JT Financial Statement 2020

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Annual report and consolidated financial statements 31 December 2020 JT Group Limited

PRIVATE & CONFIDENTIAL

TOGETHER

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Contents Directors’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Directors’ statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Independent auditor’s report to the members of JT Group Limited . 7 Consolidated statement of profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Consolidated statement of comprehensive income . . . . . . . . . . . . . . . . 10 Consolidated balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Consolidated statement of changes in equity . . . . . . . . . . . . . . . . . . . . . . 12 Consolidated statement of cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Notes to the financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 1. General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2. Summary of significant accounting policies . . . . . . . . . . . . . . . . . . . . 14 3. Accounting estimates and judgements . . . . . . . . . . . . . . . . . . . . . . . . . 29 4. Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 5. Other income and expense items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 6. Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 7. Financial assets and financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . 39 8. Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 9. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 10. Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 11. Deferred tax balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 12. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 13. Employee benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 14. Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 15. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 16. Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 17. Capital management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 18. Acquisition of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 19. Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 20. Interests in other entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 21. Events occurring after the reporting period . . . . . . . . . . . . . . . . . . . . . 67 22. Contingent liabilities and assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 23. Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 24. Directors’ emoluments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

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Directors’ report The Directors present their report and consolidated financial statements for the year ended 31 December 2020.

Incorporation

JT Group Limited (the “company”) was incorporated in Jersey, Channel Islands on 22 October 2002.

Principal activities

The principal activity of the company and its subsidiaries (the “group”) is the supply of telecommunications services and equipment.

The principal place of the company’s business is Jersey, Channel Islands.

Results

The group is presenting its annual report which includes the group’s first set of financial statements reported under International Financial Reporting Standards (IFRS). The effective transition date to IFRS was 1 January 2018. Refer to note 2 for more information on the financial impact resulting from the adoption on the group’s consolidated financial statements. The results are set out on pages 10 to 13.

2020 was a challenging year for JT Group, some of the group’s business lines suffered due to COVID-19 whilst others proved robust and, in some cases, significantly exceeded expectations.

The group’s core business, which includes the Channel Islands and International IoT businesses, have shown strong resilience as telecommunication services have been in high demand during the pandemic. Revenue and margin for these business areas have grown despite a significant decrease in roaming revenue from reduced travel. Relying on its full-fibre broadband network in Jersey, JT was able to further support the community during the ‘Stay at Home’ policy issued by the Government of Jersey by doubling the minimum available speed for all Jersey broadband customers from 500Mb/s to 1Gb/s, at no cost. JT also provided free local landline calls to its customers during this period and supported its more vulnerable customers by not charging overages and suspending late payment charges.

In response to the Covid-19 outbreak, the group put in place immediate measures to preserve cash, enhancing cost control and debt collection, focusing on priority projects and exiting businesses that were higher risk and not expected to drive significant value to the group in the current economic climate.

This led to the sale of the Corporate Communications Holdings (CCH) Group (“Worldstone Group” or “Worldstone”) and the termination of the Voice Trading business. As a result of these measures the group was able to improve its net cash position whilst maintaining dividend payments to the Shareholder.

Despite the measures put in place and the improved net cash position, the group suffered net losses for the year, mainly caused by losses in Worldstone and the trade receivables

impairment loss recognised against the Voice Trading customer receivables recognised in the balance sheet of ekit.com Inc., which could not be entirely offset by the good performance of the group’s core businesses.

Revenue

Revenue reduced by 13% (£25.0m) to £170.0m in 2020 compared to 2019. The ceased Voice Trading business reduced revenues in 2020 by £40.8m. This was partially offset by strong growth in International and more moderate growth in the Channel Islands, despite reduced roaming revenues in all markets.

Gross Profit

Gross Profit increased by 8% (£7.2m) to £98.6m in 2020 compared to 2019 due to growth in higher margin products in International and Channel Islands markets and partially offset due to a reduction in low margin Voice Trading products.

Operating Profit

Operating Profit decreased by £0.1m to a profit of £6.4m in 2020 compared to 2019. The increase in Gross Profit was offset by an increase in operating expenses, mainly driven by additional allowance for the Voice Trading receivables impairment loss.

Profit from continuing operations

Profit from continuing operations decreased by £1.3m to a profit of £0.9m in 2020 compared to 2019. Income tax expense increased by £1.9m, driven by strong profits in the Channel Islands and an impairment of deferred tax assets previously recognised in the balance sheet of ekit.com Inc.

Profit/(loss) for the year

The profit/(loss) for the year decreased by £5.6m to a loss of £4.1m in 2020 compared to a profit of £1.5m in 2019. The increase in gross profit was more than offset by the Voice Trading receivables impairment loss included in operating expenses and the loss from discontinued operations from Worldstone’s operational losses as well as the loss on its disposal.

Net Cashflow for the year

Net cash inflow from operating activities increased by £9.9m to £39.0m in 2020 compared to 2019, underscoring the strong performance of the group’s core activities. £13.3m was spent in investing activities (net of £2.6m proceeds from disposal of Worldstone), a reduction of £6.9m compared to 2019. This strong net cash inflow allowed the group to pay the 2019 final and 2020 interim ordinary dividends of £4.1m (2019: £4.8m) and reduce borrowings by £12m, whilst maintaining available cash at £10.6m as at 31 December 2020.

The Directors have approved the payment of a final ordinary dividend for 2020 of £2.0m (2019: £2.2m). Further details on dividends are included in note 17.

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Directors’ report (continued) Going concern

The group’s business activities, together with the factors likely to affect its future development, performance and financial position are described in the notes to the consolidated financial statements. Note 16 and 17 describes the group’s policies and processes to manage its financial risk management objectives and capital, provides details of financial instruments and hedging activities and the group’s exposures to risks.

Changes in Directors and membership of the Board Committees

The Directors of the group for the financial year ended 31 December 2020 are detailed in the above section titled “Directors”.

Directors’ interests

The Directors of the group had no interests, beneficial or otherwise, in the shares of the group.

Management has assessed the group’s financial stability and liquidity over the next 18 months from the reporting year end.

Additional funding was secured in May 2020 through the accordion clause within the group’s existing Revolving Credit Facility (“RCF”), resulting in a £50m facility. The group has a strong recurring revenue stream but expects inbound and outbound roaming to continue to be impacted by the pandemic with supply chain delays as a result of Covid-19 and Brexit impacting equipment sales in the short term. A reasonably plausible downside scenario to 31 December 2022 has been modelled and applies a reduction in revenue based on a risk assessment of revenue segments and an increased trade receivables impairment loss The outcome of the downside scenario provides sufficient headroom between forecasted net borrowing requirements and available funding.

Insurance of Directors and officers

Extra steps to provide additional headroom, not yet factored into the model, include cost reductions in all cost lines within operating profit and capital expenditure.

H Narcy Director

Consequently, the Directors are confident that the group and company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.

Directors

The executive and non-executive Directors of the group who served during the year and subsequently are: Non-executive Phil Male Sean Collins Meriel Lenfestey Joe Moynihan Mark Shuttleworth appointed 1 September 2020 Angus Flett appointed 1 December 2020 Executive Graeme Millar Helene Narcy

John Kent

appointed as CFO on 27 April 2020 and as statutory director on 14 May 2020 retired as CFO on 27 April 2020 and as statutory director on 14 May 2020

The group maintains an insurance policy on behalf of all Directors and officers of the group against liability arising from neglect, breach of duty and breach of trust in relation to their activities as Directors and officers of the group.

Independent auditor

KPMG LLP have indicated their willingness to continue in office as auditor.

By order of the board

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Directors’ statement Statement of Directors’ responsibilities

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 period. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRS). The financial statements are required by law to give a true and fair view of the state of affairs of the group 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 estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; • assess the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the company or to cease operations or have no realistic alternative but to do so.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the group and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included in the group’s website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that, having taken into account all of the matters considered by the Board and those brought to its attention during the year; to the best of our knowledge, the annual report and financial statements taken as a whole are fair, balanced and understandable and provide the information necessary for our shareholder to assess the company’s position and performance, business model and strategy.

Review of risk management and internal control systems

We confirm that we have carried out a review of the company’s risk management and internal control systems. We are satisfied that the systems are aligned with our strategic objectives.

Independent auditor’s report to the member of JT Group Limited Our opinion is unmodified

We have audited the consolidated financial statements of JT Group Limited (the “Company”) and its subsidiaries (together, the “Group”), which comprise the consolidated balance sheet as at 31 December 2020, the consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements:

• give a true and fair view of the financial position of the Group as at 31 December 2020, and of the Group’s financial performance and cash flows for the year then ended; • are prepared in accordance with International Financial Reporting Standards; and • have been properly prepared in accordance with the Companies (Jersey) Law, 1991.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.

Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company and Group in accordance with, UK ethical requirements including FRC Ethical Standards. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

Going concern

The Directors have prepared the consolidated financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the Company’s financial position means that this is realistic.

They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the consolidated financial statements (the “going concern period”).

In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Group and the Company’s business model and analysed how those risks might affect the Group and the Company’s financial resources or ability to continue operations over the going concern period.

Our conclusions based on this work:

• we consider that the Directors’ use of the going concern basis of accounting in the preparation of the consolidated financial statements is appropriate; and • we have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Company’s ability to continue as a going concern for the going concern period.

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group and the Company will continue in operation.

Fraud and breaches of laws and regulations – ability to detect Identifying and responding to risks of material misstatement due to fraud To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: •

enquiring of management as to the Group’s policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud;

• reading minutes of meetings of those charged with governance; and • using analytical procedures to identify any unusual or unexpected relationships.

As required by auditing standards, and taking into account possible incentives or pressures to misstate performance and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls and the risk of fraudulent revenue recognition, and the risk that management may be in a position to make inappropriate accounting entries. We did not identify any additional fraud risks.

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Independent auditor’s report to the member of JT Group Limited (continued) We performed procedures including: • identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation; • incorporating an element of unpredictability in our audit procedures; • assessing the appropriateness of the accounting for significant transactions that are outside the Group’s normal course of business, or are otherwise unusual; • considering the business processes and controls around the implementation and testing of new tariffs and, the issuing of customer goodwill credits and refunds; • documenting and testing controls in the revenue process which give assurance over the existence and accuracy of revenue recognition including within key Information and Technology systems; and • agreeing a substantive sample of usage back to invoices and customer payments.

Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the consolidated financial statements from our general commercial and sector experience and through discussion with management (as required by auditing standards), and from inspection of the Company’s regulatory and legal correspondence, and discussed with management the policies and procedures regarding compliance with laws and regulations.

The Group is subject to laws and regulations that directly affect the consolidated financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

The Group is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the consolidated financial statements, for instance through the imposition of fines or litigation or impacts on the Group and the Company’s ability to operate. We identified regulatory compliance as being the area

most likely to have such an effect. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to inquiry of management and inspection of regulatory and legal correspondence, if any.

Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the consolidated financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the consolidated financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report but does not include the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. 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.

Independent auditor’s report to the member of JT Group Limited (continued) We have nothing to report on other matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Company; or • returns adequate for our audit have not been received from branches not visited by us; or • the Company’s consolidated financial statements are not in agreement with the accounting records; or

The purpose of this report and restrictions on its use by persons other than the Company’s members, as a body

This report is made solely to the Company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991. 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.

• we have not received all the information and explanations we require for our audit.

Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 4, the Directors are responsible for: the preparation of the consolidated financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

Robert Seale For and on behalf of KPMG LLP, Senior Statutory Auditor Chartered Accountants 15 Canada Square, London, E14 5GL 31 March 2021

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10

Consolidated statement of profit or loss for the year ended 31 December 2020

2020

2019

2018

£’000

£’000

£’000

169,937

194,946

239,280

Cost of sales

(71,344)

(103,566)

(150,685)

Gross profit

98,593

91,380

88,595

Notes Continuing operations Revenue

4

Operating expenses

5

(92,551)

(85,232)

(79,728)

Other income

5

400

400

106

6,442

6,548

8,973

-

-

105

Operating profit Gain on financial assets at fair value through profit or loss Finance income

5

2

41

72

Finance costs

5

(1,700)

(2,526)

(2,388)

4,744

4,063

6,762

(3,811)

(1,878)

(3,154)

933

2,185

3,608

(5,070)

(667)

(847)

(4,137)

1,518

2,761

2020

2019

2018

£’000

£’000

£’000

(4,137)

1,518

2,761

(58)

(21)

8

12

4

(2)

73

(643)

772

27

(660)

778

Total comprehensive (loss)/income for the year

(4,110)

858

3,539

Total comprehensive (loss)/income for the year attributable to:

(4,110)

858

3,539

Owners of JT Group Limited

(4,110)

858

3,539

-

-

-

(4,110)

858

3,539

960

1,525

4,386

(5,070)

(667)

(847)

Profit before income tax Income tax expense

6

Profit from continuing operations Loss from discontinued operation

19

(Loss)/profit for the year

Consolidated statement of comprehensive income for the year ended 31 December 2020

Note

(Loss)/profit for the year Other comprehensive income Items that may not be reclassified to profit or loss Remeasurement of post-employment benefit obligations

13

Income tax relating to the above item Items that may be reclassified to profit or loss Foreign operations - foreign currency translation differences

15

Other comprehensive (loss)/income for the year, net of tax

Non-controlling interest Total comprehensive (loss)/income for the year attributable to the owners of JT Continuing operations Discontinued operations

19

The notes on pages 14 to 68 form an integral part of the consolidated financial statements.

