key resources and relationships on which our business relies. Primary responsibility for maintaining strong Client relationships and retaining key staff lies with the Agency CEOs and this is monitored via written monthly reports and interaction with the Group CEO. Their day to day involvement with Clients provides the Board with strong and up to date feedback from this vital stakeholder group, including lessons to be learnt from unsuccessful new business pitches. Periodically, a new service is developed as a result of this feedback loop. It has also been through Client feedback that we have embarked on our international expansion – going where our Clients want us to be. Potential acquisitions and changes in incentive and rewards systems, designed to motivate and retain key staff, are considered by the full Board when it meets in person, or via regular informal contact between meetings. The Board is responsible for ensuring that the Group maintains a system of internal financial controls. The objective of the system is to safeguard Group assets, ensure proper accounting records are maintained and that the financial information used within the business and for publication is timely and reliable. Any such system can only provide reasonable, but not absolute, assurance against material loss or misstatement. All day to day operational decisions are taken initially by the Executive Directors, in accordance with the Group’s strategy. The Executive Directors are also responsible for initiating commercial transactions and approving payments, save for those relating to their own employment. 46 Annual report for the year ended December 2022 Annual report for the year ended December 2022 47 Financial Statements Independent Auditor’s Report Independent Auditor’s Report to the Members of The MISSION Group plc Opinion The Group comprises the following trading companies: We have audited the financial statements of The MISSION Group plc (the “Group”) for the year ended 31 December 2022, which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and the related notes including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the UK. In our opinion, the financial statements: • give a true and fair view of the state of the Group’s affairs as at 31 December 2022 and of the Group’s profit for the year then ended; • have been properly prepared in accordance with IFRSs as adopted by the UK; and • have been prepared in accordance with the requirements of the Companies Act 2006. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group 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 those requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. An Overview of the Scope of our Audit We planned and performed our audit by obtaining an understanding of the Group and its environment, including the accounting processes and controls, and the industry in which it operates. • 18 UK subsidiary companies; • 1 wholly owned US based subsidiary; • 1 wholly owned Germany based subsidiary; • 3 wholly owned Asian subsidiaries; • A 70% owned Asian sub group comprising 5 locally incorporated companies; and • 2 UK holding companies. Of the Group’s 30 (2021: 26) reporting components, we subjected 3 to full scope audits and 6 to specific audit procedures. The remaining components were subject to analytical review procedures. All of the work was carried out by the Group audit team. Those components subject to audit and specific audit procedures cover 75% (2021: 78%) of the Group’s consolidated operating income and 79% (2021: 80%) of the Group’s headline absolute operating result (absolute result does not distinguish between profit or loss at subsidiary level). Our audit work at the component level is executed at levels of materiality appropriate for such components, which range from 11% to 52% of Group materiality. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. KEY AUDIT MATTER RESPONSE AND CONCLUSION REVENUE RECOGNITION Our audit work included: The Group’s primary income streams are outlined in the accounting policies section. We identified that the revenue recognition risk relates particularly to the correct treatment of project fees, where the service spans the year end. Assessing the timing of recognition and valuation of such work involves estimates and can be complex. • Assessing and challenging the revenue recognition policies adopted by the Group to confirm they are appropriate in the context of the business and in accordance with IFRS15. • Reviewing a sample of open jobs at the year end across the Group and testing accuracy, completeness and cut off. • Reconciling open job reports at the year end to revenue and profit recognised. • Assessing and challenging on a sample basis whether revenue and profit recognised on open jobs is complete and appropriately valued. • Evaluating the accuracy of accrued income in the previous year against actual outcomes to determine whether management’s estimations have been reliable. As a result of the procedures performed, we are satisfied that revenue has been correctly recorded. GOODWILL IMPAIRMENT Our audit work included: The impairment review of the Group’s carrying value of Goodwill arising on consolidation is one of the main areas of estimation. At 31 December 2022, the carrying value of goodwill in the Group balance sheet was £96m (2021: £95m). We identified that the audit risk relates to ensuring that management’s impairment review is robust and reliable in identifying potential impairment, and that the assumptions made are reasonable. The key assumptions used by management in assessing value in use are: • Budgets and forecasts for the next 4 years. • The discount rate applied (the Group’s weighted average cost of capital – WACC). • Revised long-term growth rate. • Assessing and challenging the key assumptions and calculations applied by management in their impairment reviews. • Benchmarking the short and long term growth rates to independent market data to confirm it is appropriate. • Reviewing the detailed components of the WACC calculation. • Assessing and challenging management’s sensitivity analysis on key assumptions and calculations. • Performing our own sensitivity analysis on short term growth forecasts and challenging where this results in no or limited headroom on value in use against carrying value. • Where there is limited headroom, comparing actual results against past forecasts used in impairment reviews to assess the reliability of the forecasts. • Assessing the disclosures surrounding impairment made in the financial statements, specifically CGUs that are significantly underperforming against forecast. As a result of the procedures performed, we are satisfied that goodwill held on the balance sheet is not further impaired. 48 Annual report for the year ended December 2022 Annual report for the year ended December 2022 49 Financial Statements Independent Auditor’s Report Our Application of Materiality Misstatements, including omissions, are considered to be material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. We use quantitative thresholds of materiality, together with qualitative assessments in planning the scope of our audit, determining the nature, timing and extent of our audit procedures and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: MATERIALITY MEASURE GROUP Overall materiality Performance materiality Basis for determination £388,000 (2021: £373,000) £291,000 (2021: £280,000) Overall materiality has been set as 5% of Headline profit before tax (2021: 5% Headline profit before tax). We have considered headline profit before tax to be the most appropriate measure for materiality as it best reflects the Group’s underlying trading profitability and is a key metric used by both management and other stakeholders in assessing the Group’s performance. Performance materiality is set as 75% of overall materiality. Misstatements reported to the audit committee £12,000 (2021: £11,000) Range of materiality at components subject to full scope audits / risk specific procedures: £44,000 – £251,000 Conclusions Relating to Going Concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s ability to continue to adopt the going concern basis of accounting included: • Assessing the amount of bank facilities and expected headroom based on the forecast over the next 12 months. • Evaluating the reliability of the forecast through discussion with management, review of post year end trading and considering the historic reliability of forecasts compared to actual results. • Reviewing going concern related disclosures in the • Reviewing and challenging management’s assessment financial statements to ensure they are appropriate. of going concern and key assumptions (including assessment at the planning stage of the audit process). Our work included assessing the timing and amount of turnover and related cashflows in the forecast models. We also tested the integrity and mathematical accuracy of the models used. • Reviewing and assessing the appropriateness of management’s sensitivity analysis including changes in turnover and related cashflows. 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 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. Other Information Responsibilities of Directors The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on Other Matters Prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. Matters on Which we are Required to Report by Exception In the light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report or the Directors’ Report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or • the 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. As explained more fully in the Directors’ responsibilities statement set out on pages 40 and 41, 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 the financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. We obtained an understanding of the legal and regulatory framework applicable to the group and the industry in which it operates. We identified the principal risks of non-compliance with laws and regulations as relating to breaches around health and safety and General Data Protection Regulation. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as financial reporting legislation (including the Companies Act 2006) and taxation legislation. We considered the extent to which any non-compliance with these laws and regulations may have a negative impact on the group’s ability to continue trading and the risk of a material misstatement in the financial statements. 50 Annual report for the year ended December 2022 Annual report for the year ended December 2022 51 Financial Statements Independent Auditor’s Report We also evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements and determined that the principal risks related to the misstatement of the result for the year, goodwill impairment and revenue recognition. Based on this understanding we designed our audit procedures to identify irregularities. Our procedures involved the following: • Both goodwill impairment and revenue recognition were assessed as Key Audit Matters and our work in respect of them is detailed above. • We made enquiries of senior management as to their knowledge of any non-compliance or potential non-compliance with laws and regulations that could affect the financial statements. As part of these enquiries we also discussed with management whether there have been any known instances of material fraud, of which there were none. • We identified the individuals with responsibility for ensuring compliance with laws and regulations and discussed with them the procedures and policies in place. • We reviewed minutes of meetings of Senior Management and those charged with governance. • We challenged the assumptions and judgements made by management in its significant accounting estimates. • We audited the risk of management override of controls, including through substantively testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our Report This report is made solely to the Company’s shareholders, 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 shareholders those matters we are required to state to them in an audit 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 shareholders as a body for our audit work, for this report, or for the opinions we have formed. Duncan Leslie FCA (Senior Statutory Auditor) PKF Francis Clark Statutory Auditor Centenary House Peninsula Park Rydon Lane Exeter EX2 7XE 28 March 2023 52 Annual report for the year ended December 2022 Annual report for the year ended December 2022 5353 Financial Statements Consolidated Financial Statements & Notes Consolidated Income Statement For the year ended 31 December 2022 Consolidated Statement of Comprehensive Income For the year ended 31 December 2022 Year to 31 December 2022 Year to 31 December 2021 Year to 31 December 2022 Year to 31 December 2021 PROFIT FOR THE YEAR Other comprehensive (loss) / income – items that may be reclassified separately to profit or loss: Exchange differences on translation of foreign operations TOTAL COMPREHENSIVE (LOSS) / INCOME FOR THE YEAR Attributable to: Equity holders of the parent Non-controlling interests £’000 36 (688) (652) (601) (51) (652) £’000 5,319 70 5,389 5,489 (100) 5,389 TURNOVER Cost of sales OPERATING INCOME Headline operating expenses HEADLINE OPERATING PROFIT Goodwill and business impairment Start-up costs Acquisition adjustments Restructuring costs OPERATING PROFIT Share of results of associates and joint ventures PROFIT BEFORE INTEREST AND TAXATION Net finance costs PROFIT BEFORE TAXATION Taxation PROFIT FOR THE YEAR Attributable to: Equity holders of the parent Non-controlling interests Basic earnings per share (pence) Diluted earnings per share (pence) Headline basic earnings per share (pence) Headline diluted earnings per share (pence) Note 2 2 3 3 3 3 5 6 8 10 10 10 10 £’000 182,685 (102,871) 79,814 (71,157) 8,657 (5,257) (776) (593) (402) 1,629 160 1,789 (1,046) 743 (707) 36 9 27 36 0.0 0.0 6.8 6.7 £’000 153,287 (80,792) 72,495 (64,476) 8,019 - (367) 156 (496) 7,312 140 7,452 (701) 6,751 (1,432) 5,319 5,423 (104) 