11

Consolidated balance sheet as at 31 December 2020

31 December 2020

31 December 2019

31 December 2018

1 January 2018

Notes

£’000

£’000

£’000

£’000

Assets Non-current assets Property, plant and equipment Right-of-use-assets Intangible assets Deferred tax assets Contract cost asset Contract assets Investments accounted for using the equity method Financial asset at fair value through profit or loss Total non-current assets

8 9 10 11 4 4 20

109,761 11,420 17,614 65 789 52 139,701

115,994 12,910 19,164 783 657 67 149,575

115,261 14,394 24,223 947 398 220 155,443

112,468 14,504 20,156 941 295 227 611 4,209 153,411

Current assets Inventories Trade receivables Other receivables Contract assets Contract cost asset Cash and equivalents (excluding bank overdrafts) Total current assets

12 7 7 4 4 7

4,452 26,252 3,216 146 715 10,602 45,383

4,148 36,081 8,337 348 579 7,259 56,752

3,180 37,739 6,036 295 430 16,930 64,610

3,355 34,853 6,500 163 341 19,781 64,993

185,084

206,327

220,053

218,404

7 7 9 4 6,7 11 13 14

(32,500) (10,000) (9,474) (2,831) (694) (9,825) (741) (4,278) (70,343)

(44,500) (10,000) (10,796) (2,418) (1,094) (10,184) (711) (2,601) (82,304)

(51,000) (10,000) (12,235) (1,992) (1,494) (9,838) (708) (2,275) (89,542)

(51,000) (10,000) (12,523) (2,071) (9,321) (725) (1,790) (87,430)

7 6 4 9

(31,876) (2,752) (1,995) (2,197) (38,820)

(35,049) (1,092) (1,478) (2,268) (39,887)

(36,560) (2,230) (1,390) (2,278) (42,458)

(36,810) (1,707) (1,120) (2,068) (41,705)

(109,163)

(122,191)

(132,000)

(129,135)

75,921

84,136

88,053

89,269

20,000 56,206 (285)

20,000 64,494 (358)

20,000 67,768 285

20,000 69,756 (487)

75,921

84,136

88,053

89,269

Total assets LIABILITIES Non-current liabilities Borrowings 2.5% Redeemable preference shares Lease liabilities Contract liabilities Other payables Deferred tax liabilities Employee benefit obligations Provisions Total non-current liabilities Current liabilities Trade and other payables Current tax liabilities Contract liabilities Lease liabilities Total current liabilities Total liabilities Net assets EQUITY Share capital and share premium Retained earnings Other reserves Total equity

15 15 15

The consolidated financial statements were approved by the board of Directors on 31 March 2021 and was signed on its behalf by:

H Narcy Chief Financial Officer The notes on pages 14 to 68 form an integral part of the consolidated financial statements.

12

Consolidated statement of changes in equity for the year ended 31 December 2020

Share capital and premium £’000

Other reserves £’000

Retained earnings £’000

Total equity £’000

20,000

(487)

69,756

89,269

Profit for the period

-

-

2,761

2,761

Other comprehensive income

-

772

6

778

Currency retranslation on foreign operations

-

-

35

35

20,000

285

72,558

92,843

-

-

(4,790)

(4,790)

Balance at 31 December 2018

20,000

285

67,768

88,053

Balance at 1 January 2019

20,000

285

67,768

88,053

Profit for the period

-

-

1,518

1,518

Other comprehensive loss

-

(643)

(17)

(660)

Currency retranslation on foreign operations

-

-

-

-

20,000

(358)

69,269

88,911

-

-

(4,775)

(4,775)

Balance at 31 December 2019

20,000

(358)

64,494

84,136

Balance at 1 January 2020

20,000

(358)

64,494

84,136

Loss for the period

-

-

(4,137)

(4,137)

Other comprehensive income/(loss)

-

73

(46)

27

Currency retranslation on foreign operations

-

-

-

-

20,000

(285)

60,311

80,026

-

-

(4,105)

(4,105)

20,000

(285)

56,206

75,921

Notes Balance at 1 January 2018

Transactions with owners in their capacity as owners: Dividends paid

17

Transactions with owners in their capacity as owners: Dividends paid

17

Transactions with owners in their capacity as owners: Dividends paid Balance at 31 December 2020

17

The notes on pages 14 to 68 form an integral part of the consolidated financial statements.

13

Consolidated statement of cash flows for the year ended 31 December 2020

2020 £’000

2019 £’000

2018 £’000

933 (5,070)

2,185 (667)

3,608 (847)

6 5 5

3,811 (2) 1,700 1,372

1,919 (41) 2,526 5,922

3,107 (72) 2,388 8,184

Amortisation of intangible assets Impairment of goodwill Depreciation of PPE Depreciation of right-of-use assets Loss on sale of subsidiary Loss on disposal of intangible assets Loss/(gain) on disposal of PPE Currency translation differences

10 10 8 9 19

3,360 18,688 2,217 1,818 265 24 200 27,944

3,610 3,951 18,128 2,181 (51) 237 33,978

3,080 3,860 17,221 1,900 99 7 800 35,151

Decrease/(increase) in inventories Decrease/(increase) in receivables (Decrease)/increase in trade payables (Decrease)/increase in other payables Decrease/(increase) in contract assets (Decrease)/increase in contract liabilities Decrease/(increase) in contract cost assets

12 7 7 7 5 5 5

(369) 17,436 (4,785) (3,138) 217 930 (268)

(968) (362) (3,461) (400) 53 514 (259)

175 (1,416) (2,488) 964 132 191 (103)

Cash generated from operations

37,967

29,095

32,606

Income taxes paid

(2,151)

(2,527)

(2,692)

Net cash inflow from operating activities

35,816

26,568

29,914

(4,958) (10,529) 2,591 1

(2,054) (18,253) 56 42

(2,013) (19,849) (6,070) 10 4,314 72

(12,895)

(20,209)

(23,536)

3,500 (15,500) (2,211) (4,105) (1,134) (200)

24,500 (31,000) (2,394) (4,775) (2,214) (200)

(2,124) (4,790) (2,113) (200)

(19,650)

(16,083)

(9,227)

Net increase/(decrease) in cash and cash equivalents

3,271

(9,724)

(2,849)

Cash and cash equivalents at the beginning of the financial year

7,259 72

16,930 53

19,781 (2)

10,602

7,259

16,930

Notes (Loss)/profit for the financial year from: - Continuing operations - Discontinued operations Adjustments for: Tax on profits from continuing operations Finance income Finance cost

Cash flows from investing activities Purchases of intangible assets Purchases of PPE Proceeds from disposal of subsidiaries Purchase of subsidiary Disposal of PPE and intangible assets Disposal of investments Interest received

10 8

Net cash outflow from investing activities Cash flows from financing activities Drawdown from borrowings Repayment of borrowings Principal elements of lease payments Dividends paid Interest paid Preference interest paid Net cash outflow from financing activities

Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year

7 7 9 17 6 6

The notes on pages 14 to 68 form an integral part of the consolidated financial statements.

14

Notes to the financial statements 1. General information

Historical cost convention

The consolidated financial statements of JT Group Limited and its subsidiaries (the “group”) for the year ended 31 December 2020 were authorised for issue in accordance with a resolution of the Directors on 31 March 2021.

The financial statements have been prepared on a historical cost basis, except for the defined benefit pension plans – plan assets measured at fair value.

The group has its principal operations in Jersey. A list of major subsidiaries is included in note 20. The group also has operations in the UK, Australia, Denmark and the USA.

For all periods up to and including the year ended 31 December 2019, the group prepared its financial statements in accordance with United Kingdom Accounting Standards, including Financial Reporting Standard 102, ‘‘The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland’’ (‘‘FRS 102’’). The group’s effective date of transition to IFRS was 1 January 2018. All impacted balances and transactions accounted for within the comparative financial years ended 31 December 2018 and 31 December 2019 were reviewed and adjusted accordingly to align with the requirements of IFRS. These financial statements for the year ended 31 December 2020 are the first the group has prepared in accordance with IFRS. Refer to Note 2 for information on how the group adopted IFRS from date of transition to the financial year ended 31 December 2019.

JT Group Limited (the “company”) was incorporated in Jersey, Channel Islands on 22 October 2002 and the address of its registered office is No. 1 The Forum, Grenville Street, St Helier, Jersey, Channel Islands, JE4 8PB. Going concern The group’s business activities, together with the factors likely to affect its future development, performance and financial position are described in the notes to the consolidated financial statements. Note 16 and 17 describes the group’s policies and processes to manage its financial risk management objectives and capital, provides details of financial instruments and hedging activities and the group’s exposures to risks.

Management has assessed the group’s financial stability and liquidity over the next 18 months from the reporting year end.

Additional funding was secured in May 2020 through the accordion clause within the group’s existing Revolving Credit Facility (“RCF”), resulting in a £50m facility. The group has a strong recurring revenue stream but expects inbound and outbound roaming to continue to be impacted by the pandemic with supply chain delays as a result of Covid-19 and Brexit impacting equipment sales in the short term. A reasonably plausible downside scenario to 31 December 2022 has been modelled and applies a reduction in revenue based on a risk assessment of revenue segments and an increased trade receivable impairment loss The outcome of the downside scenario provides sufficient headroom between forecasted net borrowing requirements and available funding.

Extra steps to provide additional headroom, not yet factored into the model, include cost reductions in all cost lines within operating profit and capital expenditure.

Consequently, the Directors are confident that the group and company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.

First time adoption of IFRS

New standards and interpretations not yet adopted Certain standards have been issued for early adoption but is not yet effective for the current reporting period. These standards are not expected to have a material impact on the group in future reporting periods.

Principles of consolidation and equity accounting Subsidiaries Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity where the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the group. Refer to note 18 for more information on the group’s acquisitions.

2. Summary of significant accounting policies

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated.

Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

This note provides a summary of the significant accounting policies adopted in the preparation of these consolidated financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss, statement of comprehensive income, statement of changes in equity and balance sheet respectively.

Basis of preparation

Associates

Statement of compliance

Associates are all entities over which the group has significant influence but not control or joint control.

The consolidated financial statements of the JT Group Limited have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and have been properly prepared in accordance with the Companies (Jersey) Law 1991.

This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting (see note2 below), after initially being recognised at cost.

Notes to the financial statements (continued) Equity method Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the group’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.

Where the group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.

Unrealised gains on transactions between the group and its associates and joint ventures are eliminated to the extent of the group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the group.

The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in note 2.

Changes in ownership interests The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of JT Group Limited.

When the group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is measured to its fair value, with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Pounds sterling (GBP), which is JT Group Limited’s functional and presentation currency.

Translation and accounting of transactions and balances in a foreign currency Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions.

At each period end, foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account.

Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet •

income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and

• all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings are recognised in other comprehensive income.

When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Revenue recognition Revenue from contracts with customers falls under the scope of IFRS 15.

At contract inception, the group identifies “performance obligations”, being distinct goods and services promised to the customer. Consideration is allocated to each performance obligation in a contract based on their relative standalone selling price, and revenue is recognised as performance obligations are satisfied, net of returns, discounts and rebates allowed by the group and sales taxes.

The group derives revenues from: Network services – fixed line, broadband, mobile and private circuit services to residential and corporate customers.

Revenue from; • Fixed line, broadband and mobile subscription fees and network usage (including revenues from interconnect traffic), is recognised over the period in which the service is provided.

15

16

Notes to the financial statements (continued)

Any upfront installation services are deferred and recognised on a straight-line basis over the period of the contract and any future expected renewals. Network usage is recognised using a measure of progress that appropriately reflects satisfaction of the performance obligation, normally based on usage (i.e. minutes or bytes of data), or by time (i.e. monthly); and

• Provision of private circuits is recognised evenly over the period to which the charge relates • Equipment sales - sale, rental and support of equipment such as handsets, corporate phone systems and data network equipment. o Revenue from retail equipment sales, is recognised at the point of sale; o Corporate equipment sales, net of rebates, discounts and similar commissions, is recognised at the point of sale; o The rental and support contracts of corporate equipment sales, is recognised evenly over the periods in which the service is provided to the customer; and •

Revenue from professional services is recognised as revenue using a measure of progress. The revenue is recognised in line with costs incurred which are used as a measure to the progress of the performance obligation

• Managed services – provision and management of data centres, hosted, cloud and WAN o

Revenue from the managed service, maintenance and support contracts of the data centres, hosted, cloud and WAN services is recognised evenly over the periods in which the service is provided to the customer.

On-Island Wholesale – fixed line, broadband and private circuit services to wholesale customers. Revenue from; •

The provision of fixed line, broadband services and private circuits on-island at wholesale rate to other operators (including revenues from network usage), is recognised over the period through which the service is provided and in line with the recognition of the same services described in network services above; and

• Network usage from inbound roaming customers, is recognised as the service is provided to the customer.

International wholesale – Internet of Things (“IoT”) services, FPS, bulk messaging and network sharing for international customers.

Revenue from; •

The provision of SIMs to resellers to provide IoT SIM and data usage, is deferred and recognised on a straight-line basis over the period of the contract and any future expected renewals. Revenue from data usage through the use of IoT sims, is recognised in the period that usage occurs and in line with measure of progress, usually bytes of data;

•

The use of data lookups using application programming interfaces (“API”) used for fraud protection services, is recognised evenly over the period through which the service is provided to the customer. Customers are provided a fixed number of data look-ups within a specific month with no rollover’s into the following month;

• The delivery of bulk messaging to international customers, is recognised when the individual message is delivered to the end customer; and

• Mobile number portability (routing) look-up services to international customers, is recognised as an when the individual look-up is delivered to the customer.

Voice trading – buying and on-selling of bulk international voice termination capacity to a variety of network operators • Revenue from Voice services is recognised when voice traffic is carried over the company’s own or third-party network based on the prices negotiated with 3rd party supplier.

Other – other minor revenue streams, including digital & advertising services, is recognised over the period the service is provided.

Products and services may be sold individually or as bundled packages. In these cases, the group identifies the separate performance obligations and applies the corresponding revenue recognition policy as described above to each one.

The total transaction price is then allocated to each distinct performance obligation based on their respective stand-alone selling prices.

Some of the group’s contracts include multiple deliverables, such as the sale of hardware and related installation and professional services. If the installation and professional services are not complex, could be performed by another party and does not include an integration service they are accounted for as separate performance obligations. Where the contracts include multiple performance obligations, the transaction price will be allocated to each performance obligation based on the relative stand-alone selling prices.

Where these are not directly observable, they are estimated based on expected cost plus margin. If contracts include the installation of hardware, revenue for the hardware is recognised at a point in time when the hardware is delivered, the legal title has passed, and the customer has accepted the hardware.

Contract assets are recognised where control of goods and services has transferred to the customer before consideration is due, such as where handsets are provided at the beginning of a contract but paid for over the contract period, or where upfront installation charges are deemed to be a distinct performance obligation. Contract assets are reclassified to trade receivables when JT obtains a right to receive payment for the asset, i.e. once the customer is billed.

Contract liabilities are recognised where payment has been received in respect of goods and services that has not yet been delivered to the customer, such as for equipment or connection services received at the start of a contract that are not deemed to be separate performance obligation.

In certain of the group’s contracts, the group incurs costs to obtain a contract with a customer such as selling and marketing costs, bid and proposal costs, sales commissions, and legal fees. Only incremental costs should be recognised as assets. The group recognises incremental costs to obtain a contract if the group expects these costs to be recoverable.

Incremental costs of obtaining a contract are those costs that the group would not have incurred if the contract had not been obtained (for example, sales commissions).

The group assesses the recoverability of the assets on a contract-by-contract basis and includes estimates of expected consideration from potential reviews and extensions. Costs of obtaining a contract that is not incremental are expensed in the period that the costs are incurred.

Notes to the financial statements (continued) The group often incur costs to fulfil its obligations under a contract once it is obtained, but before transferring goods or services to its customers. These costs are recognised as assets when they relate directly to a contract (and can be specifically identified), the costs generate or enhance resources of the group that will be used in satisfying performance obligations in the future and the costs are expected to be recovered. Examples of direct costs include direct labour and materials (such as IoT sims) and other costs that are specifically charged to the customer under the contract. General and administrative cost are not capitalised and are expensed in the period that the costs are incurred.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Income tax

Contracts may contain both lease and non-lease components.

For leases of all asset classes for which the group is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.

The income tax expense or credit for the period is the tax payable on the current period’s taxable income, based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries where the company is not able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority.

Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Leases The group leases various offices, retail stores, network assets and technical sites for masts, service distribution rooms and data centres. Rental contracts are typically made for fixed periods of 5-25 years but may have extension options as described below.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable • variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date • amounts expected to be payable by the group under residual value guarantees •

the exercise price of a purchase option if the group is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the group exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the group: •

where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received

•

uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the leasing entity in the group, which does not have recent third-party financing, and

• makes adjustments specific to the lease, e.g. term, country, currency and security.

17

18

Notes to the financial statements (continued) The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Acquisition-related costs are expensed as incurred.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

• acquisition-date fair value of any previous equity interest in the acquired entity.

Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability • any lease payments made at or before the commencement date less any lease incentives received • any initial direct costs, and • restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.

Payments associated with short-term leases and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.

Extension and termination options Extension and termination options are included in a number of leases for properties and technical sites across the group.

These are used to maximise operational flexibility in terms of managing the assets used in the group’s operations. The majority of extension and termination options held are exercisable only by both the group and the respective lessor.

See note 3 for the critical judgements which management has made in determining lease terms.

Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: • fair values of the assets transferred • liabilities incurred to the former owners of the acquired business • equity interests issued by the group • fair value of any asset or liability resulting from a contingent consideration arrangement, and • fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, remeasured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.

The excess of the: • consideration transferred, • amount of any non-controlling interest in the acquired entity, and

Over fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.

Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

Notes to the financial statements (continued) Trade receivables

Buildings

Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components when they are recognised at fair value. They are subsequently measured at amortised cost using the effective interest method, less loss allowance.

Buildings include freehold and leasehold retail outlets and offices. Buildings are stated at cost less accumulated depreciation and accumulated impairment losses.

Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Discontinued operations A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of profit or loss.

Network equipment, fixtures and fittings and motor vehicles Network equipment, fixtures and fittings and motor vehicles are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of network equipment includes all cable, ducting and transmission equipment extending from the main switching systems to the customers’ premises.

Work in progress Work in progress comprises capital projects which are under construction. Accrued and expended project labour and material costs are accounted for as capital work in progress.

Internal labour costs that were necessary and arising directly from construction or acquisition of the asset are capitalised as part of the project or asset to which they relate. Once completed, projects are capitalised as separately identifiable assets and depreciated over their estimated useful economic lives.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Intangible assets

Property, plant and equipment

Goodwill

All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced.

All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Depreciation is calculated using the straight-line method to allocate the cost of the assets, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter of the lease term and estimated useful life as follows:

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the operating segments.

Trademarks, licences and customer contracts

Freehold buildings - 50 years

Separately acquired trademarks and licences are shown at historical cost. Trademarks, licences and customer contracts acquired in a business combination are recognised at fair value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses.

Leasehold buildings - the term of the lease

Software

Motor vehicles - 7 years

Costs associated with maintaining software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the group are recognised as intangible assets where the following criteria are met:

Buildings and vehicles

Equipment, fixtures and fittings: Network infrastructure - 3-25 years Other* - 5-10 years *This includes freehold and leasehold fixtures and fittings.

19

20

Notes to the financial statements (continued) • it is technically feasible to complete the software so that it will be available for use • management intends to complete the software and use or sell it • there is an ability to use or sell the software • it can be demonstrated how the software will generate probable future economic benefits • adequate technical, financial and other resources to complete the development and to use or sell the software are available, and • the expenditure attributable to the software during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software include internal labour costs.

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use.

Research and development Research expenditure and development expenditure that do not meet the criteria above are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Amortisation methods and periods The group amortises intangible assets with a limited useful life, using the straight-line method over the following periods: Websites and website development - 3–5 years Software, software development and software applications - 3–5 years Intellectual property rights - 5-8 years The amortisation basis adopted for each class of intangible assets above reflects the group’s expected pattern of consumption of the economic benefit from those assets.

Trade and other payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. The amounts are unsecured and are usually paid within 30 to 60 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The dividends on these preference shares are recognised in profit or loss as finance costs.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non- cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

Borrowing costs General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale.

Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation.

Other borrowing costs are expensed in the period in which they are incurred.

Provisions Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.

Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

Refer to note 14 for more information on examples of specific provisions recognised by the group.

Employee benefits Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as provisions within current liabilities in the balance sheet.

Notes to the financial statements (continued) Other long-term employee benefit obligations The group also has liabilities for long service leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service.

These obligations are therefore measured as the present value of expected future payments to be made in respect of the number of service years provided by employees up to the end of the reporting period.

The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least 12 months after the reporting period, regardless of when the actual settlement is expected to occur.

Post-employment obligations The group operates various post-employment schemes, including both defined benefit and defined contribution pension plans and post-employment medical plans.

Pension obligations The liability or asset recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit or loss.

Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.

Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service costs.

For defined contribution plans, the group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Treatment of Public Employees Contributory Retirement Scheme (PECRS) from 1 October 2015 On 1 October 2015, JT (Jersey) Limited’s pension assets and liabilities were moved out of the sub-fund and into the main scheme, administered by States of Jersey. This is considered to be a multi-employer (benefit) plan as defined by IFRS.

Under the revised Terms of Admission there is insufficient information available to use defined benefit accounting and, with effect from 1 October 2015, JT (Jersey) Limited has accounted for the scheme as if it was a defined contribution scheme.

However, the scheme continues to be a defined benefit scheme.

Termination benefits Termination benefits are payable when employment is terminated by the group before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits at the earlier of the following dates: (a) when the group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”) and involves the payment of terminations benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.

Contributed equity Ordinary shares are classified as equity. Mandatorily redeemable preference shares are classified as liabilities.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.

Rounding of amounts All amounts disclosed in the financial statements and notes have been rounded off to the nearest thousand currency units unless otherwise stated.

First-time adoption of IFRS These financial statements, for the year ended 31 December 2020, are the first the group has prepared in accordance with IFRS. For periods up to and including the year ended 31 December 2019, the group prepared its financial statements in accordance with United Kingdom Accounting Standards, including Financial Reporting Standard 102, ‘‘The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland’’ (‘‘FRS 102’’).

Accordingly, the group has prepared financial statements that comply with IFRS applicable as at 31 December 2020, together with the comparative period data for the years ended 31 December 2019 and 31 December 2018, as described in the summary of significant accounting policies. In preparing the financial statements, the group’s opening statement of financial position was prepared as at 1 January 2018, the group’s date of transition to IFRS. This note explains the principal adjustments made by the group in restating its FRS 102 financial statements, including the statement of financial position as at 1 January 2018 and the financial statements as of, and for, the years ended 31 December 2018 and 31 December 2019.

21

22

Notes to the financial statements (continued) Exemptions applied IFRS 1 allows first-time adopters certain exemptions from the retrospective application of certain requirements under IFRS. The group has applied the following exemptions: •

IFRS 3 Business Combinations has not been applied to either acquisitions of subsidiaries that are considered businesses under IFRS, or acquisitions of interests in associates and joint of the acquisition. After the date of the acquisition, measurement is in accordance with IFRS. Assets and liabilities that do not qualify for recognition under IFRS are excluded from the opening IFRS statement of financial position.

The group did not recognise any assets or liabilities that were not recognised under the FRS 102 or exclude any previously recognised amounts as a result of IFRS recognition requirements

•

IFRS 1 also requires that the FRS 102 carrying amount of goodwill must be used in the opening IFRS statement of financial position (apart from adjustments for goodwill impairment and recognition or derecognition of intangible assets). In accordance with IFRS 1, the group has tested goodwill for impairment at the date of transition to IFRS. There was no impairment recognised on goodwill at 1 January 2018

•

The group has not applied IAS 21 The Effects of Changes in Foreign Exchange Rates retrospectively to fair value adjustments and goodwill from business combinations that occurred before the date of transition to IFRS. Such fair value adjustments and goodwill are treated as assets and liabilities of the parent rather than as assets and liabilities of the acquiree.

Therefore, those assets and liabilities are already expressed in the functional currency of the parent or are non-monetary foreign currency items and no further translation differences occur.

The group assessed all contracts existing at 1 January 2018 to determine whether a contract contains a lease based upon the conditions in place as at 1 January 2018.

Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at 1 January 2018. Right-of-use assets were measured at 1 January 2018 at either: • Its carrying amount as if IFRS 16 had been applied since the commencement date of the lease, but discounted using the lessee’s incremental borrowing rate at the date of transition to IFRS; or • An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position immediately before the date of transition to IFRS. The lease payments associated with leases for which the lease term ends within 12 months of the date of transition to IFRS and leases for which the underlying asset is of low value have been recognised as an expense on either a straight-line basis over the lease term or another systematic basis.

The group has applied the transitional provisions in IAS 23 Borrowing Costs and capitalises borrowing costs relating to all qualifying assets after the date of transition. Similarly, the group has not restated for borrowing costs capitalised under FRS 102 on qualifying assets prior to the date of transition to IFRS. The group has used the following transition provisions when applying IFRS 15 retrospectively: • for completed contracts, the group has not restated contracts that: ­ - begin and end within the same annual reporting period; or ­ - are completed contracts at 1 January 2018 •

for completed contracts that have variable consideration, the group has used the transaction price at the date the contract was completed rather than estimating variable consideration amounts in the comparative reporting periods

•

for contracts that were modified before 1 January 2018, the group has not retrospectively restated the contract for those contract modifications. Instead, the group has reflected the aggregate effect of all of the modifications that occurred before 1 January 2018 when:

­ - identifying the satisfied and unsatisfied performance obligations; ­ - determining the transaction price; and ­ - allocating the transaction price to the satisfied and unsatisfied performance obligations • for all reporting periods presented before 1 January 2020, the group has not disclosed the amount of the transaction price allocated to the remaining performance obligations and an explanation of when the group expects to recognise that amount as revenue.

Estimates The estimates at 1 January 2018, 31 December 2018 and 31 December 2019 are consistent with those made for the same dates in accordance with FRS 102 (after adjustments to reflect any differences in accounting policies). The estimates used by the group in accordance with IFRS reflect conditions at 1 January 2018, the date of transition to IFRS and as at 31 December 2018 and 31 December 2019.

Notes to the financial statements (continued) Group reconciliation of equity as at 1 January 2018 (date of transition to IFRS) FRS 102

Reclassifications and remeasurements

IFRS as at 1 January 2018

£’000

£’000

£’000

Assets Non-current assets Property, plant and equipment Right-of -use assets Intangible assets Deferred tax assets Contract cost assets Contract assets Investments accounted for using the equity method Financial asset at fair value through profit or loss Total non-current assets

112,468 20,156 941 611 4,209 138,385

14,504 295 227 15,026

112,468 14,504 20,156 941 295 227 611 4,209 153,411

Current assets Inventories Trade receivables Other receivables Contract assets Contract cost assets Cash and cash equivalents (excluding bank overdrafts) Total current assets Total assets

3,355 35,482 6,500 19,781 65,118 203,503

(629) 163 341 (125) 14,901

3,355 34,853 6,500 163 341 19,781 64,993 218,404

Borrowings 2.5% Redeemable preference shares Lease liabilities Contract liabilities Deferred tax liabilities Employee benefit obligations Provisions Total non-current liabilities

(51,000) (10,000) (9,238) (725) (1,790) (72,753)

(12,523) (2,071) (83) (14,677)

(51,000) (10,000) (12,523) (2,071) (9,321) (725) (1,790) (87,430)

Current liabilities Trade and other payables Current tax liabilities Contract liabilities Lease liabilities Total current liabilities

(36,810) (2,153) (38,963)

446 (1,120) (2,068) (2,742)

(36,810) (1,707) (1,120) (2,068) (41,705)

(111,716)

(17,419)

(129,135)

91,787

(2,518)

89,269

20,000 72,274 (487)

(2,518) -

20,000 69,756 (487)

91,787

(2,518)

89,269

LIABILITIES Non-current liabilities

Total liabilities Net assets EQUITY Share capital and share premium Retained earnings Other reserves Total equity

23

24

Notes to the financial statements (continued) Group reconciliation of equity as at 31 December 2018 FRS 102

Reclassifications and remeasurements

IFRS as at 31 December 2018

£’000

£’000

£’000

115,184 23,735 947 139,866

77 14,394 488 398 220 15,577

115,261 14,394 24,223 947 398 220 155,443

3,180 6,030 38,433 16,930 64,573 204,439

6 295 430 (694) 37 15,614

3,180 6,036 295 430 37,739 16,930 64,610 220,053

Borrowings 2.5% Redeemable preference shares Lease liabilities Contract liabilities Other payables Deferred tax liabilities Employee benefit obligations Provisions Total non-current liabilities

(51,000) (10,000) (1,494) (9,726) (708) (2,275) (75,203)

(12,235) (1,992) (112) (14,339)

(51,000) (10,000) (12,235) (1,992) (1,494) (9,838) (708) (2,275) (89,542)