5,319 6.0 5.9 6.6 6.5 54 Annual report for the year ended December 2022 Annual report for the year ended December 2022 55 Financial Statements Consolidated Financial Statements & Notes Consolidated Balance Sheet As at 31 December 2022 Consolidated Cash Flow Statement For the year ended 31 December 2022 Note 11 13 14 15 16 17 18 19 21.1 19 20 21.1 22 23 24 FIXED ASSETS Intangible assets Property, plant and equipment Right of use assets Investments, associates and joint ventures CURRENT ASSETS Stock Trade and other receivables Cash and short term deposits CURRENT LIABILITIES Trade and other payables Corporation tax payable Bank loans Acquisition obligations NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON CURRENT LIABILITIES Bank loans Lease liabilities Acquisition obligations Deferred tax liabilities NET ASSETS CAPITAL AND RESERVES Called up share capital Share premium account Own shares Share-based incentive reserve Foreign currency translation reserve Retained earnings EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT Non-controlling interests TOTAL EQUITY As at 31 December 2022 £’000 As at 31 December 2021 £’000 99,741 2,090 9,536 437 111,804 2,185 41,255 6,153 49,593 (39,667) (794) (27) (1,371) (41,859) 7,734 119,538 (17,488) (8,481) (2,772) (622) (29,363) 90,175 9,102 45,928 (994) 1,010 (610) 35,558 89,994 181 90,175 98,974 2,102 9,149 517 110,742 2,112 40,538 6,066 48,716 (37,338) (380) - (692) (38,410) 10,306 121,048 (16,393) (8,077) (2,623) (483) (27,576) 93,472 9,102 45,928 (518) 868 - 37,820 93,200 272 93,472 The financial statements were approved and authorised for issue on 28 March 2023 by the Board of Directors. They were signed on its behalf by: Giles Lee, Group Chief Financial Officer Company registration number: 05733632 Operating profit Depreciation, amortisation and impairment charges Decrease in the fair value of contingent consideration Loss on disposal of property, plant and equipment Non-cash charge for share options, growth shares and shares awarded, net of awards settled in cash Decrease / (increase) in receivables Increase in stock Increase in payables OPERATING CASH FLOWS Net finance costs paid Tax paid Net cash inflow from operating activities INVESTING ACTIVITIES Proceeds on disposal of property, plant and equipment Purchase of property, plant and equipment Investment in software and product development Acquisitions of or investments in businesses Payment relating to acquisitions made in prior years Cash acquired with subsidiaries Net cash outflow from investing activities FINANCING ACTIVITIES Dividends paid Dividends paid to non-controlling interests Payment of lease liabilities Increase in bank loans Purchase of own shares held in EBT Net cash (outflow) / inflow from financing activities Increase in cash and cash equivalents Exchange differences on translation of foreign subsidiaries Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Year to 31 December 2022 Year to 31 December 2021 £’000 1,629 8,701 (334) 10 73 149 (73) 1,056 11,211 (1,002) (482) 9,727 64 (1,092) (1,852) (1,893) (790) 271 (5,292) (2,180) (40) (1,935) 992 (497) (3,660) 775 (688) 6,066 6,153 £’000 7,312 4,029 (761) 11 (48) (6,703) (918) 2,798 5,720 (781) (1,355) 3,584 72 (884) (1,024) (663) (6,714) 435 (8,778) (2,100) - (2,016) 11,500 - 7,384 2,190 70 3,806 6,066 56 Annual report for the year ended December 2022 Annual report for the year ended December 2022 57 Financial Statements Consolidated Financial Statements & Notes Consolidated Statement of Changes in Equity For the year ended 31 December 2022 Notes to the Consolidated Financial Statements Share capital Share premium Own shares Share- based incentive reserve Foreign currency translation reserve Retained earnings Total attributable to equity holders of parent Non- controlling interest Total equity £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 At 1 January 2021 9,102 45,928 (591) 642 (66) 34,842 89,857 372 90,229 Profit for the year Exchange differences on translation of foreign operations Total comprehensive income for the year Share option charge Growth share charge Shares awarded and sold from own shares Dividend paid At 31 December 2021 9,102 Profit for the year Exchange differences on translation of foreign operations Total comprehensive income for the year Share option charge Growth share charge Own shares purchased by EBT Shares awarded and sold from own shares Dividend paid - - - - - - - - - - - - - - - - - - - - - - - - - - - 73 - - - - 174 52 - - 45,928 (518) 868 - - - - - - - - - - - - - (497) 21 - - - - 33 109 - - - - 5,423 5,423 (104) 5,319 66 - 66 4 70 66 5,423 5,489 (100) 5,389 - - - - - - (610) (610) - - - - - - - 174 52 (345) (272) (2,100) (2,100) - - - - 174 52 (272) (2,100) 37,820 93,200 272 93,472 9 - 9 - - - 9 27 36 (610) (78) (688) (601) (51) (652) 33 109 (497) - - - - 33 109 (497) (70) (91) (70) (2,180) (2,180) (40) (2,220) At 31 December 2022 9,102 45,928 (994) 1,010 (610) 35,558 89,994 181 90,175 1. Principal Accounting Policies Basis of preparation The Group’s financial statements consolidate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. They have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the United Kingdom and on the historical cost basis. The functional currency of the Group is Pounds Sterling and the level of rounding applied is £’000. Basis of consolidation The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Going concern The Company’s available banking facilities provide headroom against the Group’s projected cash flows and the Directors accordingly consider that it is appropriate to continue to adopt the going concern basis in preparing these financial statements. Turnover and revenue recognition policy The Group’s operating subsidiaries carry out a range of different activities. The following policies apply consistently across subsidiaries. Revenue is recognised when a performance obligation is satisfied, in accordance with the terms of the contractual arrangement. Where there are contracts with a variety of performance obligations that are distinct, an element of the transaction price is allocated to each performance obligation and recognised as revenue as and when that performance obligation is satisfied. Revenue is allocated to each of the performance obligations based on relative standalone selling prices. Typically, performance obligations are satisfied over time as services are rendered. The nature of the work is almost always such that it relates to facts and circumstances that are specific to the Client, with the result that the work performed does not create an asset with alternative use to the Group. Therefore, in accordance with IFRS 15, even if the Client will receive the benefits of the Group's performance only when the Client receives the piece of work, the performance obligation is regarded as being satisfied over time. The Group is generally entitled to payment for work performed to date. Contracts are typically short-term in nature and do not include any significant financing components. The Group is generally paid in arrears for its services and invoices are typically payable within 30 to 60 days. Where performance obligations have been satisfied and the recorded turnover exceeds amounts invoiced to Clients, the excess is classified as accrued income (within Trade and other receivables). Accrued income is a contract asset and is transferred to trade receivables when the right to consideration is unconditional and billed per the terms of the contractual agreement. Where amounts invoiced to Clients exceed recorded turnover, because performance obligations have not yet been satisfied, the excess is classified as deferred income (within Trade and other payables). These balances are considered contract liabilities. The Group has applied the practical expedient permitted by IFRS 15 to not disclose the transaction price allocated to performance obligations unsatisfied or partially unsatisfied as of the end of the reporting period as contracts typically have an original expected duration of a year or less. The amount of revenue recognised depends on whether the Group acts as principal or agent. Third party costs are included in revenue when the Group acts as principal with respect to the goods or services provided to the Client and are excluded when the Group acts as agent, by reference to whether or not the Group controls the relevant good or service before it is transferred to the Client. The Group has not recognised any significant costs incurred to obtain or fulfil a Client contract as assets on the balance sheet. Costs to obtain a contract are typically expensed as incurred as the contracts are generally short term in nature. Turnover represents fees, commissions, rechargeable expenses and sales of materials performed subject to specific contracts. 58 Annual report for the year ended December 2022 Annual report for the year ended December 2022 59 Financial Statements Consolidated Financial Statements & Notes Further details on revenue recognition are detailed by activity below: incurred to date and actual labour hours devoted to date relative to the total expected costs and labour hours. (i) Advertising and ad hoc marketing campaigns (vi) Learning and training This typically involves fees for strategic planning and creative concepts through to execution and delivery of final campaigns. Revenue may consist of various arrangements, but typically comprises retainer fees or fixed price contracts, both of which are recognised over time. Retainer fees are recognised on a straight-line basis over the term of the contract. For fixed price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is typically determined based on third party costs incurred to date and actual labour hours devoted to date relative to the total expected costs and labour hours. (ii) Website, portal or application design and build (Digital) The Group derives revenue from designing and building websites, portals and applications under fixed price contracts. Revenue is typically recognised over time, determined by applying the hours devoted to date as a percentage of total hours expected. (iii) Software development (Digital) This revenue stream involves the supply of software licences and aftersales support. If billed as a single fixed price fee, each of these services is accounted for as a separate performance obligation, the transaction price allocated to each being determined by the labour hours and cost required to supply each service. Revenue attributable to the provision of the software is recognised at a point in time when the software licence is made available for use by the Client. Revenue attributable to the aftersales support is recognised monthly on a straight-line basis over the period support is to be provided. In some cases, the contract might also cover the provision of data migration and training services, but each of these is separately billed, the revenue being recognised over time, determined by applying the hours devoted to date as a percentage of total hours expected. (iv) Media buying Revenue is derived from identifying the Client’s media requirements and managing and placing orders for the appropriate media. Revenue is typically recognised at the point in time the media is aired or on the date of publication. Revenue is in the form of fixed price fees from planning and designing training courses and from performing training courses. Specific training is recognised at a point in time on the date the training takes place. If the service provided includes planning and designing the training course and material, then revenue would be attributed to this performance obligation and recognised over time based on third party costs incurred to date and actual labour hours devoted to date relative to the total expected costs and labour hours. (vii) Public Relations PR revenue is typically derived from retainer fees and fixed price fees for services to be performed subject to specific agreement. Revenue under these arrangements is earned over time, in accordance with the terms of the contractual arrangement. Retainer fee revenue is recognised on a straight-line basis over the period covered by the fee. For ad hoc fixed price projects, the Group generally applies the hours devoted to date as a percentage of total hours as the basis for recognising revenue. Goodwill and other intangible assets Goodwill Goodwill arising from the purchase of subsidiary undertakings and trade acquisitions represents the excess of the total cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary acquired. The total cost of acquisition represents both the unconditional payments made in cash and shares on acquisition and an estimate of future contingent consideration payments to vendors in respect of earn-outs. Goodwill is not amortised but is reviewed annually for impairment. Goodwill impairment is assessed by comparing the carrying value of goodwill for each cash-generating unit to the future cash flows, discounted to their net present value using an appropriate discount rate, derived from the relevant underlying assets. Where the net present value of future cash flows is below the carrying value of goodwill, an impairment adjustment is recognised in profit or loss and is not subsequently reversed. v) Exhibitions, events and conferences Other intangible assets Revenue is derived from the design, planning and supply of exhibition stands, events and conferences. Revenue is typically recognised over time based on third party costs Other intangible assets separately identified as part of an acquisition are amortised over periods of between 3 and 10 years, except certain brand names which are considered to have an indefinite useful life. The value of such brand names is not amortised, but rather an annual impairment test is applied and any shortfall in the present value of future cash flows derived from the brand name versus the carrying value is recognised in profit and loss. Amortisation and impairment charges are excluded from headline profit. Other intangible assets also include costs associated with the development of identifiable software and other products. Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources available to complete development and to use or sell the asset. Otherwise, it is recognised in profit or loss as incurred. Development expenditure includes all directly related costs, including internal staff costs and an element of directly attributable overheads. Expenditure on research and sales related activities is recognised in profit or loss. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. These assets are carried at cost less accumulated amortisation and are amortised over periods of between 3 and 5 years. Impairments are recognized if the carrying amount of an asset exceeds the recoverable amount. Amortisation of software and product development costs is included within operating expenses. Contingent consideration payments The Directors manage the financial risk associated with making business acquisitions by structuring the terms of the acquisition, wherever possible, to include an element of the total consideration payable for the business which is contingent on its future profitability (i.e. earn-out). Contingent consideration is initially recognised at its estimated fair value based on a reasonable estimate of the amounts expected to be paid. Changes in the fair value of the contingent consideration that arise from additional information obtained during the first twelve months from the acquisition date, about facts and circumstances that existed at the acquisition date, are adjusted retrospectively, with corresponding adjustments against goodwill. The fair value of contingent consideration is reviewed annually and subsequent changes in the fair value are recognised in profit or loss but excluded from headline profits. financial statements and concluded that the main areas of judgement are, in order of significance: Potential impairment of goodwill The potential impairment of goodwill is based on estimates of future cash flows derived from the financial projections of each cash-generating unit over an initial three-year period and assumptions about growth thereafter, discussed in more detail in Note 11. Contingent payments in respect of acquisitions Contingent consideration, by definition, depends on uncertain future events. At the time of purchasing a business, the Directors use the financial projections obtained during due diligence as the basis for estimating contingent consideration. Subsequent estimates benefit from the greater insight gained in the post-acquisition period and the business’ track record of financial performance. Revenue recognition policies in respect of contracts which straddle the year end Estimates of revenue to be recognised on contracts which straddle the year end are typically based on the amount of time so far committed to those contracts by reference to timesheets in relation to the total estimated time to complete them. Valuation of intangible assets on acquisitions Determining the separate components of intangible assets acquired on acquisitions is a matter of judgement exercised by the Directors. Brand names, customer relationships and intellectual property rights are the most frequently identified intangible assets. When considering the valuation of intangible assets on acquisitions, a range of methods is undertaken both for identifying intangibles and placing valuations on them. The valuation of each element is assessed by reference to commonly used techniques, such as “relief from royalty” and “excess earnings” and to industry leaders and competitors. Estimating the length of Client retention is the principal uncertainty and draws on historic experience. Intangible development costs The Group capitalises development costs within intangible fixed assets. The key sources of estimation uncertainty involved in this are: i. Assessment of proportion of employees’ time spent Accounting estimates and judgements on product development. The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the ii. Period of amortisation – the length of time between the creation of the asset and it being consumed in the sales of the products created. 60 Annual report for the year ended December 2022 Annual report for the year ended December 2022 61 Financial Statements Consolidated Financial Statements & Notes Share-based payment transactions Financial instruments Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of shares that will eventually vest. Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. Issue costs are offset against the proceeds of such instruments. Financial liabilities are released to income when the liability is extinguished. The fair value of nil-cost share options is measured by use of a Black Scholes model on the grounds that there are no market-related vesting conditions. The fair value of Growth Shares is measured by use of a Monte Carlo simulation model on the grounds that they are subject to market- based conditions (the future share price of the Company). Foreign currencies Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies arising from normal trading activities are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are reflected in the profit or loss accordingly. The income statements of overseas subsidiary undertakings are translated at average exchange rates and the year-end net assets of these companies are translated at year-end exchange rates. Exchange differences arising from retranslation of the opening net assets are reported in the Consolidated Statement of Comprehensive Income. Property, plant and equipment Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the date of acquisition, of each asset evenly over its expected useful economic life, as follows: Short leasehold improvements Period of the lease Motor vehicles 25% per annum Fixtures, fittings and office equipment 10-33% per annum Computer equipment 25-33% per annum Stock Stock is stated at the lower of cost and net realisable value and includes the costs of direct materials and purchases, and the costs of direct labour. Net realisable value is based on estimated invoice value less further costs expected to be incurred to completion. Leases The Group recognises a right of use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short term leases (defined as leases with a term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the lease term. Lease incentives are spread over the term of the lease. The lease liability is presented as a separate line in the Consolidated Balance Sheet. The lease liability is initially measured at the present value of all future lease payments, discounted at the rate implicit in the lease, or if this rate is not readily determined, the incremental borrowing rate of the Group. Lease payments included in the measurement of the lease liability include: • fixed and variable lease payments, less any lease incentives; • the amount expected to be payable by the lessee under residual value guarantees; • the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and • payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest rate method) and by reducing the carrying amount by any lease payments made. The Group remeasures the lease liability and makes a corresponding adjustment to the related right of use asset whenever: • the lease term has changed or there is a change in the assessment of exercise of a purchase option; or • a lease contract is modified and the lease modification is not accounted for as a separate lease in which case the liability is remeasured by discounting the revised lease payments using a revised discount rate. The Group has applied the practical expedient that allows lessees not to account for rent concessions as lease modifications if they are a direct consequence of COVID-19. New standards, interpretations and amendments to existing standards There are no new or amended standards or interpretations that impact the Group’s financial statements. At the date of authorisation of these financial statements, certain new standards, amendments, and interpretations to existing standards have been published by the IASB but are not yet effective and have not been adopted early by the Group. No new standards in issue but not yet effective are expected to have a material impact on the Group. The right of use assets are presented as a separate line in the Consolidated Balance Sheet. The right of use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day of the lease and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The costs are included in the related right of use asset. Right of use assets are depreciated over the shorter period of lease term and useful life of the underlying asset, unless a lease transfers ownership of the underlying asset or the cost of the right of use assets reflects that the Group expects to exercise a purchase option, in which case the right of use asset is depreciated over the useful life of the underlying asset. The depreciation starts at commencement of the lease. Deferred taxation Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Where material intangible assets are recognised on acquisition which will be amortised over their useful lives, a deferred tax liability is also recognised and released against income over the corresponding period. 62 Annual report for the year ended December 2022 Annual report for the year ended December 2022 63 Financial Statements Consolidated Financial Statements & Notes 2. Segmental Information IFRS 15: Revenue from Contracts with Customers requires the disaggregation of revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Board has considered how the Group’s revenue might be disaggregated in order to meet the requirements of IFRS 15 and has concluded that the activity and geographical segmentation disclosures set out below represent the most appropriate categories of disaggregation. The Board considers that neither differences between types of Clients, sales channels and markets nor differences between contract duration and the timing of transfer of goods or services are sufficiently significant to require further disaggregation. For management purposes the Group monitored the performance of its separate operating units, each of which carries out a range of activities, as a single business segment. However, since different activities have different revenue characteristics, the Group’s turnover and operating income has been disaggregated below to provide additional benefit to readers of these financial statements. Following the implementation of a Shared Services function from the start of 2018 and the resulting transfer of certain Agency-specific contracts onto centrally-managed arrangements, a significant portion of the total operating costs are now centrally managed and segment information is therefore now only presented down to the operating income level. Year to 31 December 2022 Turnover Operating income Year to 31 December 2021 Turnover Operating income Advertising & Digital £’000 109,406 62,045 Advertising & Digital £’000 103,062 56,725 Media Buying Events Public Relations £’000 39,008 4,335 £’000 25,440 6,255 £’000 8,831 7,179 Media Buying Events Public Relations £’000 28,878 3,305 £’000 13,081 5,492 £’000 8,266 6,973 Total £’000 182,685 79,814 Total £’000 153,287 72,495 As contracts typically have an original expected duration of less than one year, the full amount of the accrued income balance at the beginning of the year is recognised in revenue during the year. All media buying turnover is recognised at a point in time. Virtually all other turnover from continuing operations is recognised over time. Assets and liabilities are not split between activities. Geographical segmentation The following table provides an analysis of the Group’s operating income by region of activity: UK USA Asia Rest of Europe Year to 31 December 2022 Year to 31 December 2021 £’000 67,766 9,156 2,667 225 79,814 £’000 63,160 6,425 2,720 190 72,495 3. Reconciliation of Headline Profit to Reported Profit The Board believes that headline profits, which eliminate certain amounts from the reported figures, provide a better understanding of the underlying trading of the Group. The adjustments to reported profits generally fall into three categories: acquisition-related items, exceptional restructuring costs and start-up costs. Headline profit Year ended 31 December 2022 PBT £’000 7,771 PAT £’000 6,130 Goodwill and business impairment (5,257) (4,697) Start-up costs Acquisition-related items (Note 4) Restructuring costs Reported profit (776) (593) (402) 743 (629) (443) (325) 36 Year ended 31 December 2021 PAT £’000 5,819 - (341) 243 (402) 5,319 PBT £’000 7,458 - (367) 156 (496) 6,751 Goodwill and business impairment costs relate to the impairment of Splash goodwill and the impairment of Pathfindr fixed assets and stock, following a review of the valuation of these cash generating units and assets, and the loss on disposal of the Fenturi investment in associate and write-off of intercompany balance. Start-up costs derive from organically started businesses or loss-making businesses acquired and comprise the trading losses of such entities until the earlier of two years from commencement or when they show evidence of becoming sustainably profitable. Start-up costs in 2022 relate to the trading losses of the new Livity youth-marketing offer as well as costs associated with the early-stage foundation of performance marketing and data science capabilities. Start-up costs in 2021 related to the launch of a Mongoose Sports venture in Birmingham and the venture Alive, launched in Asia in 2021. Restructuring costs in 2022 comprised the costs associated with the major fundamental restructuring of the Splash business. Board restructuring costs in 2021 comprised leaving packages payable to former MISSION directors Robert Day, Peter Fitzwilliam and David Morgan following their resignations. 64 Annual report for the year ended December 2022 Annual report for the year ended December 2022 65 Financial Statements Consolidated Financial Statements & Notes 4. Acquisition Adjustments 6. Profit Before Taxation Profit or loss on ordinary activities before taxation is stated after charging / (crediting): Decrease in fair value of contingent consideration Amortisation of other intangibles recognised on acquisitions Acquisition transaction costs expensed Year to 31 December 2022 £’000 334 (519) (408) (593) Year to 31 December 2021 £’000 761 (446) (159) 156 The decrease in fair value of contingent consideration relates to a net downward (2021: downward) revision in the estimate payable to vendors of businesses acquired in prior years. Acquisition transaction costs relate to professional fees in connection with acquisitions made or contemplated. 5. Net Finance Costs Interest on bank loans and overdrafts, net of interest on bank deposits Amortisation of bank debt arrangement fees Interest expense on lease liabilities Net finance costs Year to 31 December 2022 £’000 (656) (48) (342) (1,046) Year to 31 December 2021 £’000 (283) (67) (351) (701) Depreciation of owned tangible fixed assets Depreciation expense on right of use assets Amortisation of intangible assets recognized on acquisitions Amortisation of other intangible assets Expense relating to short term leases Expense relating to low value leases Income from subleasing right of use assets Staff costs before furlough grants (Note 7) Furlough grants received (Note 7) Bad debts and net movement in provision for bad debts Auditors’ remuneration (Profit) / loss on foreign exchange Auditors’ remuneration may be analysed by: Audit of Group’s annual report and financial statements Audit of subsidiaries Audit related assurance services Corporate finance Year to 31 December 2022 Year to 31 December 2021 £’000 1,068 1,918 519 337 376 12 (194) 55,032 - 386 238 (411) Year to 31 December 2022 £’000 56 128 5 49 238 £’000 1,094 1,995 446 494 521 17 - 49,629 (347) 177 179 51 Year to 31 December 2021 £’000 45 111 5 18 179 66 Annual report for the year ended December 2022 Annual report for the year ended December 2022 67 Financial Statements Consolidated Financial Statements & Notes 7. Employee Information Directors’ Remuneration The average number of Directors and staff employed by the Group during the year analysed by segment, was as follows: Directors’ remuneration is derived from their role as either a Board member of MISSION or as an Executive Director of one of the Group’s Agencies. Remuneration for the year was as follows (all amounts in £’000): Year to 31 December 2022 Year to 31 December 2021 Salary / Fees Performance - related payments Benefits Pension Advertising & Digital Media Buying Events Public Relations Central 878 48 69 86 6 1,087 The aggregate employee costs of these persons included in operating expenses were as follows: Wages and salaries Social security costs Pension costs Share based payment expense Total employee costs before furlough grants Furlough grants received Net employee costs after furlough grants Year to 31 December 2022 £’000 47,593 5,453 1,844 142 55,032 - 55,032 760 57 78 84 5 984 Year to 31 December 2021 £’000 42,522 5,075 1,806 226 49,629 (347) 49,282 The Group operates twenty six (2021: twenty) defined contribution pension schemes. The pension cost charge for the year represents contributions payable by the Group to the schemes. At the end of the financial year outstanding contributions amounted to £279,000 (2021: £275,000). As Board Directors Julian Hanson-Smith (Chair) James Clifton (Chief Executive) Eliza Filby (Non-Executive from 1 January 2022) Mark Lund (Non-Executive from 1 October 2022) Giles Lee (Chief Financial Officer) Andy Nash (Non-Executive to 30 September 2022) Total As Agency Directors Dylan Bogg Sue Mullen Fiona Shepherd Former Directors Barry Cook (to 30 April 2021) Robert Day (to 30 September 2021) Peter Fitzwilliam (to 30 April 2021) David Morgan (to 30 September 2021) Total Notes: 80 310 45 25 222 34 716 151 127 221 - - - - - 156 - - 101 - 257 2 4 111 - - - - 1 10 1 - 5 - 17 11 1 5 - - - - - 4 - - 22 2 28 10 11 20 - - - - Total 2022 81 480 46 25 350 36 1,018 174 143 357 - - - - Total 2021 63 437 - - 319 45 864 180 176 259 10 422* 177* 338* 1,215 374 34 69 1,692 2,426* * During 2021 costs were incurred relating to former Directors as part of restructuring the Board. These costs have been treated as headline adjustments (see Note 3). 68 Annual report for the year ended December 2022 Annual report for the year ended December 2022 69 Financial Statements Consolidated Financial Statements & Notes 8. Taxation 9. Dividends Amounts recognised as distributions to equity holders in the year: Interim dividend of 0.83 pence (2021: 0.80 pence) per share Final dividend of 1.60 pence (2021: deferred 2019 final dividend of 1.53 pence) per share Year to 31 December 2022 £’000 743 1,437 2,180 Year to 31 December 2021 £’000 721 1,379 2,100 The 2019 final dividend of 1.53 pence per share was proposed in the 2019 annual report and accounts but subsequently deferred due to the priority to preserve cash during the pandemic. Following the much-improved net debt position at 31 December 2020, this dividend was paid in March 2021 and, in accordance with IFRS, recognised in the 2021 accounts. A final dividend of 1.67 pence per share is to be paid in July 2023 should it be approved by shareholders at the AGM. In accordance with IFRS this final dividend will be recognised in the 2023 accounts. Current tax: UK corporation tax at 19.00% (2021: 19.00%) Adjustment for prior periods Foreign tax on profits of the period Deferred tax: Current year originating temporary differences Tax charge for the year Year to 31 December 2022 £’000 380 (36) 364 708 (1) 707 Factors Affecting the Tax Charge for the Current Year: The tax assessed for the year is higher (2021: higher) than the standard rate of corporation tax in the UK. The differences are: Profit before taxation Profit on ordinary activities before tax at the standard rate of corporation tax of 19.00% (2021: 19.00%) Effect of: Rate changes Non-deductible expenses / income not taxable Depreciation (lower than) / in excess of capital allowances Losses not utilised Higher rates on overseas earnings Adjustments in respect of prior periods Other differences Actual tax charge for the year Year to 31 December 2022 £’000 743 141 (99) 562 (76) - 190 (36) 25 707 Year to 31 December 2021 £’000 1,133 (64) 226 1,295 137 1,432 Year to 31 December 2021 £’000 6,751 1,283 119 (42) (32) 36 160 (64) (28) 1,432 70 Annual report for the year ended December 2022 Annual report for the year ended December 2022 71 Financial Statements Consolidated Financial Statements & Notes 10. Earnings Per Share 11. Intangible Assets The calculation of the basic and diluted earnings per share is based on the following data, determined in accordance with the provisions of IAS 33: Earnings Per Share. Earnings Reported profit for the year Attributable to: Equity holders of the parent Non-controlling interests Headline earnings (Note 3) Attributable to: Equity holders of the parent Non-controlling interests Number of shares Year to 31 December 2022 £’000 Year to 31 December 2021 £’000 9 27 36 6,103 27 6,130 5,423 (104) 5,319 5,923 (104) 5,819 Weighted average number of Ordinary shares for the purpose of basic earnings per share 89,906,999 90,134,211 Dilutive effect of securities: Employee share options Weighted average number of Ordinary shares for the purpose of diluted earnings per share Reported basis Basic earnings per share (pence) Diluted earnings per share (pence) Headline basis: Basic earnings per share (pence) Diluted earnings per share (pence) 617,992 90,524,991 1,414,543 91,548,754 0.0 0.0 6.8 6.7 6.0 5.9 6.6 6.5 A reconciliation of the profit after tax on a reported basis and the headline basis is given in Note 3. Goodwill Other intangible assets Goodwill Cost At 1 January Recognised on acquisition of subsidiaries At 31 December Impairment adjustment At 1 January and 31 December Impairment during the year At 31 December Net book value at 31 December 31 December 2022 31 December 2021 £’000 96,213 3,528 99,741 Year to 31 December 2022 £’000 98,877 3,609 102,486 4,273 2,000 6,273 96,213 £’000 94,604 4,370 98,974 Year to 31 December 2021 £’000 96,433 2,444 98,877 4,273 - 4,273 94,604 In accordance with the Group’s accounting policies, an annual impairment test is applied to the carrying value of goodwill. The review performed assesses whether the carrying value of goodwill is supported by the net present value of projected cash flows derived from the underlying assets for each cash-generating unit (“CGU”), discounted using an appropriate discount rate. It is the Directors’ judgement that each distinct Agency represents a CGU. The initial projection period of four years includes the annual budget for each CGU, based on insight into Clients’ planned marketing expenditure and targets for net new business growth derived from historical experience, and extrapolations of the budget in subsequent years based on known factors and estimated trends. The key assumptions used by each CGU concern revenue growth and staffing levels and different assumptions are made by different CGUs based on their individual circumstances. Beyond this initial projection period, a generic long term growth rate of 2.0% is assumed for all units based on information published by market analysts. The resulting pre-tax cash flow forecasts were discounted using the Group’s estimated pre-tax Weighted Average Cost of Capital (“WACC”), which is 8.36% (2021: 8.75%, the average of the WACC over the 10 years from 2012 to 2021). As a result of the performance and restructuring of the operations of Bray Leino Splash Pte Ltd, the Directors considered it prudent to impair £2.0m of goodwill relating to this CGU. No other impairments in goodwill were required. No change to this conclusion is reached as a result of the following independent changes in assumptions: nil growth in 2023 and a one-year delay in the achievement of 2023 budgets; any reduction in short term growth rates beyond 2024; nil long term growth rates; a 1% increase in discount rate. The only change in assumptions that would result in a material impairment in the carrying value of the Group’s goodwill is an increase in discount rate of 4%, which management do not believe is a reasonably possible change in key assumption. 72 Annual report for the year ended December 2022 Annual report for the year ended December 2022 73 Financial Statements Consolidated Financial Statements & Notes 11. Intangible Assets – continued Goodwill arose from the acquisition of the following subsidiary companies and trade assets and is comprised of the following substantial components: 31 December 2022 31 December 2021 April Six Ltd and April Six (Mobility) Ltd Bray Leino Ltd Influence Sports Ltd Krow Agency Ltd and Krow Communications Ltd Mongoose Sports & Entertainment Ltd RJW & Partners Ltd Solaris Healthcare Network Ltd Soul (London) Ltd Speed Communications Agency Ltd Bray Leino Splash Pte. Ltd Story Agency Ltd (formerly Chapter Agency Ltd) Story UK Ltd ThinkBDW Ltd Other smaller acquisitions £’000 14,832 27,761 2,834 18,327 931 4,962 1,058 2,444 3,085 356 3,440 7,516 6,283 2,384 96,213 £’000 14,832 27,761 - 18,327 931 4,962 1,058 2,444 3,085 2,356 3,440 7,516 6,283 1,609 94,604 Other intangible assets Cost At 1 January 2021 Additions Disposals At 31 December 2021 Additions Transfers to PPE Disposals Impairment At 31 December 2022 Amortisation and impairment At 1 January 2021 Charge for the year Disposals At 31 December 2021 Charge for the year Transfers to PPE Disposals Impairment At 31 December 2022 Net book value at 31 December 2022 Net book value at 31 December 2021 Software and product development Trade names Customer relationships £’000 £’000 £’000 2,969 1,024 (165) 3,828 1,852 (103) (3) (2,875) 2,699 1,465 494 (165) 1,794 337 (100) (2) (277) 1,752 947 2,034 1,858 100 - 1,958 150 - - - 5,994 160 - 6,154 614 - - - 2,108 6,768 462 91 - 553 110 - - - 663 1,445 1,405 4,868 355 - 5,223 409 - - - 5,632 1,136 931 Total £’000 10,821 1,284 (165) 11,940 2,616 (103) (3) (2,875) 11,575 6,795 940 (165) 7,570 856 (100) (2) (277) 8,047 3,528 4,370 Additions of £1,852,000 (2021: £1,024,000) in the year include costs associated with the development of identifiable software and other products that are expected to generate economic benefits in excess of the costs of development. Included within the value of intangible assets is an amount of £783,000 (2021: £783,000) relating to trade names of businesses acquired, which are deemed to have indefinite useful lives. These trade names have attained recognition in the marketplace and the companies acquired will continue to operate under the relevant trade names, which will play a role in developing and sustaining customer relationships for the foreseeable future. As such, it is the Directors’ judgement that the useful life of these trade names is considered to be indefinite. Intangible assets include an amount of nil (2021: £1,202,000) relating to product development costs in Pathfindr. At the end of 2022 it was decided that the full value of capitalised product development costs in Pathfindr should be impaired as the sales and improved profitability that was expected from these products was believed to be unlikely to materialise in the short-term. 74 Annual report for the year ended December 2022 Annual report for the year ended December 2022 75 Financial Statements Consolidated Financial Statements & Notes 11. Intangible Assets – continued 13. Property, Plant and Equipment Also included is an amount of £393,000 (2021: £468,000) relating to the krow trade name, which has attained recognition in the marketplace and plays a role in attracting and retaining Clients. This value will be amortised over the next 5 years (2021: 6 years). In addition there are amounts of £393,000 (2021: £708,000) and £473,000 (2021: nil) included relating to krow customer relationships and Influence customer relationships respectively. krow and Influence have developed a base of customers to whom the Group would expect to continue selling in the future. The remaining useful life of the krow customer relationships is deemed to be 1 year (2021: 2 years), and of the Influence customer relationships is deemed to be 3 years. The values will be amortised over these periods. 