Current liabilities Trade and other payables Current tax liabilities Contract liabilities Lease liabilities Provisions Total current liabilities

(36,560) (2,624) (39,184)

394 (1,390) (2,278) (3,274)

(36,560) (2,230) (1,390) (2,278) (42,458)

Total liabilities

(114,387)

(17,613)

(132,000)

Net assets

90,052

(1,999)

88,053

EQUITY Share capital and share premium Retained earnings Other reserves

20,000 69,767 285

(1,999) -

20,000 67,768 285

Total equity

90,052

(1,999)

88,053

Assets Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Deferred tax assets Contract cost assets Contract assets Total non-current assets Current assets Inventories Other receivables Contract assets Contract cost assets Trade receivables Cash and cash equivalents (excluding bank overdrafts) Total current assets Total assets LIABILITIES Non-current liabilities

Notes to the financial statements (continued) Group reconciliation of equity as at 31 December 2019 FRS 102

Reclassifications and remeasurements

IFRS as at 31 December 2019

£’000

£’000

£’000

115,884 17,767 783 134,434

110 12,910 1,397 657 67 15,141

115,994 12,910 19,164 783 657 67 149,575

4,148 8,947 36,081 7,259 56,435 190,869

(610) 348 579 317 15,458

4,148 8,337 348 579 36,081 7,259 56,752 206,327

Borrowings 2.5% Redeemable preference shares Lease liabilities Contract liabilities Other payables Deferred tax liabilities Employee benefit obligations Provisions Total non-current liabilities

(44,500) (10,000) (1,094) (10,078) (711) (2,601) (68,984)

(10,796) (2,418) (106) (13,320)

(44,500) (10,000) (10,796) (2,418) (1,094) (10,184) (711) (2,601) (82,304)

Current liabilities Trade and other payables Current tax liabilities Contract liabilities Lease liabilities Provisions Total current liabilities

(35,049) (1,433) (36,482)

341 (1,478) (2,268) (3,405)

(35,049) (1,092) (1,478) (2,268) (39,887)

(105,466)

(16,725)

(122,191)

Net assets

85,403

(1,267)

84,136

EQUITY Share capital and share premium Retained earnings Other reserves

20,000 65,761 (358)

(1,267) -

20,000 64,494 (358)

Total equity

85,403

(1,267)

84,136

Assets Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Deferred tax assets Contract cost assets Contract assets Total non-current assets Current assets Inventories Other receivables Contract assets Contract cost assets Trade receivables Cash and cash equivalents (excluding bank overdrafts) Total current assets Total assets LIABILITIES Non-current liabilities

Total liabilities

25

26

Notes to the financial statements (continued) Group reconciliation of total comprehensive income for the year ended 31 December 2018

FRS 102

Reclassifications and remeasurements

IFRS for the year ended 31 December 2018

£’000

£’000

£’000

239,340 (150,880)

(60) 195

239,280 (150,685)

Gross profit

88,460

135

88,595

Operating expenses Impairment Other income

(80,370) 106

4,502 (3,860) -

(75,868) (3,860) 106

Operating profit

8,196

777

8,973

Gain on financial assets at fair value through profit or loss Finance income Finance costs

105 72 (2,211)

(177)

105 72 (2,388)

Profit before income tax

6,162

600

6,762

(3,073) 3,089

(81) 519

(3,154) 3,608

Profit/(Loss) from discontinued operation (attributable to equity holders of the company)

(847)

-

(847)

Profit for the year

2,242

519

2,761

Items that will not be reclassified to profit or loss Remeasurements of post-employment benefit obligations Income tax relating to these items

8 (2)

-

8 (2)

Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations Income tax relating to these items Other comprehensive income for the period, net of tax

772 772

-

772 772

3,014

519

3,533

3,014 3,014

519 519

3,533 3,533

3,861 (847)

519 -

4,380 (847)

3,014

519

3,533

Continuing operations Revenue Cost of sales

Income tax expense Profit from continuing operations

Other comprehensive income

Total comprehensive income for the year Total comprehensive income for the year is attributable to: Owners of JT Group Limited Non-controlling interest

Total comprehensive income for the year attributable to owners of the JT Group Limited arises from: Continuing operations Discontinued operations

Notes to the financial statements (continued) Group reconciliation of total comprehensive income for the year ended 31 December 2019

FRS 102

Reclassifications and remeasurements

IFRS for the year ended 31 December 2019

£’000

£’000

£’000

195,556 (103,898)

(610) 332

194,946 (103,566)

91,658

(278)

91,380

(83,896) (2,600) 400

2,615 (1,351) -

(81,281) (3,951) 400

Operating profit

5,562

986

6,548

Finance income Finance costs

41 (2,318)

(208)

41 (2,526)

Profit before income tax

3,285

778

4,063

Income tax expense Profit from continuing operations

(1,831) 1,454

(47) 731

(1,878) 2,185

(667)

-

(667)

787

731

1,518

Items that will not be reclassified to profit or loss Exchange differences on translation of foreign operations Income tax relating to these items

(644) -

1 -

(643) -

Items that will not be reclassified to profit or loss Remeasurement of post-employment benefit obligations Income tax relating to these items

(21) 4

-

(21) 4

(661)

1

(660)

126

732

858

126

732

858

126

732

858

732 -

1,525 (667)

732

858

Continuing operations Revenue Cost of sales Gross profit Operating expenses Impairment Other income

Profit/(Loss) from discontinued operation (attributable to equity holders of the company) Profit for the year Other comprehensive income

Other comprehensive income for the period, net of tax Total comprehensive income for the year Total comprehensive income for the year attributable to: Owners of JT Group Limited Non-controlling interests

Total comprehensive income for the year attributable to owners of the JT Group Limited arises from: Continuing operations Discontinued operations

793 (667) 126

27

28

Notes to the financial statements (continued) Notes to the reconciliation of equity as at 1 January 2018 and 31 December 2019 and total comprehensive income for the year ended 31 December 2019 All amounts provided in the below note are presented in thousands.

Trade and other receivables The adoption of IFRS has fundamentally changed the group’s accounting for impairment losses for financial assets by replacing incurred loss approach under FRS 102 with a forward-looking expected credit loss approach. IFRS requires the group to recognise an allowance for all debt instruments not held at fair value through profit or loss and contract assets.

At the date of transition to IFRS, the group recognised additional impairment on its Trade receivables of £443 (31 December 2018: £30, 31 December 2019: (£300)), which resulted in a decrease/(increase) in retained earnings by the same amount.

Included within the group’s additional impairment is an amount of £28 (31 December 2018: £2, 31 December 2019: £67) relating to its contract assets. The total adjustment relating to IFRS 9 at the transition dated amounted to £471.

In addition to the amounts recognised above, the group also reclassified an amount of £158 (31 December 2018: £97, 31 December 2019: £52 ) related to its prepayments into the group’s right-ofuse assets on transition date.

Property, plant and equipment – borrowing costs Under IFRS, all directly attributable borrowing costs should be capitalised. The group has applied the transitional provisions in IAS 23 Borrowing Costs and capitalised borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset after the date of transition. Borrowing costs capitalised amounted to £77 in 2018 and £41 in 2019. These had been expensed as incurred under FRS 102.

Intangible assets – goodwill Under FRS 102 goodwill was amortised over its estimated useful life and required an assessment for impairment be made following impairment indicators. IFRS requires goodwill to be annually tested for impairment.

Under FRS 102, the amortisation of goodwill amounted to £4,349 in 2018 and £2,260 in 2019. An impairment loss of £2,600 was recognised in 2019. With the transition to IFRS, the amortisation recognised in 2018 and 2019 was reversed, following this the goodwill value was assessed at 31 December 2018 and 2019. The assessments resulted in an impairment recognised against the goodwill of £3,860 in 2018 and £1,351 in 2019.

Deferred tax The various transitional adjustments resulted in various temporary differences. According to the accounting policies in note 2, the group has to recognise the tax effects of such differences. Deferred tax adjustments are recognised in correlation to the underlying transaction either in retained earnings or a separate component of equity.

Leases Under FRS 102, a lease is classified as a finance lease or an operating lease. Operating lease payments are recognised as an operating expense in the statement of profit or loss on a straight-line basis over the lease term. Under IFRS, as explained in note 2, a lessee applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets and recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

At the date of transition to IFRS, the group applied the transitional provision and measured lease liabilities at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of transition to IFRS. Right-of-use assets were measured at either: •

Its carrying amount as if IFRS 16 had been applied since the commencement date of the lease, but discounted using the lessee’s incremental borrowing rate at the date of transition to IFRS; or

•

An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position immediately before the date of transition to IFRS.

As a result, on 1 January 2018, the group recognised an increase of £14,591 (31 December 2018: £14,513, 31 December 2019: £13,064) of lease liabilities included under interest-bearing loans and borrowings and £14,504 (31 December 2018: £14,394, 31 December 2019: £12,910) of right-of-use assets. The difference between lease liabilities and right-of-use assets has been recognised in retained earnings.

Additionally, depreciation increased by £1,900 (included in administrative expenses) and finance costs increased by £255 for the year ended 31 December 2018.

For the year ended 31 December 2019, depreciation increased by £2,182 (included in operating expenses) and finance costs increased by £248.

Contract assets and contract liabilities Under FRS 102, the group recognised trade receivables, even if the receipt of the total consideration was conditional on successful completion of installation services. Under IFRS, any earned consideration that is conditional should be recognised as a contract asset rather than a receivable. Therefore, at the date of transition to IFRS, the group reclassified £636 (31 December 2018: £515, 31 December 2019: £415) from trade receivables to contract assets. Furthermore, at 1 January 2018, the group recognised additional contract assets amounting to £636 (31 December 2018: £818, 31 December 2019: £1,236) relating to satisfied obligations to transfer goods or services to a customer under IFRS, but not yet recognised as revenue under FRS 102.

Notes to the financial statements (continued) Under FRS 102, the group recognised deferred revenue for an obligation to transfer goods or services to a customer for which the entity has received consideration or the amount is due from the customer. Under IFRS, the obligation should be recognised as a contract liability rather than deferred revenue. Therefore, at the date of transition to IFRS, the group reclassified £3,191 (31 December 2018: £3,382, 31 December 2019: £3,897) from deferred revenue to contract liabilities. Furthermore, at 1 January 2018, the group recognised additional contract liabilities amounting to £3,191 (31 December 2018: £3,392, 31 December 2019: £3,897) relating to obligations to transfer goods or services to a customer not yet satisfied under IFRS, but recognised as revenue under FRS 102.

Statement of cash flows Under FRS 102, a lease is classified as a finance lease or an operating lease. Cash flows arising from operating lease payments are classified as operating activities. Under IFRS, a lessee generally applies a single recognition and measurement approach for all leases and recognises lease liabilities. Cash flows arising from payments of principal portion of lease liabilities are classified as financing activities. Therefore, cash outflows from operating activities decreased by £2,026 and cash outflows from financing activities increased by the same amount for the year ended 31 December 2018, and £2,342 for the year 31 December 2019.

3. Accounting estimates and judgements The preparation of the group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities.

Accounting estimates and assumptions The assumptions concerning the future and other sources of estimation uncertainty at the reporting date are described below. The group based its assumptions and estimates on information available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the group. Such changes are reflected in the assumptions when they occur.

Development costs The group capitalises costs for product development projects.

Initial capitalisation of costs is based on management’s judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalised, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits.

Impairment of non-financial assets Impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the group is not yet committed to or significant future investments that will enhance the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill and other intangibles with indefinite useful lives recognised by the group.

The key assumptions used to determine the recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and further explained in Note 10.

Fair values on acquisition of Neoconsult ApS and Nomad IP ApS The fair value of the intangible asset acquired on the step-acquisition of Neoconsult ApS and Nomad IP ApS involved the use of a valuation technique and estimation of future cash flows to be generated over a number of years. The key intangible asset acquired was determined to have an economic useful life of eight years and a discounted cash flow model was used over the same period to validate its indicative acquisition date fair value. The estimation of the fair value required a combination of assumptions including cashflow forecasts of the IoT business over 8 years applying a 12% discount rate on the discounted cashflow model.

In addition, the deferred and contingent consideration payable required estimation of the level of profitability of the business unit incorporating the acquired entities as well as an assessment of performance on other agreed deliverables on each pre-agreed date. As the deferred and contingent consideration are payable over a three-year period, the expected outflows were discounted to present value.

Useful lives of tangible and intangible assets The annual depreciation and amortisation charges for tangible assets are sensitive to the estimated lives allocated to each type of asset. Lives are assessed annually and changed when necessary to reflect expected impact from changes in technology, network investment plans and physical condition of the assets.

29

30

Notes to the financial statements (continued) The carrying value of intangible and tangible assets are disclosed in note 8 and note 10 and the useful lives applied to the principal categories are disclosed in note 2 for tangible and intangible assets respectively.

Provisions Provision for expected credit losses (ECLs) of trade receivables and contract assets The group uses a provision matrix to calculate ECLs for trade receivables and contract assets. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e., by geography, product type, and customer type).

The provision matrix is initially based on the group’s historical observed default rates. The group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e. economic growth outlook and unemployment rate) are expected to deteriorate over the next year which can lead to an increased number of defaults, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions.

The group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. The information about the ECLs on the group’s trade receivables and contract assets is disclosed in notes 7 and 16.

Other provisions Provisions are also made for asset retirement obligations, dilapidations and contingencies. These provisions require management’s best estimate of the costs that will be incurred based on legislative and contractual requirements. In addition, the timing of the cash flows and the discount rates used to establish net present value of the obligations require management’s judgement.

In respect of claims, litigation, disputes and regulatory matters the group provides for anticipated costs where the outflow of resources is considered probable, and a reasonable estimate can be made on the likely outcome. The ultimate liability may vary from the amounts provided and will be dependent upon the eventual outcome of any settlement. The carrying value of provisions is disclosed in note 14.

Defined benefit pension schemes (TBPS scheme) and Long-Term Incentive Plan (LTIP) The cost of the defined benefit pension plan and other employee obligations (e.g. the JT Long-Term Incentive Plan) and the present value of the obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

For the defined benefit pension plan, the parameter most subject to change is the discount rate. In determining the appropriate discount rate, management considers the interest rates of corporate bonds in currencies consistent with the currencies of the post-employment benefit obligation and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation.

The underlying bonds are further reviewed for quality. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at intervals in response to demographic changes.

For both the defined benefit pension plan and the LTIP, future salary increases, and pension increases are based on expected future inflation rates for the respective countries.

Further details about pension obligations are provided in note 13. As at the financial reporting date, there were two employees on the TBPS scheme and employees on the LTIP scheme.

Current and deferred income tax The actual tax we paid on profits is determined according to complex tax laws and regulations. Where the effect of these laws is unclear, estimates are used in determining the liability for the tax to be paid on past profits which is recognised in the financial statements. The Directors believe the estimates, assumptions and judgements are reasonable, but this can involve complex issues which may take a number of years to resolve. The final determination of prior year liabilities could be different from the estimates reflected in the financial statements and may result in the recognition of an additional tax expense or tax credit in the income statement.

Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised. The group uses management’s expectations of future revenue growth, operating costs and profit margins to determine the extent to which future taxable profits will be generated against which to consume the deferred tax assets.

The value of the group’s income tax assets and liabilities is disclosed on the statement of financial position. The carrying value of the group’s deferred tax assets and liabilities is disclosed in note 12.

Notes to the financial statements (continued) Inventory provision and impairment

Key judgements

Provisions are made for inventory impairment. This provision requires management’s best estimate based on the assessment of various factors relating to the inventory on hand at the reporting date and historical experience.

In the process of applying the group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements:

The value of the inventory impairment is offset against the inventory balance on the statement of financial position.

Determining the lease term of contracts with renewal and termination options

Contingent and deferred consideration

The group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The group has entered into acquisitions with deferred consideration, including amounts which are contingent on future events, where future payments are dependent upon the provision of future services. The group has recognised the deferred consideration as part of the consideration transferred on the assumption that all conditions related to the provision of future services will likely be satisfied. Refer to the business combinations accounting policy for more information on how the group accounts for the deferred consideration.

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option.

Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

Revenue recognition – Estimating stand-alone selling price

For leases of buildings and technical sites, the following factors are normally the most relevant:

Bundled products

• If there are significant penalties to terminate (or not extend), the group is typically reasonably certain to extend (or not terminate)

Bundled products that combine different goods and services are assessed to determine whether there are different distinct performance obligations and hence necessary to separate the different identifiable components and apply the corresponding revenue recognition policy to each element. Total bundled revenues, i.e. the total transaction price, are allocated among the identified elements based on their respective standalone selling prices.

• If any leasehold improvements are expected to have a significant remaining value, the group is typically reasonably certain to extend (or not terminate) • Otherwise, the group considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset.

Determining standalone selling prices for each identified component requires estimates that are complex due to the nature of the business. A change in estimates of standalone selling prices could affect the apportionment of revenue among the elements and, as a result, the timing of recognition of revenues.

The lease term is reassessed if an option is actually exercised (or not exercised) or the group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.

Leases - Estimating the incremental borrowing rate

Long term multi-service agreements

The group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the group ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency).

The group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).

Where the outcome of long-term multi-service agreements can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the reporting date. This is normally measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs, except where this would not be representative of the stage of completion. Estimation of the contract stage of completion requires management judgement.

Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

31

32

Notes to the financial statements (continued) Gross versus net presentation When the group sells goods or services as a principal, income and payments to suppliers are reported on a gross basis in revenue and cost of sales. If the group sells goods or services as an agent, revenue and payments to suppliers are recorded in revenue on a net basis, representing the margin earned. Whether the group is considered to be the principal or an agent in the transaction depends on analysis by management of both the legal form and substance of the agreement between the group and its business partners; such judgements impact the amount of reported revenue and operating expenses but do not impact reported assets, liabilities or cash flows.

4. Revenue Disaggregation of revenue from contracts with customers The presentation of revenue is disaggregated by segment. The group derives revenue from the transfer of goods and services in the following major product lines: • Network services – fixed line, broadband, mobile and private circuit services to residential and corporate customers • Equipment sales – sale, rental and support of equipment such as handsets, corporate phone systems and data network equipment • Managed services – fixed line, broadband and private circuit services to wholesale customers • On-island wholesale – roaming revenue from customers of other networks and from network sharing • International wholesale - IoT services, FPS, bulk messaging and network sharing for international customers • Voice trading – buying and on-selling of bulk international voice termination capacity to a variety of network operators • Other – other minor revenue streams, including digital advertising services Management have considered the disclosure requirements of IFRS 15 and deems the below revenue segments appropriate; •

Channel Islands (being the group’s predominantly core telecommunications business lines such as network services, equipment sales and on-island wholesale provided to local consumer and enterprise customers); and

•

International (being predominantly made up of our non-core telecommunications business lines such as international wholesale and voice trading, the majority of which is provided to customers outside of the Channel Islands)

33

Notes to the financial statements (continued) 2020

Network services

Channel Islands

International

Total

£’000

£’000

£’000

60,394

450

60,844

Equipment sales

14,978

10

14,988

Managed services

10,985

496

11,481

On-Island wholesale

11,266

-

11,266

-

45,294

45,294

International wholesale Voice trading

-

25,147

25,147

Other

910

7

917

Total

98,533

71,404

169,937

2019

Channel Islands

International

Total

£’000

£’000

£’000

Network services

59,196

1,259

60,455

Equipment sales

12,770

-

12,770

-

-

-

10,847

422

11,269

11,757

-

11,757

Solution sales Managed services On-Island wholesale International wholesale

-

32,617

32,617

Voice trading

-

65,937

65,937

Other

-

141

141

Total

94,570

100,376

194,946

2018

Channel Islands

International

Total

£’000

£’000

£’000

Network services

62,215

1,675

63,890

Equipment sales

13,044

-

13,044

-

-

-

9,605

156

9,761

Solution sales Managed services On-Island wholesale International wholesale Voice trading

8,351

-

8,351

-

25,135

25,135

-

117,677

117,677

Other

1,396

26

1,422

Total

94,611

144,669

239,280

34

Notes to the financial statements (continued) Assets and liabilities related to contracts with customers The group has recognised the following assets and liabilities related to contracts with customers: 31 December 2020 £’000

31 December 2019 £’000

31 December 2018 £’000

1 January 2018 £’000

Contract cost assets

1,504

1,236

828

636

Total contract costs assets

1,504

1,236

828

636

Contract assets

198

415

515

390

Total contract assets

198

415

515

390

Contract liabilities

(4,826)

(3,896)

(3,382)

(3,191)

Total contract liabilities

(4,826)

(3,896)

(3,382)

(3,191)

Revenue recognised in relation to contract liabilities The following table shows how much of the revenue recognised in the current reporting period relates to carried-forward contract liabilities and how much relates to performance obligations that were satisfied in a prior year:

Balance at 1 January - Revenue recognised during year through profit/(loss) - Unearned revenue credited to contract liabilities Balance at 31 December

31 December 2020 £’000

31 December 2019 £’000

31 December 2018 £’000

(3,896)

(3,382)

(3,191)

2,027

1,837

1,360

(2,957)

(2,351)

(1,551)

(4,826)

(3,896)

(3,382)

Contract assets recognised from contracts with customers The table below provides a breakdown of the group’s contract assets at the end of each reporting period as well as the amortisation relating to these balances during the reporting periods respectively.

31 December 2020 £’000

31 December 2019 £’000

31 December 2018 £’000

415

515

390

(341)

(363)

(214)

- Unearned revenue credited to contract liabilities

128

263

339

Balance at 31 December

202

415

515

Balance at 1 January - Amortisation recognised during the year

35

Notes to the financial statements (continued) Assets recognised from costs to obtain and fulfil a contract In addition to the contract balances disclosed above, the group has also recognised assets in relation to costs to fulfil a long-term contract and costs to obtain contracts. This is presented as contract cost assets on the balance sheet.

Costs to obtain contract assets relate to commission fees paid to the group’s sale staff under a commission policy that was terminated effective 31 December 2019. No additional costs have been recognised since the termination date of the policy. The group’s current commission policies do not meet the capitalisation requirements under IFRS 15 and are expensed in the period incurred.

In addition to the above capitalised costs, the group also capitalised setup costs related to its IoT business as costs to fulfil its customer contracts. The costs relate directly to the customer contracts, generate resources that will be used in satisfying the contracts and are expected to be recovered and were therefore recognised as costs to fulfil a contract. All costs capitalised in 2020 relate to the IoT setup costs.

31 December 2020 £’000

31 December 2019 £’000

31 December 2018 £’000

Balance at 1 January

1,236

828

636

- Amortisation/impairment loss recognised as cost of providing services during the year

(749)

(599)

(441)

1,017

1,007

633

1,504

1,236

828

- Additions recognised during year Balance at 31 December

5. Other income and expense items This note provides an explanation and/or breakdown of the items included in other income, operating expenses and finance income and costs.

Other income Notes Service income

2020 £’000

2019 £’000

2018 £’000

400

400

106

400

400

106

During 2018, the group sold its supply of its directory services business line to a 3rd party through a licensing arrangement and continues to support this business through billing and other related services. The proceeds from this transaction and its ongoing support services are recognised as other income.

36

Notes to the financial statements (continued) Breakdown of expenses Notes Employee benefits expense

2020 £’000

2019 £’000

2018 £’000

32,764

34,736

34,528

Depreciation of PPE

8

18,688

18,128

17,221

Depreciation on right of use assets

9

2,217

2,181

1,900

Inventory charged as expense

10,117

10,163

9,471

Provision for and write-off of bad debt

6,015

87

759

3,360

3,610

3,080

1,879

357

485

24

(51)

7

-

-

99

-

1,351

3,860

(94)

89

159

Amortisation of intangible assets

10

Charged provisions/(released unused) (Profit)/loss on disposal of tangible assets (Profit)/loss on disposal of intangible assets Impairment of goodwill

10

Impairment of inventory

17,581

14,581

8,159

92,551

85,232

79,728

2020 £’000

2019 £’000

2018 £’000

Interest income

2

41

72

Finance income

2

41

72

Other expenses

Finance income and costs Notes Finance income

Finance costs Interest on revolving credit facility and private placement

1,216

1,945

1,858

Interest and finance charges paid/payable for lease liabilities

227

248

255

Interest on 2.5% preference shares

250

250

250

Other interest paid or payable

(7)

104

85

Net finance costs from pension schemes

14

19

17

1,700

2,566

2,465

-

(40)

(77)

Finance costs expensed

1,700

2,526

2,388

Net finance costs

1,698

2,567

2,316

Amount capitalised as borrowing costs

Capitalised borrowing costs No borrowing costs were capitalised during 2020, and a capitalisation rate of 4.10% was used to capitalise borrowing costs in 2018 and 2019

37

Notes to the financial statements (continued) 6. Income tax expense This note provides an analysis of the group’s income tax expense, and shows what amounts are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the group’s tax position.

The main uncertainty is whether the group’s intra-group trading model would be accepted by a particular tax authority.

Management consider the probability of an outflow is low and as such no provision has been made.

Deciding whether to recognise deferred tax assets is judgemental. The group only recognise a deferred tax asset when we consider it is probable that they can be recovered. In making this judgement the group consider evidence such as historical performance, financial forecasts and future activities Income tax expense 2020 £’000

2019 £’000

2018 £’000

3,228

1,631

2,713

16

(175)

2

3,244

1,456

2,715

Current Tax Current tax on profits for the year Adjustments for current tax of prior periods Total current tax expense Deferred income tax Decrease/(increase) in deferred tax assets (Decrease)/increase in deferred tax liabilities Total deferred tax expense/(benefit) Income tax expense

700

101

37

(133)

321

402

567

422

439

3,811

1,878

3,154

3,811

1,878

3,154

Income tax expense is attributable to: Profit from continuing operations Profit from discontinued operation

(39)

10

16

3,772

1,888

3,170

38

Notes to the financial statements (continued) Numerical reconciliation of income tax expense to prima facie tax payable Income tax expense 2020 £’000

2019 £’000

2018 £’000

4,744

4,063

6,762

4,744

4,063

6,762

949

813

1,352

Expenses not deductible for tax purposes

305

143

136

Non-qualifying depreciation

240

240

275

Subject to tax at 0%

220

660

1,142

-

-

(24)

Profit from continuing operations before income tax expense

Tax at the standard tax rate of 20% (2019 - 20%, 2018 - 20%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income:

Non taxable adjustment Write down of deferred tax asset

819

-

-

Unrecognised deferred tax asset

1,303

14

-

Transfer pricing adjustment from discontinued operations Other adjustments Subtotal Adjustments for current tax of prior periods Income tax expense

-

-

199

(55)

50

4

3,781

1,920

3,084

30

(42)

70

3,811

1,878

3,154

2020 £’000

2019 £’000

2018 £’000

14,659

3,485

3,526

4,398

1,046

1,058

Tax losses

Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit @30%

39

Notes to the financial statements (continued) 7. Financial assets and financial liabilities This note provides information about the group’s financial instruments, including: • an overview of all financial instruments held by the group • specific information about each type of financial instrument • accounting policies • information about determining the fair value of the instruments, including judgements, estimates and the level of uncertainty involved.

The group holds the following financial instruments: Notes

2020 £’000

2019 £’000

2018 £’000

Trade and other receivables

7

29,468

44,418

43,775

Cash and cash equivalents

7

10,602

7,259

16,930

40,070

51,677

60,705

Financial assets Financial assets at amortised cost

Financial liabilities

Notes

Financial liabilities at amortised cost Trade and other payables

7

31,876

35,049

36,560

Borrowings

7

32,500

44,500

51,000

2.5% redeemable preference shares

7

10,000

10,000

10,000

Other payables

5

694

1,094

1,494

Lease liabilities

9

11,671

13,064

14,513

86,741

103,707

113,567

The group’s exposure to various risks associated with the financial instruments is discussed in note 16. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above (a) Trade receivables 31 December 2020 £’000

31 December 2019 £’000

31 December 2018 £’000

1 January 2018 £’000

Trade receivables from contracts with customers

32,560

36,768

39,154

35,877

Loss allowance

(6,308)

(687)

(1,415)

(1,024)

Trade receivables less loss allowance

26,252

36,081

37,739

34,853

3,216

9,558

6,036

6,500

29,468

45,639

43,775

41,353

Other receivables Total trade and other receivables

40

Notes to the financial statements (continued)

Classification as trade receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 1 year and are therefore all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components, when they are recognised at fair value. The group holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.