12. Subsidiaries The Group’s principal trading subsidiaries are listed below. All subsidiaries are 100% owned and all are incorporated in the United Kingdom, except for Spark Marketing Services Ltd which is 75% owned, Pathfindr Ltd which is 80% owned, and Bray Leino Splash Pte. Ltd which is 70% owned and incorporated in Singapore. A full list of all Group companies at 31 December 2022 can be found in Note 42 to the Company Financial Statements. Subsidiary undertaking Nature of business April Six Ltd Marketing communications, specialising in the technology sector April Six (Mobility) Ltd (formerly RLA Group Ltd) Marketing communications, specialising in the automotive sector Bray Leino Ltd Bray Leino Splash Pte. Ltd Influence Sports Ltd Krow Agency Ltd Krow Communications Ltd Advertising, media buying, digital marketing, events and training Digital marketing Sports and entertainment marketing Marketing communications Marketing communications Mongoose Sports & Entertainment Ltd Sports, fitness and entertainment marketing Pathfindr Ltd RJW & Partners Ltd Soul (London) Ltd Creator of IIoT solutions Pricing and market access in the healthcare sector Marketing communications Solaris Healthcare Network Ltd Marketing communications, specialising in the medical sector Spark Marketing Services (formerly Mongoose Promotions Ltd) Sales promotion Speed Communications Agency Ltd Public relations Story Agency Ltd (formerly Chapter Agency Ltd) Marketing communications Story UK Ltd ThinkBDW Ltd Marketing communications Marketing communications, specialising in the property sector Fixtures & fittings and office equipment Property Computer equipment Motor vehicles £’000 £’000 £’000 £’000 2,280 3,038 3,648 - 42 (23) 2,299 14 111 (4) (169) - 2,251 1,652 140 (1) 1,791 144 - (148) - 1,787 464 508 - 118 (775) 2,381 7 256 275 (150) (62) 2,707 2,153 388 (728) 1,813 284 268 (103) (41) 2,221 486 568 1 663 (338) 3,974 34 725 (168) (403) - 4,162 2,780 549 (325) 3,004 618 (168) (398) - 3,056 1,106 970 59 - 61 (1) 119 - - - (17) - 102 46 17 - 63 22 - (17) - 68 34 56 Total £’000 9,025 1 884 (1,137) 8,773 55 1,092 103 (739) (62) 9,222 6,631 1,094 (1,054) 6,671 1,068 100 (666) (41) 7,132 2,090 2,102 Cost or valuation At 1 January 2021 Acquisition of subsidiaries Additions Disposals At 31 December 2021 Acquisition of subsidiaries Additions Transfers between categories and from other intangible assets Disposals Impairment At 31 December 2022 Depreciation At 1 January 2021 Charge for the year Disposals At 31 December 2021 Charge for the year Transfers between categories and from other intangible assets Disposals Impairment At 31 December 2022 Net book value at 31 December 2022 Net book value at 31 December 2021 76 Annual report for the year ended December 2022 Annual report for the year ended December 2022 77 Financial Statements Consolidated Financial Statements & Notes 14. Right of Use Assets 16. Trade and Other Receivables The Group leases several assets including property, office equipment, computer equipment and motor vehicles. Fixtures & fittings and office equipment Property Computer equipment Motor vehicles £’000 £’000 £’000 £’000 Net carrying amount At 31 December 2021 At 31 December 2022 Depreciation expense Year to 31 December 2021 Year to 31 December 2022 Additions Year to 31 December 2021 Year to 31 December 2022 8,815 9,004 1,700 1,638 184 1,705 24 22 18 2 2 3 15. Investments, Associates and Joint Ventures At 1 January Profit during the year Additions Disposal of Fenturi At 31 December In 2022 Fenturi was disposed of. 302 506 272 273 225 467 8 4 5 5 4 8 Year to 31 December 2022 £’000 517 160 - (240) 437 Total £’000 9,149 9,536 1,995 1,918 415 2,183 Year to 31 December 2021 £’000 317 140 60 - 517 Trade receivables Accrued income Prepayments Other receivables 31 December 2022 31 December 2021 £’000 25,052 13,273 2,051 879 41,255 £’000 25,727 11,551 2,154 1,106 40,538 An allowance has been made for estimated irrecoverable amounts from the provision of services of £228,000 (2021: £225,000). The estimated irrecoverable amount is arrived at by considering the historical loss rate and adjusting for current expectations, Client base and economic conditions. Both historical losses and expected future losses being very low, the Directors consider it appropriate to apply a single average rate for expected credit losses to the overall population of trade receivables and accrued income. Accrued income relates to unbilled work in progress and has substantially the same risk characteristics as the trade receivables for the same types of contracts. The Directors consider that the carrying amount of trade and other receivables approximates their fair value. Gross trade receivables Gross accrued income Total trade receivables and accrued income Expected loss rate Provision for doubtful debts 31 December 2022 31 December 2021 £’000 25,280 13,273 38,553 0.6% 228 £’000 25,952 11,551 37,503 0.6% 225 Trade receivables include £6.5m (2021: £7.4m) that is past due but not impaired, of which £1.0m (2021: £1.1m) is greater than 3 months past due. Accrued income has increased by £1,722,000 as a result of an increase in the volume of work taking place just prior to the 2022 year end, including two large campaigns from new clients, where the work has been performed prior to year end, but the customer will only be invoiced and pay in 2023. 78 Annual report for the year ended December 2022 Annual report for the year ended December 2022 79 Financial Statements Consolidated Financial Statements & Notes 16. Trade and Other Receivables – continued 19. Bank Overdrafts, Loans and Net Bank Debt Credit risk The Group’s principal financial assets are trade receivables, accrued income and bank balances, which represent the Group’s maximum exposure to credit risk in relation to financial assets. The Group’s credit risk is primarily attributable to its trade receivables and accrued income. The credit risk on cash balances is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The majority of the Group’s trade receivables and accrued income is due from large national or multinational companies where the risk of default is considered low. In order to mitigate this risk further, the Group has arranged credit insurance on certain of its trade receivables as deemed appropriate. Where credit insurance is not considered cost effective, the Group monitors credit-worthiness closely and mitigates risk, where appropriate, through payment plans. There can be no assurance that any of the Group’s Clients will continue to utilise the Group’s services to the same extent, or at all, in the future. The loss of, or a significant reduction in advertising and marketing spending by, the Group’s largest Clients, if not replaced by new Client accounts or an increase in business from existing Clients, would adversely affect the Group’s prospects, business, financial condition and results of operations. The impact would however be limited as only three Clients represented more than 3% of total operating income in 2022 (2021: three Clients). 17. Cash and Short Term Deposits Cash and short term deposits comprise cash held by the Group and short term bank deposits. 18. Trade and Other Payables Bank loan outstanding Unamortised bank debt arrangement fees Carrying value of loan outstanding Less: Cash and short term deposits Net bank debt The borrowings are repayable as follows: Less than one year In one to two years In two to three years In three to four years 31 December 2022 31 December 2021 Unamortised bank debt arrangement fees Trade creditors Deferred income Other creditors and accruals Other tax and social security payable Lease liabilities (Note 20) £’000 14,454 8,903 10,771 3,957 1,582 39,667 £’000 10,807 9,128 11,196 4,611 1,596 37,338 Trade creditors increased as a result of the increased level of trading towards the end of 2022 versus 2021, accompanied by slightly slower payment of creditors as evidenced by an increase in trade creditors days. The Directors consider that the carrying amount of trade and other payables approximates their fair value. 31 December 2022 31 December 2021 £’000 17,575 (60) 17,515 (6,153) 11,362 27 17,521 22 5 17,575 (60) 17,515 27 17,488 £’000 16,500 (107) 16,393 (6,066) 10,327 - - 16,500 - 16,500 (107) 16,393 - 16,393 Less: Amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months Bank debt arrangement fees, where they can be amortised over the life of the loan facility, are included in finance costs. The unamortised portion is reported as a reduction in bank loans outstanding. Included in the above is £75,000 of bank loans owing by Populate Social Ltd, one of the companies acquired during the year. These borrowings are repayable over a four year period. At 31 December 2022, the Group’s committed bank facilities comprised a revolving credit facility of £20m, expiring on 5 April 2024, with an option to increase the facility by £5m and by one year. Interest on the new facility is based on SONIA (sterling overnight index average) plus a margin of between 1.50% and 2.25% depending on the Group’s debt leverage ratio, payable in cash on loan rollover dates. On 8 March 2023 the option to extend the facility by one year was exercised, extending the facility expiration date to 5 April 2025. In addition to its committed facilities, at 31 December 2022 the Group had available an overdraft facility of up to £3.0m with interest payable by reference to National Westminster Bank plc Base Rate plus 2.25%. At 31 December 2022, there was a cross guarantee structure in place with the Group’s bankers by means of a fixed and floating charge over all of the assets of the Group companies in favour of National Westminster Bank plc. All borrowings are in sterling. 80 Annual report for the year ended December 2022 Annual report for the year ended December 2022 81 Financial Statements Consolidated Financial Statements & Notes 20. Lease Liabilities Obligations under leases are due as follows: In one year or less (shown in trade and other payables) In more than one year 31 December 2022 31 December 2021 £’000 1,582 8,481 10,063 £’000 1,596 8,077 9,673 The fair values of the Group’s lease obligations approximate their carrying amount. The Group’s obligations under leases are secured by the lessor’s charge over the leased assets. 21. Acquisitions 21.1 Acquisition Obligations The terms of an acquisition provide that the value of the purchase consideration, which may be payable in cash or shares at a future date, depends on uncertain future events such as the future performance of the acquired company. The Directors estimate that the liability for contingent consideration payments is as follows: 31 December 2022 31 December 2021 Cash Shares Total Cash Shares £’000 £’000 £’000 £’000 £’000 Less than one year Between one and two years In more than two years but less than three years In more than three years but less than four years 1,371 53 1,820 899 4,143 - - - - - A reconciliation of acquisition obligations during the period is as follows: At 31 December 2021 Obligations settled in the period Adjustments to estimates of obligations New acquisitions At 31 December 2022 1,371 53 1,820 899 4,143 Cash £’000 3,315 (790) (334) 1,952 4,143 692 430 300 1,893 3,315 - - - - - Shares £’000 - - - - - Total £’000 692 430 300 1,893 3,315 Total £’000 3,315 (790) (334) 1,952 4,143 21. Acquisitions – continued 21.2 Acquisition of Influence Sports Ltd On 7 December 2022, the Group acquired the entire issued share capital of Influence Sports Ltd (“Influence”). Headquartered in London and with a strong presence in the US, Influence works with sponsors and brands, rights holders, investors and industry Clients to deliver marketing communications strategies, commercial programs, and actionable market intelligence. The fair value of the consideration given for the acquisition was £3,337,000, comprising initial cash consideration and deferred contingent consideration. The deferred contingent consideration is to be satisfied by the issue of new ordinary shares up to a maximum of 40% at MISSION's discretion, with the balance payable in cash. Costs relating to the acquisition amounted to £128,000 and were expensed. Maximum contingent consideration of £6,500,000 is dependent on Influence achieving a profit target over the period 1 January 2023 to 31 December 2025. The Group has provided for contingent consideration of £1,780,000 to date. The fair value of the net identifiable assets acquired was £73,000 resulting in goodwill and previously unrecognised other intangible assets of £3,264,000. Goodwill arises on consolidation and is not tax-deductible. Management carried out a review to assess whether any other intangible assets were acquired as part of the transaction. Management concluded that both a brand name and customer relationships were acquired and attributed a value to each of these by applying commonly accepted valuation methodologies. The goodwill arising on the acquisition is attributable to the anticipated profitability of Influence. Net assets acquired: Fixed assets Trade and other receivables Cash and cash equivalents Trade and other payables Deferred tax Other intangibles recognised at acquisition Deferred tax adjustment Goodwill Total consideration Satisfied by: Cash Deferred contingent consideration Book value £’000 Fair value adjustments £’000 9 460 89 (483) (2) 73 - - 73 - - - - - - 573 (143) 430 Fair value £’000 9 460 89 (483) (2) 73 573 (143) 503 2,834 3,337 1,557 1,780 3,337 Influence contributed turnover of £439,000, operating income of £329,000 and headline operating profit of £222,000 to the results of the Group in 2022. 82 Annual report for the year ended December 2022 Annual report for the year ended December 2022 83 Financial Statements Consolidated Financial Statements & Notes 21. Acquisitions – continued 21.3 Other Acquisitions A total of £508,000 was invested in other acquisitions during the year, comprising initial cash consideration of £336,000 and deferred contingent consideration of £172,000. 21.4 Pro-forma results including acquisitions The Directors estimate that the turnover, operating income and headline operating profit of the Group would have been approximately £185.2m, £80.8m and £9.0m had the Group consolidated the results of the acquisitions made during the year, from the beginning of the year. 22. Share Capital 23. Own Shares At 31 December 2020 Awarded or sold during the year At 31 December 2021 Own shares purchased Awarded or sold during the year At 31 December 2022 No. of shares £'000 897,814 (179,676) 718,138 827,937 (50,537) 1,495,538 591 (73) 518 497 (21) 994 Allotted and called up: 91,015,897 Ordinary shares of 10p each (2021: 91,015,897 Ordinary shares of 10p each) Share-based incentives The Group has the following share-based incentives in issue: 31 December 2022 £’000 31 December 2021 £’000 9,102 9,102 TMMG Long Term Incentive Plan At start of year 711,211 Growth Share Scheme 3,200,000 Granted/ acquired Waived/ lapsed Exercised At end of year - - (146,628) (171,362) 393,221 - - 3,200,000 The TMMG Long Term Incentive Plan (“LTIP”) was created to incentivise senior employees across the Group. Nil-cost options are awarded at the discretion of, and vest based on criteria established by, the Remuneration Committee. During the year, 171,362 options were exercised at an average share price of 59.7p and at the end of the year 271,859 of the outstanding options are exercisable. Shares held in an Employee Benefit Trust (see Note 23) will be used to satisfy share options exercised under the Long Term Incentive Plan. A Growth Share Scheme was implemented in June 2021. Participants in the scheme subscribed for Ordinary B shares in The Mission Marketing Holdings Limited (the “growth shares”) at a nominal value. These growth shares can be exchanged for an equivalent number of Ordinary Shares in MISSION if MISSION’s share price equals or exceeds 150p for at least 15 consecutive days during the period ending on the date the Company’s financial results for the year ended 31st December 2023 are announced; if not, they will have no value. Shares are held in an Employee Benefit Trust to meet certain requirements of the Long Term Incentive Plan. During the year, 827,937 (2021: nil) shares were purchased at an average share price of 60.0p. This represents 0.9% of the total issued share capital. 24. Share-Based Incentive Reserve The share-based incentive reserve represents charges to the profit or loss required by IFRS 2 to reflect the cost of the nil-cost share options and growth shares issued to the Directors and employees. 25. Share-Based Payments Nil-cost share options Details of the relevant option schemes are given in Note 22. Fair value on grant date is measured by use of a Black Scholes model. The valuation methodology is applied at each year-end and the valuation revised to take account of any changes in estimate of the likely number of shares expected to vest. No options were issued during 2022 or 2021. The weighted average share price over the three years ending 31 December 2022 was 69.7p and the weighted average remaining contractual life of the share options outstanding at 31 December 2022 was 4.0 years. The Group recognised an expense of £33,000 in 2022 (2021: £174,000). Growth Shares Details of the Growth Share scheme are given in Note 22. The fair value of growth shares was measured by use of a Monte Carlo simulation model, which uses probability analysis to calculate the value of options. The fair value of the growth shares issued in 2021 was 9.0p per share at measurement date. No growth shares were issued in 2022. The key inputs for the valuation of the growth shares issued in 2021 are: Share price at grant Risk free rate Dividend yield Expected volatility 75.0p 0.2% 3.0% 33.0% Volatility is based on the historical volatility of the share price over a 3 year trading period. The weighted average share price from inception of the scheme until 31 December 2022 was 65.4p and the weighted average remaining contractual life of the growth shares outstanding at 31 December 2022 was 1.3 years. The Group recognised an expense of £109,000 in 2022 (2021: £52,000). 84 Annual report for the year ended December 2022 Annual report for the year ended December 2022 85 Financial Statements Consolidated Financial Statements & Notes 26. Financial Assets and Liabilities Capital management The Group defines “capital” as being debt plus equity. Net bank debt comprises short and long term borrowings net of cash, cash equivalents and the unamortised balance of bank renegotiation fees as analysed in Note 19. In addition, the Group treats its commitment to future consideration payments under acquisition agreements as another component of debt. Equity comprises issued share capital, reserves and retained earnings as disclosed in the balance sheet and in the Consolidated Statement of Changes in Equity. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and maintain an appropriate capital structure to balance the needs of the Group to grow, whilst operating with sufficient headroom within its bank covenants. The principal measures by which the Directors monitor capital risk are the ratios of net bank debt to EBITDA and total debt (including both net bank debt and estimated acquisition consideration payable) to EBITDA. (Note that, since acquisition consideration is dependent on future levels of profitability in the acquired business, which are inevitably uncertain, the Directors calculate this ratio by reference to the amount of consideration which would be payable if the acquired business were to maintain its current level of profitability.) The Directors have set targets, of remaining below x1.5 and x2.0 for these ratios respectively (calculated on a pre-IFRS 16 basis). Financial risk management The Group’s policy is to eliminate financial risk where it is cost-effective, including the use of credit insurance and currency hedges, and to mitigate it where not, including close monitoring of credit-worthiness and the use of Client payment plans if possible. The Group’s policy is not to use any financial instruments for speculating. The Group's principal financial instruments comprise cash and various forms of borrowings. Substantially all the Group's activities continue to take place in the United Kingdom. Where revenue is generated in one currency and costs are incurred in another, the Group aims to agree pricing at the outset of a piece of work and then hedge its foreign currency exposure, if considered significant, through the use of forward exchange contracts. There was no material foreign currency exposure at the year end. The main purpose of the Group's use of financial instruments is for day-to-day working capital and as part of the funding for past acquisitions. The Group’s financial policy and risk management objective is to achieve the best interest rates available whilst maintaining flexibility and minimising risk. The main risks arising from the Group's use of financial instruments are interest rate risk and liquidity risk. Interest rate risk The operations of the Group generate cash and it funds acquisitions through a combination of retained profits, equity issues and borrowings. The Group's financial liabilities comprise floating rate instruments. The bank loan’s interest rate is reset from time to time and accordingly is not deemed a fixed rate financial liability. Interest on the Group’s revolving credit facility is payable by reference to SONIA (sterling overnight index average), subject to downward or upward ratchets depending on certain ratios of debt to EBITDA on a quarterly basis. The Directors have considered again the relative merits of the use of hedging instruments to limit the exposure to interest rate risk. Since the sensitivity of profits to a 1% change in interest rates is less than £0.2m, they have decided not to enter into any hedging arrangements. Liquidity risk The Group's financial instruments include a mixture of short and long-term borrowings. The Group seeks to ensure sufficient liquidity is available to meet working capital needs and the repayment terms of the Group's financial instruments as they mature. Financial assets Cash at bank maturing in less than one year or on demand 31 December 2022 £’000 6,153 31 December 2021 £’000 6,066 Financial liabilities At 31 December 2022 Interest analysis: Subject to floating rates Subject to fixed rates Maturity analysis: One year or less, or on demand In one to two years In two to three years In three to four years In four to five years In more than five years At 31 December 2021 Interest analysis: Subject to floating rates Subject to fixed rates Maturity analysis: One year or less, or on demand In one to two years In two to three years In three to four years In four to five years In more than five years Bank loan and overdraft Lease liabilities Acquisition obligations £’000 £’000 £’000 17,575 - 17,575 - 17,575 - - - - 17,575 16,500 - 16,500 - - 16,500 - - - 16,500 - 10,063 10,063 1,582 1,346 1,170 998 717 4,250 10,063 - 9,673 9,673 1,596 1,209 1,032 875 782 4,179 9,673 - 4,143 4,143 1,371 53 1,820 899 - - 4,143 - 3,315 3,315 692 430 300 1,893 - - Total £’000 17,575 14,206 31,781 2,953 18,974 2,990 1,897 717 4,250 31,781 16,500 12,988 29,488 2,288 1,639 17,832 2,768 782 4,179 The Group's bank loans and overdraft facility are floating rate borrowings and all facilities are secured by a fixed and floating charge over the assets of all Group companies. The fair value of the Group's financial assets and liabilities is not considered to be materially different from their book values. 3,315 29,488 86 Annual report for the year ended December 2022 Annual report for the year ended December 2022 87 Financial Statements Consolidated Financial Statements & Notes Financial Statements Independent Auditor’s Report: Company 27. Leave Pay Accrual The Group has a policy of not allowing days to be carried forward from one year to the next, unless in exceptional circumstances. In addition, no payment is made in lieu of untaken leave which is not carried forward. There is no material liability relating to untaken leave at year end. 28. Post Balance Sheet Events There have been no material post balance sheet events. 29. Related Party Transactions The Directors consider that the Directors of the Company represent the Group’s key management personnel for the purposes of disclosing related party transactions. Directors’ remuneration is disclosed in detail in Note 7. The total compensation payable to key management personnel is detailed below. Short-term employee benefits Post-employment benefits Share-based payments Remuneration arising from Board restructuring Year to 31 December 2022 Year to 31 December 2021 £’000 1,593 69 30 - 1,692 £’000 1,666 58 217 485 2,426 Bray Leino Ltd rents property from entities under the control of David Morgan, significant shareholder and Chairman of The MISSION Group plc until retirement on 30 September 2021, and members of his close family. During the year the Company paid annual rental and property fees totalling £75,000 (2021: £75,000). There were no amounts owed at the balance sheet date to these entities. Krow Agency Ltd is contracted to pay annual rent to four individuals, including Dylan Bogg (Executive Director). During the year, total rental of £74,000 (2021: £74,000) was paid and no amount was outstanding at the balance sheet date. During 2021 seven directors received loans totalling £46,045 in respect of the personal tax payable on a growth share award, as follows: Dylan Bogg £3,061; James Clifton £10,000; Julian Hanson-Smith £4,269; Giles Lee £10,000; Sue Mullen £5,970; Andy Nash £2,746; Fiona Shepherd £10,000. All loans are repayable from the proceeds of the growth share scheme or on termination of employment. No interest is being charged and all loans remain outstanding at the year end. Mark Lund, a Non-Executive Director, is also a director of Smart Energy GB, a company which is a Client of Livity Ltd. Sales from Livity Ltd to Smart Energy GB at arms length subsequent to Mark becoming a director on 1 October 2022 amounted to £31,853. Included within trade debtors is £38,224 due from Smart Energy GB. James Clifton, the Group Chief Executive, owns a 5% (2021: 5%) holding in Pathfindr Ltd. 30. Availability of Annual Report Copies of the Annual Report for the year ended 31 December 2022 will be circulated to shareholders at least 21 days ahead of the Annual General Meeting (“AGM”) on 20 June 2023 and, after approval at the AGM, will be delivered to the Registrar of Companies. Further copies will be available from the Company’s registered office and on the Group’s website, www.themission.co.uk Independent Auditor’s Report to the Members of The MISSION Group plc Report on the parent company financial statements Key audit matters Opinion We have audited the financial statements of The MISSION Group plc (the 'Company') for the year ended 31 December 2022, which comprise the Company Balance Sheet, Statement of Changes in Equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). In our opinion the financial statements: • give a true and fair view of the state of the company's affairs as at 31 December 2022 and of its profit for the year ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the 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. An overview of the scope of our audit We planned and performed our audit by obtaining an understanding of the Company and its environment, including the accounting processes and controls, and the industry in which it operates. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matter identified for the company related to the carrying value of its investments, given the company holds material investments in subsidiary undertakings. The company receives dividend income from its trading subsidiaries. We reviewed and considered the level of dividend income received from subsidiary companies along with the ongoing ability for subsidiary companies to generate distributable profits. Further detailed work in respect of goodwill impairment in respect of the group’s cash generating units is set out in our group audit report. Our application of materiality Misstatements, including omissions, are considered to be material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. We use quantitative thresholds of materiality, together with qualitative assessments in planning the scope of our audit, determining the nature, timing and extent of our audit procedures and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the company financial statements should be based on gross assets as it is a holding company. This was restricted to 50% of group materiality to give overall company materiality of £194,000 (2021: £186,500), performance materiality of £146,000 (2021: £140,000). Individual errors above £6,000 (2021: £6,000) were reported to the audit committee. 