Details about the group’s impairment policies and the calculation of the loss allowance are provided in note 16.

Fair values of trade receivables Due to the short-term nature of the current receivables, their carrying amount is the same as their fair value.

Impairment and risk exposure Information about the impairment of trade receivables and the group’s exposure to credit risk and foreign currency risk can be found in note 16 (b) Cash and cash equivalents 2020 £’000

2019 £’000

2018 £’000

Current assets 10,602

7,259

16,930

10,602

7,259

16,930

2020 £’000

2019 £’000

2018 £’000

Trade payables

9,718

15,442

15,083

Corporation tax payable

2,752

1,092

2,230

Accruals and deferred income

13,013

8,390

8,700

Other payables

9,839

12,311

14,271

35,322

37,235

40,284

Cash at bank and in hand

(c) Trade and other payables

Current liabilities

Trade payables are unsecured and are usually paid within 1 year of recognition. The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature.

Notes to the financial statements (continued)

(d) Borrowings Total

Current

£’000

2020 Noncurrent £’000

£’000

Private placement (i)

-

20,000

Total secured borrowings

-

20,000

Current

Total

Current

£’000

2019 Noncurrent £’000

£’000

2018 Noncurrent £’000

£’000

£’000

20,000

-

20,000

20,000

31,000

20,000

51,000

20,000

-

20,000

20,000

31,000

20,000

51,000

-

10,000

10,000

10,000

10,000

Total

Secured

Unsecured Revolving credit facility (ii)

-

12,500

12,500

-

24,500

24,500

2.5% Redeemable preference sh ares (iii)

-

10,000

10,000

-

10,000

10,000

Total unsecured borrowings

-

22,500

22,500

-

34,500

34,500

-

10,000

10,000

Total borrowings

-

42,500

42,500

-

54,500

54,500

31,000

30,000

61,000

(i) Private placement JT Group Limited received £51m under a private placement facility during August of 2012. £31m has a term of 7 years and £20m has a term of 10 years. The first tranche accrues interest at a rate of 3.86% per annum, the second of 4.48%. The group entered into the new RCF above to cover the repayment requirements of the £31m tranche falling due on the 6th of September 2019 not otherwise met from normal operating cash flows of the group. (ii ) Revolving Credit Facility (RCF) On 06 December 2018, the group entered into a multicurrency Revolving Credit Facility “RCF” with HSBC Bank Plc, Jersey Branch (“HSBC”) and The Royal Bank of Scotland International Limited (“RBSI”) which provided access to a facility of £15m from HSBC and £15m from Royal Bank of Scotland International (“RBSI”), which replaced its £5m (2017: £5m) RCF facility previously held with Barclays.

Additional funding through the accordion clause within the RCF, was secured in May 2020, which provides access to an additional £20m from RBSI. The now £50m facility is interest-bearing and is redeemable 5 years from date of the facility agreement date or, earlier in the event of default or non-compliance with specific terms and conditions as prescribed in the facility agreement. The RCF is therefore presented as a non-current liability within the consolidated balance sheet.

On 06 December 2018, the group terminated the Barclays RCF facility which provided for an overdraft facility of £5m (2017: £5m).

The facility was interest-bearing and when drawn down. (iii) Redeemable preference shares The 2.5% redeemable preference shares were issued in three tranches during 2012. Interest accrues at 2.5% per annum. The repayment date (along with other terms and conditions) may be assessed annually at the request of the holder of the preference shares and will be based on a future date agreed with the holder of the preference shares. Accordingly, the preference shares have been presented as non-current liabilities within the consolidated balance sheet.

Fair value For the majority of the borrowings, the fair values are not materially different from their carrying amounts, since the interest payable on those borrowings is close to current market rates.

Risk exposures Details of the group’s exposure to risks arising from current and non-current borrowings are set out in note 16.

41

42

Notes to the financial statements (continued) 8. Property, plant and equipment Motor vehicles

Work in progress

Total

£’000

Network plant and equipment £’000

£’000

£’000

£’000

38,457 (22,564) 15,893

229,008 (135,537) 93,471

1,627 (937) 690

2,414 2,414

271,506 (159,038) 112,468

15,893 2 10 1,178 (94) (2,101) 14,888

93,471 (47) 107 805 (303) 18,815 (6) (14,971) 97,871

690 (149) 541

2,414 19,540 (19,993) 1,961

112,468 (45) 107 20,355 (303) (100) (17,221) 115,261

At 31 December 2018 Cost Accumulated depreciation and impairment Net book amount

38,057 (23,169) 14,888

247,661 (149,790) 97,871

1,627 (1,087) 540

1,962 1,962

289,307 (174,046) 115,261

Year ended 31 December 2019 Cost Accumulated depreciation and impairment Net book amount

38,057 (23,169) 14,888

247,661 (149,790) 97,871

1,627 (1,087) 540

1,962 1,962

289,307 (174,046) 115,261

28 855 (2) (1,812) 13,957

(25) 427 14,346 (16,167) 96,452

(149) 391

18,433 (15,201) 5,194

3 18,860 (2) (18,128) 115,994

38,940 (24,983) 13,957

262,409 (165,957) 96,452

1,627 (1,236) 391

5,194 5,194

308,170 (192,176) 115,994

38,940 (24,983)

262,409 (165,957)

1,627 (1,236)

5,194 -

308,1707 (192,176)

Opening net book amount

13,957

96,452

391

5,194

115,994

Exchange differences Additions Disposals Transfers Depreciation charge Closing net book amount

7 1,316 (1,437) 13,843

(87) 21 (720) 10,596 (17,095) 89,167

267 (156) 502

13,234 (12,179) 6,249

(80) 13,255 (720) (18,688) 109,761

Buildings

Non-current At 1 January 2018 Cost Accumulated depreciation and impairment Net book amount Year ended 31 December 2018 Opening net book amount Exchange differences Additions - through acquisition of subsidiary Additions Reclassifications to intangible assets Transfer from capital work in progress Disposals Depreciation charge Closing net book amount

Exchange differences Additions Transfer from capital work in progress Disposals Depreciation charge Closing net book amount At 31 December 2019 Cost Accumulated depreciation and impairment Net book amount Year ended 31 December 2020 Cost Accumulated depreciation and impairment

43

Notes to the financial statements (continued) 8. Property, plant and equipment (continued) Motor vehicles

Work in progress

Total

£’000

Network plant and equipment £’000

£’000

£’000

£’000

40,263 (26,240)

272,219 (183,052)

1,894 (1,392)

6,249 -

320,625 (210,864)

13,843

89,167

502

6,249

109,761

Buildings

At 31 December 2020 Cost Accumulated depreciation and impairment Net book amount

9. Leases

This note provides information for leases where the group is a lessee and a lessor.

Amounts recognised in the balance sheet The balance sheet shows the following amounts relating to leases: 2020 £’000

2019 £’000

2018 £’000

5,955 4,343 1,102 20 11,420

7,075 4,630 1,177 28 12,910

8,094 5,002 1,267 31 14,394

2,197 9,474 11,671

2,268 10,796 13,064

2,278 12,235 14,513

2020 £’000

2019 £’000

2018 £’000

1,118 761 335 3 2,217

1,125 761 292 3 2,181

915 770 212 3 1,900

227

248

255

Expense relating to short-term leases (included in cost of goods sold and administrative expenses)

71

130

50

Expense relating to leases of low value assets that are not shown above as short-term leases (included in administrative expenses)

111

132

128

Right-of-use assets Buildings Technical sites Network assets Others

Lease liabilities Current Non-current Additions to the right-of-use assets during the 2020 financial year were £722.

Amounts recognised in the statement of profit or loss The statement of profit or loss shows the following amounts relating to leases:

Depreciation charge of right-of-use assets Buildings Technical sites Network assets Others

Interest expense (included in finance cost)

The total cash outflow for leases in 2020 was £2.2m. During the year the group recognised an impairment loss of £0.36m in the consolidated statement of profit or loss following the closure of one the group’s office buildings.

44

Notes to the financial statements (continued) 10. Intangible assets

Non-current assets

Goodwill £’000

Development costs £’000

Website purchased £’000

IP & IP rights £’000

Capital work in progress £’000

Total £’000

37,824 (22,314) 15,510

21,887 (17,246) 4,641

153 (148) 5

-

-

59,864 (39,708) 20,156

15,510 (65) (3,860) 11,585

4,641 303 118 1,856 (103) (21) (2,681) 4,113

5 8 31 (4) 40

8,873 2 5 (395) 8,485

1,887 (1,887) -

20,156 303 2,013 8,873 (101) (81) (3,080) (3,860) 24,223

37,759 (26,174) 11,585

20,987 (16,874) 4,113

192 (152) 40

8,880 (395) 8,485

-

67,818 (43,595) 24,223

37,759 (26,174) 11,585

20,987 (16,874) 4,113

192 (152) 40

8,880 (395) 8,485

-

67,818 (43,595) 24,223

11,585 (3,951) 7,634

4,113 573 (64) (2,448) 2,174

40 (13) 27

8,485 546 (34) (1,149) 7,848

2,054 (573) 1,481

24,223 2,600 (98) (3,610) (3,951) 19,164

37,759 (30,125) 7,634

21,496 (19,322) 2,174

192 (165) 27

9,426 (1,578) 7,848

1,481 1,481

70,354 (51,190) 19,164

At 1 January 2018 Cost Accumulated amortisation and impairment Net book amount Year ended 31 December 2018 Opening net book amount Reclassifications from tangible assets Reclassifications from goodwill to development costs Additions Additions - through acquisition Transfer from capital work in progress Disposals Exchange differences Amortisation charge Impairment charge for the year Closing net book amount At 31 December 2018 Cost Accumulated amortisation and impairment Net book amount At 1 January 2019 Cost Accumulated amortisation and impairment Net book amount Year ended 31 December 2019 Opening net book amount Additions Transfer from capital work in progress Disposals Exchange differences Amortisation charge Impairment charge for the year Closing net book amount At 31 December 2019 Cost Accumulated amortisation and impairment Net book amount

45

Notes to the financial statements (continued)

Non-current assets

Goodwill £’000

Development costs £’000

Website purchased £’000

IP & IP rights £’000

Capital work in progress £’000

Total £’000

37,759 (30,125) 7,634

21,496 (19,322) 2,174

192 (165) 27

9,426 (1,578) 7,848

1,481 1,481

70,354 (51,190) 19,164

7,634 (3,371) 4,263

2,174 3,391 45 191 (2,186) 3,615

27 (2) (10) 15

7,848 54 (1,164) 6,738

1,481 4,958 (3,391) (65) 2,983

19,164 4,958 (3,328) 180 (3,360) 17,614

37,759 (33,496) 4,263

24,887 (21,272) 3,615

190 (175) 15

9,426 (2,688) 6,738

3,048 (65) 2,983

75,310 (57,696) 17,614

2020 £’000

2019 £’000

2018 £’000

4,262 4,262

4,262 2,862 7,124

4,262 7,323 11,585

At 1 January 2020 Cost Accumulated amortisation and impairment Net book amount Year ended 31 December 2020 Opening net book amount Additions Transfer from capital work in progress Disposals Exchange differences Amortisation charge Closing net book amount At 31 December 2020 Cost Accumulated amortisation and impairment Net book amount Impairment tests for goodwill Goodwill is monitored by management at the level of the cash generating units identified in note 2.:

Newtel Worldstone Net book amount Significant estimate: key assumptions used for value-in-use calculations

The group tests whether goodwill has suffered any impairment on an annual basis. For the 2020, 2019 and 2018 reporting periods, the recoverable amount of the CGUs were determined based on calculations to assume an equity value which require the use of assumptions. The calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are determined through the use of a terminal multiple and discounted to their present value.

46

Notes to the financial statements (continued) The following table sets out the key assumptions for those CGUs that have significant goodwill allocated to them: 2020

Newtel

EBITDA % Annual capital expenditure Terminal multiple Pre-tax discount

-1% £1.5m 6 10.20%

2019 EBITDA % Annual capital expenditure Terminal multiple Pre-tax discount 2018 EBITDA % Annual capital expenditure Terminal multiple Pre-tax discount

Newtel

Worldstone

-1% £1.5m 6 10.20%

1% £0.05m 9 12%

Newtel

Worldstone

-1% £1.5m 6 10.20%

1% £0.05m 8 12%

Management has determined the values assigned to each of the above key assumptions as follows: Assumption

Approach used to determining values

EBITDA

Forecasted EBITDA takes into account expected growth/decline in revenues, cost of sales and operating expenses based on past performance and management’s expectations for the future.

Operating expenditures are forecasted based on the current structure of the business

Annual capital expenditure

Expected cash costs in the CGUs. This is based on the historical experience of management.

Terminal multiple

This the terminal multiple used to extrapolate cash flows beyond the forcasted 5 year period. The multiples are consistent with the telecommunications industry.

Pre-tax discount rate

A Weighted Average Cost of Capital (WACC) is used to discount the future cash flow to assume a present value, or an alternative rate considered appropriate for the business and the environment and market in which it operates.

47

Notes to the financial statements (continued) Significant estimate – impairment charge Worldstone During the 2019 financial year, the group recognised an impairment charge of £3,951 which arose in the Worldstone CGU following a difficult year in the UK retail market and uncertainties surrounding Brexit, exacerbated by COVID-19 since March 2020.

As at 31 December 2019, the recoverable amount of the entire CGU amounted to £5,503, representing the CGU’s value in use. There has been no change in the underlying assets included within the CGU since the group’s previous assessment of the recoverable amount in 2018.

Worldstone has been classified a separate CGU with 100% of the goodwill that arose on acquisition date being fully allocated to the CGU. During the year, the group disposed of its 100% interest in Worldstone and related entities. On date of sale, the carrying value of the goodwill was derecognised and include as part of the loss on sale of the subsidiary in the Consolidated statement of profit or loss.

For more information relating to the sale refer to note 19.

Significant estimate: impact of possible changes in key assumptions Newtel An impairment trigger would occur if EBITDA were to fall by more than 35% over the forecasted period in the valuation of the CGU. No impairment has been recognised against the goodwill carried for Newtel in 2019 or 2018.