88 Annual report for the year ended December 2022 Annual report for the year ended December 2022 89 Financial Statements Independent Auditor’s Report: Company Conclusions relating to going concern Matters on which we are required to report by exception In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. In the light of our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report and the Directors' Report. Based on the work we have performed (as set out in the group audit report), we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the original financial statements were 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. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, 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 or a material misstatement of the other information. 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. Opinion on other matter prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic Report and Directors' Report have been prepared in accordance with applicable legal requirements. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the Statement of Directors' Responsibilities set out on pages 40 and 41, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities is available 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. Duncan Leslie FCA (Senior Statutory Auditor) PKF Francis Clark Statutory Auditor Centenary House Peninsula Park Rydon Lane Exeter EX2 7XE 28 March 2023 Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: We obtained an understanding of the legal and regulatory framework applicable to the company and the industry in which it operates. We identified the principal risks of non-compliance with laws and regulations as relating to breaches around GDPR. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as financial reporting legislation (including The Companies Act 2006), distributable profits legislation and taxation legislation. We considered the extent to which any non-compliance with these laws and regulations may have on the company’s ability to continue trading and the risk of a material misstatement in the financial statements. We also evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements and determined that the principal risks related to the misstatement of the result for the year and impairment of assets. Based on this understanding we designed our audit procedures to identify irregularities. Our procedures involved the following: • We made enquiries of senior management as to their knowledge of any non-compliance or potential non-compliance with laws and regulations that could affect the financial statements. As part of these enquiries we also discussed with management whether there have been any known instances of material fraud, of which there were none. • We identified the individuals with responsibility for ensuring compliance with laws and regulations and discussed with them the procedures and policies in place. • We reviewed minutes of meetings of Senior Management and those charged with governance. • We challenged the assumptions and judgements made by management in its significant accounting estimates. • We audited the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness, and evaluating the business rationale of significant transactions outside the normal course of business. 90 Annual report for the year ended December 2022 Annual report for the year ended December 2022 91 Financial Statements Company Financial Statements & Notes Company Balance Sheet As at 31 December 2022 NON-CURRENT ASSETS Intangible assets Investments Property, plant and equipment CURRENT ASSETS Debtors CREDITORS: Amounts falling due within one year NET CURRENT LIABILITIES Note 32 33 34 35 TOTAL ASSETS LESS CURRENT LIABILITIES CREDITORS: Amounts falling due after more than one year 36 NET ASSETS CAPITAL AND RESERVES Called up share capital Share premium account Own shares Share-based incentive reserve Profit and loss account SHAREHOLDER’S FUNDS 38 38 38 As at 31 December 2022 £’000 As at 31 December 2021 £’000 1,296 114,596 965 116,857 10,653 10,653 (11,655) (1,002) 115,855 (17,640) 98,215 9,102 45,928 (994) 886 43,293 98,215 1,430 114,596 851 116,877 9,952 9,952 (12,654) (2,702) 114,175 (16,988) 97,187 9,102 45,928 (518) 828 41,847 97,187 The company made a profit of £3,717,000 for the year (2021: £4,103,000). The financial statements were approved and authorised for issue on 28 March 2023 by the Board of Directors. They were signed on its behalf by: Giles Lee , Group Chief Financial Officer Company registration number: 05733632 Company Statement of Changes in Equity For the year ended 31 December 2022 At 1 January 2021 Profit for the year Share option charge Growth share charge Shares awarded and sold from own shares Dividend paid Share capital Share premium Own shares Share- based incentive reserve Retained earnings Total equity £’000 £’000 £’000 £’000 £’000 £’000 9,102 45,928 (591) - - - - - - - - - - - - - 73 - 582 - 234 12 - - 40,190 95,211 4,103 4,103 - - 234 12 (346) (273) (2,100) (2,100) At 31 December 2021 9,102 45,928 (518) 828 41,847 97,187 Profit for the year Share option charge Growth share charge Own shares purchased Shares awarded and sold from own shares Dividend paid - - - - - - - - - - - - - - - (497) 21 - - 33 25 - - - 3,717 3,717 - - - (91) 33 25 (497) (70) (2,180) (2,180) At 31 December 2022 9,102 45,928 (994) 886 43,293 98,215 92 Annual report for the year ended December 2022 Annual report for the year ended December 2022 93 Financial Statements Notes to the Company Financial Statements 31. Principal Accounting Policies Financial assets and liabilities All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial assets classified as fair value through profit and loss, which are initially measured at fair value. Financial assets and liabilities are only offset in the statement of financial position when, and only when, there exists a legally enforceable right to set off the recognised amounts and the Company intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Debt instruments which meet the conditions to be classified as basic instruments are subsequently measured at amortised cost using the effective interest method. Basic debt instruments that are classified as payable or receivable within one year are measured at the undiscounted amount of the cash or other consideration expected to be paid or received, net of impairment. Financial liabilities are released to the profit and loss account when the liability is extinguished. Contingent consideration payments The terms of an acquisition may provide that the value of the purchase consideration, which may be payable in cash or shares at a future date, depends on uncertain future events such as the future performance of the acquired company. The amounts recognised in the financial statements represent a reasonable estimate at the balance sheet date of the amounts expected to be paid and has been classified in the balance sheet in accordance with the substance of the transaction. Revisions to estimated consideration payable year on year are reflected in the value of the corresponding investment. Where the agreement gives rise to an obligation that may be settled by the delivery of a variable number of shares to meet a defined monetary liability, these amounts are disclosed as debt. Investments In the Company’s financial statements, investments in subsidiary and associate undertakings are stated at cost less provision for any impairment in value. The principal accounting policies are summarised below. They have all been applied consistently throughout the year and to the preceding year. General information and basis of accounting The MISSION Group plc is a company incorporated in England and Wales under the Companies Act. The address of the registered office is given on page 105. The nature of the Group’s operations and its principal activities are set out in the Strategic Report on pages 2 to 11. The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value, and in accordance with Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting Council. Reduced disclosure exemptions The MISSION Group plc meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure exemptions available to it in respect of its financial statements. Exemptions have been taken in relation to the presentation of a statement of comprehensive income, cash flow statement, financial instruments, share-based payment, share capital and remuneration of key management personnel. The company made a profit of £3.7m for the year (2021: £4.1m). Deferred taxation Deferred taxation is recognised on all timing differences where the transactions or event that give the Company an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recoverable. Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance sheet date. Financial instruments Financial assets and financial liabilities are recognised when the Company becomes party to the contractual provisions of the instrument. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. Accounting estimates and judgements The Company makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the financial statements and concluded that the main areas of judgement are, in order of significance: Potential impairment of investments The potential impairment of investments is based on estimates of future cash flows derived from the financial projections of each cash-generating unit over an initial four year period and assumptions about growth thereafter. Contingent payments in respect of acquisitions Contingent consideration, by definition, depends on uncertain future events. At the time of purchasing a business, the Directors use the financial projections obtained during due diligence as the basis for estimating contingent consideration. Subsequent estimates benefit from the greater insight gained in the post-acquisition period and the business’ track record of financial performance. Lease commitments Rental costs under operating leases are charged against profits as incurred. Profit of parent company As permitted under Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these accounts. 94 Annual report for the year ended December 2022 Annual report for the year ended December 2022 95 Financial Statements Notes to the Company Financial Statements 32. Intangible Assets 33. Investments Other intangible assets Cost At 1 January 2021 Additions At 31 December 2021 Additions Adjustments to purchase consideration At 31 December 2022 Amortisation and impairment At 1 January 2021 Charge for the year At 31 December 2021 Charge for the year At 31 December 2022 Net book value at 31 December 2022 Net book value at 31 December 2021 Software development and licences Customer relationships Goodwill £’000 £’000 £’000 Total £’000 1,171 520 1,691 86 (34) 1,743 132 129 261 186 447 608 289 897 - (34) 863 - - - - - 863 897 1,296 1,430 502 231 733 86 - 819 71 129 200 186 386 433 533 61 - 61 - - 61 61 - 61 - 61 - - Cost At 1 January 2021 Additions Adjustment to purchase consideration At 31 December 2021 Additions Adjustment to purchase consideration At 31 December 2022 Impairment At 1 January 2021 Impairment At 31 December 2021 Impairment At 31 December 2022 Net book value at 31 December 2022 Net book value at 31 December 2021 Shares in subsidiary undertakings £’000 123,039 - - 123,039 - - 123,039 (8,443) - (8,443) - (8,443) 114,596 114,596 Additions of £86,000 (2021: £231,000) in the year include costs associated with the development of identifiable software products that are expected to generate economic benefits in excess of the costs of development. A list of the principal trading companies in the Group at 31 December 2022 can be found in Note 12 to the Consolidated Financial Statements and a complete list can be found in Note 42. 96 Annual report for the year ended December 2022 Annual report for the year ended December 2022 97 Financial Statements Notes to the Company Financial Statements 34. Debtors 37. Borrowings 31 December 2022 31 December 2021 31 December 2022 31 December 2021 Trade debtors Amounts due from subsidiary undertakings Corporation tax Prepayments Accrued income Other debtors 35. Creditors: Amounts Falling Due Within One Year Trade creditors Bank overdraft Amounts due to subsidiary undertakings Accruals Acquisition obligations Other creditors 36. Creditors: Amounts Falling Due After More Than One Year £’000 652 6,510 1,499 1,453 485 54 10,653 £’000 326 7,138 639 1,355 415 79 9,952 31 December 2022 31 December 2021 £’000 831 326 9,003 834 371 290 11,655 £’000 885 1,400 8,550 1,223 280 316 12,654 Bank loan outstanding Adjustment to amortised cost Carrying value of loan outstanding The borrowings are repayable as follows: Less than one year In one to two years In more than two years but less than three years Adjustment to amortised cost Less: Amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months £’000 17,500 (60) 17,440 - 17,500 - 17,500 (40) 17,440 - 17,440 £’000 16,500 (107) 16,393 - - 16,500 16,500 (107) 16,393 - 16,393 Details of the Company’s borrowing facilities and interest rates are set out in Note 19 and not therefore repeated here. All borrowings are in sterling. As at 31 December 2022, net assets of the Group were £90,175,000 (2021: £93,472,000) and net borrowings under this Group arrangement amounted to £11,362,000 (2021: £10,327,000). 38. Share Capital and Own Shares The movements on these items are disclosed within the Consolidated Financial Statements. A description of Own Shares is disclosed in Note 23. During the year, the Company did not issue any new Ordinary shares of 10p each (2021: no shares were issued) and at 31 December 2022, the number of shares in issue was 91,015,897 (2021: 91,015,897). Bank loan (see Note 37) Acquisition obligations Deferred tax liability £’000 17,440 - 200 17,640 £’000 16,393 430 165 16,988 Included in reserves at 31 December is unrealised profit, which is non-distributable, of £3,165,000 (2021: £3,165,000). 31 December 2022 31 December 2021 39. Unrealised Reserves 98 Annual report for the year ended December 2022 Annual report for the year ended December 2022 99 Financial Statements Notes to the Company Financial Statements 40. Operating Lease Commitments 42. Group Companies – continued The total minimum lease payments under non-cancellable operating leases are as follows: 31 December 2022 31 December 2021 Land and buildings £’000 286 899 581 1,766 Other £’000 Land and buildings £’000 12 35 - 47 178 80 48 306 Other £’000 6 1 - 7 Within one year Between two and five years In more than five years 41. Related Party Transactions Details of related party transactions are disclosed in Note 29 of the Consolidated Financial Statements. 42. Group Companies Below is a list of all companies in the Group. All subsidiaries are 100% owned and all are incorporated in the United Kingdom, unless otherwise indicated. In addition, the Company holds an indirect interest in Destination CMS Ltd (50%), treated as a joint venture. Unless otherwise stated, the registered office of all companies is The Old Sawmills, Filleigh, Barnstaple, EX32 0RN. Subsidiary undertaking Country of Incorporation Registered office Held directly: The Mission Marketing Holdings Ltd ** Held indirectly: April Six GmbH April Six Inc. April Six Ltd ** April Six (Mobility) Ltd ** April Six Proof Ltd ** April Six Pte. Ltd Balloon Dog Ltd Bastin Day Westley Ltd Big Communications Ltd Bray Leino Ltd ** Germany USA 1/f, Rosental 7, Munich 80331, Germany 900 Kearny Street, Suite 700, San Francisco, CA 94133, United States of America Singapore 176 Orchard Road #05 - 05, The Centrepoint, Singapore 238843 Subsidiary undertaking Bray Leino Splash Ltd * Bray Leino Splash Pte. Ltd Bray Leino Splash Sdn. Bhd. * Fox Murphy Ltd Fuse Digital Ltd Influence Sports Ltd ** Jellyfish Ltd Joluxon Holdings Ltd ** Krow Agency Ltd ** Krow Communications Ltd ** Livity Ltd ** Mongoose Sports & Entertainment Ltd ** Pathfindr Ltd (80% owned) ** Populate Social Ltd ** RJW & Partners Ltd ** Robson Brown Ltd Solaris Healthcare Network Ltd ** Soul (London) Ltd ** Spark Marketing Services Ltd (formerly Mongoose Promotions Ltd) (75% owned) ** Speed Communications Agency Ltd ** Splash Interactive Ltd * Splash Interactive * Story Agency Ltd (formerly Chapter Agency Ltd) ** Story UK Ltd ** The Mission Ltd The Splash Partnership Ltd ** ThinkBDW Ltd ** Country of Incorporation Registered office Hong Kong Singapore Malaysia Unit 1101, 11/F, Tower 1, Cheung Sha Wan Plaza, 833 Cheung, Sha Wan Road, Lai Chi Kok, Kowloon, Hong Kong 51 Tai Seng Ave, #04-04 Pixel Red, Singapore - 533941 No. 308, Block A (3rd Floor), Kelana Business Centre, No. 97, Jalan 557/2, Kelana Jaya, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia Vietnam China Suite 13-01 Pearl Plaza Offices 561A Dien Bien Phu Ward 25, Binh Thanh District, HCMC, Vietnam Room 1723, Raffles City Shanghai, 268 Middle Xizang Road, Huangpu District, Shanghai, China 1-4, Atholl Crescent, Edinburgh, Scotland EH3 8HA TMGPLC Asia Pte Ltd (formerly Bray Leino Singapore Pte. Ltd) Singapore 176 Orchard Road #05 - 05, The Centrepoint, Singapore 238843 ThinkBDW Ltd ** Zonr Ltd (formerly Mission Marketing Ltd) Bray Leino Productions Ltd ** Bray Leino Sdn. Bhd. * Malaysia 100.6.04, 129 Offices, Block J, Jaya One. No. 72A, Jalan Universiti 46200 Petaling Jaya, Selangor Darul Ehsan, Malaysia * These subsidiaries are 100% owned by Bray Leino Splash Pte. Ltd, which is 70% owned by The MISSION Group plc. ** These subsidiaries are exempt from the Companies Act 2006 requirements relating to the audit of their individual accounts by virtue of Section 479A of the Act as The MISSION Group plc has guaranteed the subsidiary company under Section 479C of the Act. 100 Annual report for the year ended December 2022 Annual report for the year ended December 2022 101 Additional information Notice of Annual General Meeting NOTICE is hereby given that the Annual General Meeting (“AGM”) of The MISSION Group plc (the “Company”) will be held at 12 noon on Tuesday 20 June 2023 at the offices of MISSION, 196 Tottenham Ct Rd, London W1T 7LQ to transact the business set out below. The following resolutions will be proposed as ordinary resolutions: Report and Accounts 1. To receive the financial statements and the reports of the Directors and the auditors for the year ended 31 December 2022. Dividend 2. To approve a final dividend of 1.67 pence per share for the year ended 31 December 2022 to shareholders on the register at the close of business on 14 July 2023, payable on 28 July 2023. Directors 3. To elect Mark Lund as a Director. Auditors 4. To re-appoint PKF Francis Clark as auditors of the Company. 5. To authorise the Directors to fix the remuneration of PKF Francis Clark. Authority to allot shares 6. THAT the Directors be and are hereby generally and unconditionally authorised pursuant to Section 551 of the Companies Act 2006 (the “Act”) to exercise all the powers of the Company to allot shares in the Company and to grant rights to subscribe for, or to convert any security into, shares in the Company up to an aggregate nominal value of £3,033,863 being one third of the issued share capital of the Company, provided that this authority shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution, save that the Company shall be entitled to make an offer or agreement before the expiry of such authority which would or might require shares to be allotted or any such rights to be granted, after such expiry and the Directors shall be entitled to allot shares or grant any such rights pursuant to any such offer or agreement as if this authority had not expired and all unexercised authorities previously granted to the Directors to allot shares or grant any such rights be and are hereby revoked provided that the resolution shall not affect the right of the Directors to allot shares or grant any such rights in pursuance of any offer or agreement entered into prior to the date of this resolution. The following resolutions will be proposed as special resolutions: Authority to dis-apply pre-emption rights 7. THAT (subject to the passing of the resolution numbered 6 above) the Directors be and are hereby empowered pursuant to Section 570, Section 571 and Section 573 of the Act to allot equity securities (as defined in Section 560 of the Act) for cash pursuant to the authority conferred by resolution 6 above as if Section 561 of the Act did not apply to any such allotment, provided that this power shall be limited to: i. the allotment of equity securities in connection with a rights issue, open offer or other offer of securities in favour of the holders of ordinary shares on the register of members at such record date(s) as the Directors may determine where the equity securities respectively attributable to the interests of the ordinary shareholders are proportionate (as nearly as may be) to the respective numbers of ordinary shares held by them on any such record date(s), subject to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal with treasury iv. the authority hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company held in 2024 or 18 months from the date of this resolution (whichever is earlier); and v. the Company may make any purchase of its ordinary shares pursuant to a contract concluded before the authority hereby conferred expires and which will or may be executed wholly or partly after the expiry of such authority; and vi. all ordinary shares purchased pursuant to the authority conferred by this resolution 8 shall be cancelled immediately on completion of the purchase or held in treasury (provided that the aggregate nominal value of shares held as treasury shares shall not at any time exceed 10 per cent of the issued share capital of the Company at any time). By Order of the Board Giles Lee 28 March 2023 shares, fractional entitlements or legal or practical problems arising under the laws of any overseas territory or the requirements of any regulatory body or stock exchange or by virtue of shares being represented by depositary receipts or any other matter whatever; and ii. the allotment (other than pursuant to sub-paragraph (i) above) to any person or persons of equity securities up to an aggregate nominal value of £910,158.97 being 10% of the issued share capital of the Company. This power shall expire upon the expiry of the general authority conferred by resolution 6 above, save that the Company shall be entitled to make an offer or agreement before the expiry of such power which would or might require equity securities to be allotted after such expiry and the Directors shall be entitled to allot equity securities pursuant to any such offer or agreement as if the power conferred hereby had not expired and all unexercised authorities previously granted to the Directors to allot equity securities be and are hereby revoked provided that the resolution shall not affect the right of the Directors to allot equity securities in pursuance of any offer or agreement entered into prior to the date of this resolution. Authority to purchase own shares 8. THAT pursuant to section 701 of the Act and subject to, and in accordance with the Company’s Articles of Association, the Company be generally and unconditionally authorised to make market purchases (within the meaning of Section 693(4) of the Act) of ordinary shares of the Company provided that: i. the maximum number of ordinary shares hereby authorised to be acquired is 13,652,384 being 15% of the issued share capital; and ii. the minimum price which may be paid for an ordinary share is the nominal value of such share; and iii. the maximum price which may be paid for an ordinary share is an amount equal to 105% of the average of the middle market quotations for an ordinary share in the Company as derived from The London Stock Exchange Daily Official List for the 5 business days immediately preceding the day on which such ordinary share is contracted to be purchased; and 102 Annual report for the year ended December 2022 Annual report for the year ended December 2022 103 Additional information Notice of Annual General Meeting Note to the Notice of Annual General Meeting A member entitled to attend and vote at the Annual General Meeting may appoint one or more proxies (who need not be a member of the Company) to attend, speak and vote on his or her behalf. A member may appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights attached to different shares. To appoint as your proxy a person other than the chair of the meeting, insert their full name in the box on the Form of Proxy accompanying the annual report. If you sign and return the proxy form with no name inserted in the box, the chair of the meeting will be deemed to be your proxy. Where you appoint as your proxy someone other than the chair, you are responsible for ensuring that they attend the meeting and are aware of your voting intentions. If you wish your proxy to make any commitments on your behalf, you will need to appoint someone other than the chair, and give them relevant instructions directly. In order to be valid an appointment of proxy must be completed, signed and returned in hard copy form by post, by courier or by hand to Neville Registrars Limited, Neville House, Steelpark Road, Halesowen, West Midlands B62 8HD. The closing time for lodging proxies is 12 noon on Friday 16 June 2023. For the purposes of determining which persons are entitled to attend or vote at the meeting, members entered on the Company’s register of members at 6p.m. on Friday 16 June 2023 have the right to attend and vote at the meeting. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the AGM and any adjournment thereof by using the procedures described in the CREST manual. CREST personal members who have appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & International Limited’s specifications and must contain the information required for such instructions, as described in the CREST manual. All messages relating to the appointment of a proxy or an instruction to a previously appointed proxy must be transmitted so as to be received by Neville Registrars Limited (ID: 7RA11) no later than 12 noon on Friday 16 June 2023. Normal system timings and limitations will apply in relation to the input of CREST Proxy Instructions. It is therefore the responsibility of the CREST member concerned to take such action as shall be necessary to ensure that a message is transmitted by means of the CREST system, and where applicable, their CREST sponsor(s) or voting service provider(s) are referred, in particular, to those sections of the CREST manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. Advisors Company Registration Number: 05733632 Registered Office: Nominated Advisor: Stockbroker: Auditors: Lawyers: Registrars: Company Secretary: The Old Sawmills Filleigh, Barnstaple Devon, EX32 0RN Shore Capital and Corporate Limited Cassini House 57 St James’s Street London, SW1A 1LD Shore Capital Stockbrokers Limited Cassini House 57 St James’s Street London, SW1A 1LD PKF Francis Clark Statutory Auditor Centenary House Peninsula Park Rydon Lane Exeter, EX2 7XE Shakespeare Martineau No 1 1 Colmore Square, Birmingham, B4 6AA Neville Registrars Neville House Steelpark Road Halesowen, B62 8HD Michael Langford The Old Sawmills Filleigh, Barnstaple Devon, EX32 0RN Bankers: NatWest Corporate & Commercial Banking 250 Bishopsgate London, EC2M 4AA 104 Annual report for the year ended December 2022 Annual report for the year ended December 2022 105 The Old Sawmills, Filleigh, Barnstaple, Devon, EX32 0RN themission.co.uk 

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