11. Deferred tax balances Deferred tax assets The balance comprises temporary differences attributable to: Notes Tax losses Defined benefit pension obligation Lease liabilities Total deferred tax assets Set-off of deferred tax liabilities pursuant to set-off provisions Net deferred tax assets

2020 £’000

2019 £’000

2018 £’000

65

783

947

148

142

142

62

38

27

275

963

1,116

(210)

(180)

(169)

65

783

947

A deferred tax asset of £65 (2019: nil) has been recognised in respect of losses arising in JT Australasia Pty Ltd (the “Australian company”), as we conclude that it is probable that the Australian company will generate taxable profits against which the losses can be utilised. The Australian company’s income is derived from Australian Fraud Protection customers which commenced in November 2020 and from acting as a cost centre for services supplied by Australian employees on an arm’s length basis to other members of the group.

48

Notes to the financial statements (continued) Movements Loses £’000

Pension obligation £’000

Lease liabilities £’000

Other £’000

Total £’000

941 51

145 -

17 -

-

1,103 51

-to other comprehensive income

(46) -

(1) (2)

10 -

-

(37) (2)

At 31 December 2018

947

142

27

-

1,116

At 1 January 2019

947

142

27

-

1,116

-

-

-

-

-

- to profit or loss

(112)

-

11

-

(101)

-to other comprehensive income -other adjustments

(52)

-

-

-

(52)

At 31 December 2019

783

142

38

-

963

At 1 January 2018 (Charged)/credited -on acquisition -to profit or loss

(Charged)/credited

At 1 January 2020 (Charged)/credited -on profit or loss -to other comprehensive income At 31 December 2020

783

142

38

-

963

(718) -

(6) 12

24 -

-

(700) 12

65

148

62

-

275

49

Notes to the financial statements (continued) Deferred tax liabilities The balance comprises temporary differences attributable to: 2020 £’000

2019 £’000

2018 £’000

9,996

10,184

9,950

Right-of-use assets

19

22

19

Other

20

158

38

Total other

39

180

57

10,035

10,364

10,007

(210)

(180)

(169)

9,825

10,184

9,838

Property and plant equipment

Right of use assets

other

Total

9,411

16

55

9,482

- new acquisitions

125

-

-

125

- to profit or loss

414

3

(15)

402

-

-

-

-

9,950

19

40

10,009

234

3

84

321

Property, plant and equipment Other

Total deferred tax liabilities Set-off of deferred tax liabilities pursuant to set-off provisions Net deferred tax liabilities Movements

At 1 January 2018 Charged/(credited)

- to other comprehensive income At 31 December 2018 At 1 January 2019 Charged/(credited) - to profit or loss - discontinued operations

-

-

10

10

- to other comprehensive income

-

-

24

24

10,184

22

158

10,364

(130)

(3)

-

(133)

At 31 December 2019 At 1 January 2020 Charged/(credited) - to profit or loss - to other comprehensive income Other adjustment At 31 December 2020

-

-

-

-

(58)

-

(138)

(196)

9,996

19

20

10,035

50

Notes to the financial statements (continued) 12. Inventories 2020 £’000

2019 £’000

2018 £’000

Finished goods at cost

4,452

4,148

3,180

Total deferred tax assets

4,452

4,148

3,180

Current assets

Inventories have been reduced by £104 (2019: £89 2018: £107) as a result of a write-down to net realisable value. This write-down was recognised as an expense during the year ended 31 December 2020 and included in cost of sales in the Consolidated statement of profit or loss.

Finished goods Finished goods includes: Telecommunications Equipment, Network, Circuits, Internet and Mobile Handsets.

Assigning costs to inventories The costs of individual items of inventory are determined using weighted average costs.

Amounts recognised in profit or loss Inventories recognised as an expense during the year ended 31 December 2020 amounted to £10.2m (2019: £10.2m, 2018: £9.5m).

These were included in cost of sales.

13. Employee benefit obligations Defined contribution pension plans Most employees are members of the JT Group Limited Pension Plan, a defined contribution scheme administered by Alexander Forbes. The plan receives fixed contributions from group companies at 10% of members’. The group’s legal or constructive obligation for these plans is limited to the contributions. The expense recognised in the current period in relation to these contributions was £1.09m (2019 – £0.9m, 2018 – £0.8m).

Defined benefit pension plans The group operates three defined benefit pension plans, the Public Employees Contributory Retirement Scheme (“PECRS”), two Telecommunications Board Pension Scheme (“TBPS”) and Public Employees’ Pension Scheme (PEPS).

Both plans are final salary pension plans, which provide benefits to members in the form of a guaranteed level of pension payable for life. The level of benefits provided depends on members’ length of service and their salary in the final years leading up to retirement. Pensions in payment are generally updated in line with the retail price index.

PECRS & PEPS The PECRS is a defined benefit pension plan, providing retirement benefits based on final salary.

JT (Jersey) Limited participates in the PECRS as an Admitted Body under a Terms of Admission Document which sets out how the contributions to and assets of the company’s notional Sub-Fund are to be determined.

With effect from 1 October 2015 the Terms of Admission were amended to remove the requirement for the Scheme’s Actuary to monitor a ring-fenced Sub-Fund for the purpose of setting JT (Jersey) Limited’s contributions to the Scheme. Under the amended terms JT (Jersey) Limited’s contributions will increase over a period to 2020 in accordance with a fixed schedule. Thereafter contribution rates will be set in accordance with Jersey Law insofar as it applies to Admitted Bodies in the Scheme. Under the revised Terms of Admission there is insufficient information available to use defined benefit accounting and, with effect from 1 October 2015, JT (Jersey) Limited has accounted for the Scheme as if it was a defined contribution scheme.

From 1st January 2019 most employees on the PECRS scheme moved to PEPS.

51

Notes to the financial statements (continued) TBPS TBPS is an unfunded plan where the group meets the benefit payment obligation as it falls due. The scheme holds a small cash reserve but is otherwise unfunded with pensions payable on a pay as you go basis.

Responsibility for governance of the plans – including investment decisions and contributions schedules – lies jointly with the group and the board of trustees. The board of trustees must be composed of representatives of the group and plan participants in accordance with the plan’s regulations.

The TBPS is an unfunded scheme under which a defined benefit pension is payable to current pensioners.

The IFRS disclosure of the TBPS has been based on a valuation of the liabilities of the scheme as at 31 December 2020, 31 December 2019 and 31 December 2018 using the membership data at the accounting date. The present values of the defined benefit obligation and the related current service cost were measured using the projected unit method. Employer contributions in 2021 are expected to be £0.04m (2019: £0.04m 2018: £0.04m) to provide for the payment of benefits to pensioners.

Actuarial gains and losses have been recognised in the period in which they occur, (but outside the income statement), through other comprehensive income (“OCI”).

The principal assumptions used by the independent qualified actuaries to calculate the liabilities under IFRS are set out below: Balance sheet amounts The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows Present value of obligation 2020 £’000

2019 £’000

2018 £’000

714

711

738

Current service cost

-

-

-

Past service

-

-

-

Balance at 1 January

Interest expense/(income)

13

19

17

Total amount recognised in profit or loss

13

19

17

44

47

-

12

(29)

-

Remeasurements Acturial (gains) / losses due to the financial assumptions Acturial (gains) / losses due to changes in demographic assumptions Acturial (gains) / losses due to liability experience Total amount recognised in other comprehensive income

2

3

(8)

58

21

(8)

(38)

(37)

(36)

Contributions Employers Payments from plan:

-

-

-

Benefit payments

-

-

-

Settlements Balance at 31 December

-

-

-

747

714

711

2020 £’000

2019 £’000

2018 £’000

The net liability disclosed above relates to funded and unfunded plans as follows:

Present value of funded obligations

747

714

711

Fair value of plan assets

(6)

(3)

(3)

Funded status

741

711

708

-

-

-

741

711

708

Unrecognised asset due to the limit in paragraph 64 Total deficit of defined benefit pension plans

The split of the defined benefit obligation at the last valuation between the various categories of members is as follows: • Actives 0% • Deferreds 0% • Pensioners 100%

52

Notes to the financial statements (continued) Post-employment benefits Significant estimates: actuarial assumptions and sensitivity The significant actuarial assumptions were as follows:

2020 Discount rate to scheme liabilities

2019

2018

1.3

1.9

2.7

Rate of increase to pensions

2.8

2.8

3.0

Jersey price inflation

2.8

2.8

3.0

Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each territory. These assumptions translate into an average life expectancy in years for a pensioner retiring at age 75:

Post retirement mortality assumptions Males Base table Scaling to above base table rates

Improvements to base table Future life time from age 75

Standard SAPS 3 “All Lives” tables (S2PMA)

Standard SAPS 2 “All Lives” tables (S2PMA)

105% CMI 2018 Projections (Sk=7.0, A=0.5) and a longterm rate of future improvements of 1.5% p.a.

105% CMI 2018 Projections (Sk=7.5, A=0.0) and a longterm rate of future improvements of 1.5% p.a.

13.4

13.2

Standard SAPS 3 “All Lives” tables (S2PMA)

Standard SAPS 2 “All Lives” tables (S2PMA)

105% CMI 2018 Projections (Sk=7.0, A=0.5) and a longterm rate of future improvements of 1.5% p.a.

105% CMI 2018 Projections (Sk=7.5, A=0.0) and a longterm rate of future improvements of 1.5% p.a.

13.4

13.2

Females Base table Scaling to above base table rates

Improvements to base table Future life time from age 75

53

Notes to the financial statements (continued) The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:

Adjustment to the discount rate

+0.1% p.a.

Base figure

-0.1% p.a.

Present value of total obligation (£K)

739

747

755

% Change in present value of total obligation

-1.1%

-

1.1%

Adjustment to pension increase rate

+0.1% p.a.

Base figure

-0.1% p.a.

Present value of total obligation (£K)

739

747

755

% Change in present value of total obligation

-1.1%

-

1.1%

Adjustment to pension increase rate

-1 year

Base figure

+1 year

Present value of total obligation (£K)

788

747

707

% Change in present value of total obligation

5.5%

-

-5.5%

Rate of increase to pension payment

Post retirement mortality assumption

*A rating of +1 year means that members are assured to follow the mortality pattern of the base table for an individual that is 1 year older than them.

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Balance sheet amounts The major categories of plan assets are as follows: Value at 31 December 2020

Value at 31 December 2019

Value at 31 December 2018

Equities

0

0

0

Property

0

0

0

Fixed interest Gilts

0

0

0

Corporate Bonds

0

0

0

Cash

6

6

3

Total

6

6

3

(vii) Split of assets

54

Notes to the financial statements (continued) Risk exposure Through its defined benefit pension plans the group is exposed to a number of risks, the most significant of which are detailed below: Changes in bond yields

A decrease in corporate bond yields will increase the value placed on the defined benefit obligation for accounting purposes.

Inflation risks

Pension liabilities are linked to price inflation. Higher inflation, or higher expectations of future inflation, will lead to a higher defined benefit obligation.

Life expectancy

The Scheme’s obligations are to provide benefits for the life of the beneficiaries following retirement, so increases in life expectancy will result in an increase in the defined benefit obligation.

14. Provisions 2020

2019

2018

Current £’000

Noncurrent £’000

Total £’000

Current £’000

Noncurrent £’000

Total £’000

Current £’000

Noncurrent £’000

Total £’000

Asset retirement obligations (i)

-

1,989

1,989

-

1,708

1,708

-

1,617

1,617

Other provisions (ii)

-

2,289

2,289

-

893

893

-

657

657

-

4,278

4,278

-

2,601

2,601

-

2,274

2,274

(i)Asset retirement obligations and dilapidations Asset retirement obligations involves an estimate of the cost to dismantle equipment and restore network sites upon vacation and the timing of the event.

Dilapidations involves an estimate of the cost to restore leased premises to their original condition at the end of the lease under terms of the lease. (ii) Other provisions Other provisions consist of the group’s best estimate of the cost to settle litigation, disputes and regulatory matters across a range of issues, including price, service, regulatory and contractual issues. When estimating the likely value of the provision, management make key judgements, including in regard to interpreting local and UK regulations and past and current claims. The charge/credit for the year represents the outcome of management’s reassessment of the estimates.

Movements in provisions Movements in each class of provision during the financial year are set out below:

55

Notes to the financial statements (continued) Asset retirement obligations £’000

Other provisions £’000

Total £’000

1,516

274

1,790

101

-

101

- additional provisions recognised

-

383

383

- unused amounts reversed

-

-

-

- unwinding of discount

-

-

-

Amounts used during the year

-

-

-

1,617

657

2,274

Asset retirement obligations £’000

Other provisions £’000

Total £’000

1,617

657

2,274

31 December 2018 Carrying amount at start of year Charged/(credited) to profit or loss - additional provision recognised

Carrying amount at end of year

31 December 2019 Carrying amount at start of year Charged/(credited) to profit or loss - additional provision recognised

90

295

385

- unused amounts reversed

-

(59)

(59)

- unwinding of discount

-

-

-

Amounts used during the year

-

-

-

1,707

893

2,600

Asset retirement obligations £’000

Other provisions £’000

Total £’000

1,707

893

2,600

-

-

-

240

1,396

1,636

-

-

-

42

-

42

-

-

-

1,989

2,289

4,278

Carrying amount at end of year

31 December 2020 Carrying amount at start of year Additional provision charged to plant and equipment Charged/(credited) to profit or loss - additional provision recognised - unused amounts reversed - unwinding of discount Amounts used during the year Carrying amount at end of year

56

Notes to the financial statements (continued) 15. Equity Share capital and share premium 2020 shares

2019 shares

2018 shares

2020 £’000

2019 £’000

2018 £’000

Fully paid

20000

20000

20000

20,000

20,000

20,000

Total share capital and share premium

20000

20000

20000

20,000

20,000

20,000

(thousands)

Par value £’000

Share premium £’000

Total £’000

Opening balance 1 January 2018

20000

20,000

-

20,000

Balance 31 December 2018

20000

20,000

-

20,000

Balance 31 December 2019

20000

20,000

-

20,000

Balance 31 December 2020

20000

20,000

-

20,000

Notes Ordinary shares

Movements in ordinary shares:

Notes

Number of shares

Details

Ordinary shares Ordinary shares have a par value of £1. They entitle the holder to participate in dividends, and to share in the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. The company does not have a limited amount of authorised capital. At 31 December 2020 there were 20,000 ordinary shares fully paid up.

Other reserves The following table shows a breakdown of the balance sheet line item ‘other reserves’ and the movements in these reserves during the year. A description of the nature and purpose of each reserve is provided in the below table.

57

Notes to the financial statements (continued) Foreign currency translation £’000

Total other reserves £’000

(487)

(487)

Foreign operations - translation differences

772

772

Other comprehensive income

772

772

At 31 December 2018

285

285

At 1 January 2019

285

285

Foreign operations - translation differences

(643)

(643)

Other comprehensive income

(643)

(643)

At 31 December 2019

(358)

(358)

At 1 January 2020

(358)

(358)

Foreign operations - translation differences

73

73

Other comprehensive income

73

73

(285)

(285)

At 1 January 2018

At 31 December 2020 Nature and purpose of other reserves

Foreign currency translation Exchange differences arising on translation of the long term foreign intercompany balances, including the results and financial position of foreign operations, are recognised in other comprehensive income and accumulated in a separate component of equity.

The cumulative amount is reclassified to profit or loss when the net investment in the subsidiary is disposed.

58

Notes to the financial statements (continued) Retained earnings Movements in retained earnings were as follows:

Balance 1 January Net (loss)/profit for the year

2020 £’000

2019 £’000

2018 £’000

64,494

67,768

69,756

(4,137)

1,518

2,761

(46)

(17)

6

-

-

35

Items of other comprehensive income recognised directly in retained earnings Remeasurements of post-employment benefit obligations (net of tax) Transfers Dividends

(4,105)

(4,775)

(4,790)

Balance 31 December

56,206

64,494

67,768

Net debt reconciliation This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.

Net debt Cash and cash equivalents Borrowings Lease liabilities Net debt

2020 £’000

2019 £’000

2018 £’000

10,602

7,259

16,930

(32,500)

(44,500)

(51,000)

(11,671)

(13,064)

(14,513)

(33,569)

(50,305)

(48,583)

Cash and liquid investments

10,602

7,259

16,930

Gross debt - fixed interest rates

(31,671)

(33,064)

(34,513)

Gross debt - fixed and variable interest rate components

(12,500)

(24,500)

(31,000)

Net debt

(33,569)

(50,305)

(48,583)

59

Notes to the financial statements (continued) Liabilities from financing activities

Other

Borrowings £’000

Leases £’000

Sub-total £’000

Cash £’000

Total £’000

(51,000)

(14,591)

(65,591)

16,930

(48,661)

-

2,124 (2,046) -

2,124 (2,046) -

-

2,124 (2,046) -

(51,000)

(14,513)

(65,513)

16,930

(48,583)

6,500

2,394

8,894

(9,671)

(777)

-

(945) -

(945) -

-

(945) -

(44,500)

(13,064)

(57,564)

7,259

(50,305)

12,000

2,211

14,211

3,343

17,554

-

(818) -

(818) -

-

(818) -

(32,500)

(11,671)

(44,171)

10,602

(33,569)

Net debt as at 1 January 2018 Cash flows Acquisitions - finance leases Foreign exchange adjustments Net debt as at 31 December 2018 Cash flows Acquisitions - finance leases Foreign exchange adjustments Net debt as at 31 December 2019 Cash flows Acquisitions - finance leases Foreign exchange adjustments Net debt as at 31 December 2020

Movements in borrowings are the aggregate movement of draw downs and repayments as disclosed in the cash flow statement.

16. Financial risk management This note explains the group’s exposure to financial risks and how these risks could affect the group’s future financial performance.

Current year profit and loss information has been included where relevant to add further context.

Risk

Exposure arising from

Measurement

Management

Market risk - foreign exchange

Future commercial transactions recognised financial assets and liabilities not denominated in GBP

Cash flow forecasting sensitivity analysis

Accounts receivable and payable matching Spot and forward FX transactions to limit exposure

Market risk - interest rate

Long-term borrowings at variable rates

Sensitivity analysis Cash flow forecasting

Monitored but limited exposure as currently no long term borrowings at variable rates

Credit risk

Cash and cash equivalents, trade receivables and contract assets

Debt level reporting

Credit limits monitoring

Liquidity risk

Borrowings and other liabilities

Rolling cash flow forecasts

Availability of committed credit lines and borrowing facilities

60

Notes to the financial statements (continued) The group’s financial risk management is predominantly controlled by a central treasury department (group treasury) under policies approved by the board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the group’s operating units. The board provides written principles for overall risk management.

Market risk - Foreign exchange risk Exposure The group’s exposure to foreign currency risk at the end of the reporting period, expressed in pounds sterling was as follows: 31 December 2020

Trade receivables

31 December 2019

USD £’000

EUR £’000

CAD £’000

USD £’000

EUR £’000

CAD £’000

USD £’000

EUR £’000

CAD £’000

1,998

739

58

1,539

759

24

680

283

6

1,998

739

58

1,539

759

24

680

283

6

31 December 2020

Trade payables

31 December 2019

31 December 2018

USD £’000

EUR £’000

CAD £’000

USD £’000

EUR £’000

CAD £’000

USD £’000

EUR £’000

CAD £’000

702

255

-

2,200

1,393

-

1,973

121

-

702

255

-

2,200

1,393

-

1,973

121

-

The aggregate net foreign exchange gains/losses recognised in profit or loss were:

Foreign exchange gains or losses

31 December 2018

USD £’000

EUR £’000

CAD £’000

(92)

27

(0.4)

Notes to the financial statements (continued) Risk management The group operates internationally and is exposed to foreign exchange risk, the US dollar, Euro, Canadian dollar, Australian dollar and Danish Krone.

The group’s treasury department is responsible for reviewing, monitoring and management of the group’s risk management policies in response to foreign currency exposure. The group’s overall strategy is to reduce, eliminate or mitigate foreign exchange risk and related uncertainties. This is achieved through an ultimate objective to natural hedge exposures in payables against receivables insofar as possible, and limit exposure by maintaining balances in currency to cover short term net payable demands in each currency.

The group measures its risk exposures by maintaining a 2 year rolling cash forecast and performs monthly reviews and reforecasting of foreign currency cash flows. Where material committed exposures are identified, the risk and certainty around the cashflows are assessed and appropriate actions taken to reduce risk in line with the foreign exchange policy, e.g. through financial hedging instruments.

Price risk The group has no price risk exposure for the year ended 31 December 2020.

Credit risk Credit risk arises from cash and cash equivalents, contract assets and outstanding receivables.

Risk management Credit risk is managed for the group through a ‘Know Your Customer’ (“KYC”) process which includes a credit check performed by an independent 3rd party to ensure customer risks are understood and appropriate action taken before the customer is on-boarded.

Credit limits are applied in accordance with the assessed risk and where necessary deposits held on account until such time as considered necessary to reduce an assumed assessed risk e.g. businesses with little or no payment or credit history.

It is mandatory for all new consumer customers to agree to pay through direct debit and any additional sales made to existing account holders require an internal review of the customers payment history to mitigate the credit risk from our consumer business.

Impairment of financial assets The group has two types of financial assets that are subject to the expected credit loss model: • Trade receivables for sales of inventory and from the provision of telecommunication services • Contract assets relating to contracts with customers While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, any potential impairment losses are deemed immaterial.

Trade receivables and contract assets The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets.

To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.

The expected loss rates are based on the payment profiles of sales over a period of 24 months before 31 December 2019 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The group has identified the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. In addition, reviews are performed with the group’s debt collection team and management to ensure a reasonable loss rate is applied.

61

62

Notes to the financial statements (continued) On that basis, the loss allowance as at 31 December 2020, 31 December 2019 and 31 December 2018 was determined as follows for both trade receivables and contract assets:

Current

More than 30 days past due

More than 60 days past due

More than 90 days past due

More than 120 days past due

Expected loss rate Gross carrying amount - trade receivables Gross carrying amount - contract assets Loss allowance

0.24% 18,585 198 44

0.30% 5,611 17

3.24% 632 20

5.67% 321 18

83.78% 7,411 6,209

32,560 198 6,308

31 December 2019 Expected loss rate Gross carrying amount - trade receivables Gross carrying amount - contract assets Loss allowance

0.53% 22,985 415 121

0.57% 4,920 28

2.25% 1,580 36

5.15% 483 25

7.01% 6,800 477

36,768 415 687

31 December 2018 Expected loss rate Gross carrying amount - trade receivables Gross carrying amount - contract assets Loss allowance

0.10% 29,622 515 31

0.55% 3,854 21

1.81% 1,184 21

6.43% 403 26

32.18% 4,091 1,316

39,154 515 1,415

Total

31 December 2020

The loss allowances for trade receivables and contract assets as at 31 December reconcile to the opening loss allowances as follows: 2020 £’000

2019 £’000

2018 £’000

687

1,415

1,024

6,015

291

1,008

Receivables written off during the year as uncollectable

422

290

221

Unused amount reversed

(28)

728

396

6,308

687

1,415

Opening loss allowance at 1 January Increase in loan loss allowance recognised in profit or loss during the year

Closing loss allowance 31 December

Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group, and a failure to make contractual payments for a period of greater than 120 days past due.

Impairment losses on trade receivables and contract assets are presented as provision for and write-off of bad debts within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item.

Significant estimates and judgements Impairment of financial assets The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the group’s past history and existing market conditions, as well as forward-looking estimates at the end of each reporting period. Details of the key assumptions and inputs used are disclosed in the tables above.

63

Notes to the financial statements (continued) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash balances and ensuring the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions.

Management monitors rolling forecasts of the group’s liquidity reserve (comprising the undrawn borrowing facilities below) and cash and cash equivalents (note 7) on the basis of expected cash flows.

This is generally carried out at group level. In addition, the group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios and managing current and planned debt financing.

Financing arrangements The group had access to the following undrawn borrowing facilities at the end of the reporting period: Variable rate - Expiring beyond one year (RCF)

2020 £’000

2019 £’000

2018 £’000

37,500 37,500

5,500 5,500

30,000 30,000

Refer to note 7 for more information relating to the above financial liabilities.

Maturities of financial liabilities The tables below analyse the group’s financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivative financial liabilities.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Contractual maturities of financial liabilities at 31 December 2020 Non-Derivatives Trade payables and other payables Borrowings 2.5% preference shares Lease liabilities Total Non-Derivatives

less than 6 months

6-12 months

Between 1-2 years

Between 2-5 years

Over 5 years

Total contractual cash flows

Carrying amount (assets)/ (liabilities)

35,322 541 100 1,151 37,114

541 100 1,151 1,792

21,102 400 3,635 25,137

12,598 600 4,233 17,431

10,000 2,468 12,468

35,322 34,783 11,200 12,638 93,943

35,322 32,500 10,000 11,670 89,492

37,235 633 100 1,184 39,152

633 100 1,184 1,917

1,286 200 4,243 5,729

44,552 200 5,277 50,029

10,000 3,118 13,118

37,235 44,500 10,600 15,007 107,342

37,235 44,500 10,000 13,064 104,799

40,284 1,046 100 1,199 42,629

32,046 100 1,199 33,345

996 200 4,671 5,867

21,992 200 6,148 28,340

10,000 4,187 14,187

40,284 56,080 10,600 17,406 124,370

40,284 51,000 10,000 14,514 115,798

Contractual maturities of financial liabilities at 31 December 2019 Non-Derivatives Trade payables and other payables Borrowings 2.5% preference shares Lease liabilities Total Non-Derivatives Contractual maturities of financial liabilities at 31 December 2018 Non-Derivatives Trade payables and other payables Borrowings 2.5% preference shares Lease liabilities Total Non-Derivatives

64

Notes to the financial statements (continued) 17. Capital management Risk management The group’s primary objective when managing capital is to maintain sufficient equity to ensure stability and provide a return for our shareholder, the Government of Jersey, while allowing access to necessary funding when required.

Under the terms of the borrowing facilities of the group’s RCF and private placements as described in note 7, the group is required to meet certain financial covenants which impose capital requirements. The group has complied with these requirements throughout the year, and continues to meet its requirements on all covenants.

2020 £’000

2019 £’000

2018 £’000

Final dividend for the previous year end of 0.1095 pence (2019 - 0.1125 pence, 2018 - 0.1198 pence) per fully paid

2,190

2,525

2,395

Interim dividend for the current year end of 0.9575 pence (2019 - 0.1263 pence, 2018 - 0.1198 pence) per fully paid

1,915

2,250

2,395

4,105

4,775

4,790

(i) Ordinary shares

Dividends not recognised at the end of the reporting period In addition to the above dividends, since year end the Directors have recommended the payment of a final dividend of 9.853 pence per fully paid ordinary share (2019: 1.095 pence, 2018: 1.125 pence). The aggregate amount of the proposed dividend expected to be paid by 31 July 2021 out of retained earnings at 31 December 2020, but not recognised as a liability at year end, is £1.97m (2019: £2.19m, 2018: £2.53m).

18. Acquisition of subsidiary On 17 August 2018, the group through Jersey Telecom (UK) Limited, which already had a 20% interest in NeoConsult ApS and Nomad IP ApS (the “entities”), completed the acquisition of a further 80% equity interest, thus obtaining full control. The transaction was completed for a consideration of £9.3m made up of a cash and a guaranteed and performance related deferred consideration component, payable over 3 years. The entities’ results were consolidated in the group’s income statement from 17 August 2018.

19. Discontinued operation During the year the group sold its shareholding in Corporate Communications Holding Limited and its associated subsidiaries (“Worldstone”). The entities were sold on 30 October 2020 and is reported as a discontinued operation in the current year’s financial statements. Worldstone was previously not classified as held-for-sale or as a discontinued operation. The comparative consolidated statement of profit or loss and other comprehensive income has been represented to show the discontinued operation separately from continuing operations.

Financial performance and cash flow information The financial performance and cash flow information presented are for year ended 30 October 2020 and the years ended 31 December 2019 and 31 December 2018.

65

Notes to the financial statements (continued) 2020 £’000

2019 £’000

2018 £’000

4,982

10,453

11,154

(3,253)

(5,188)

(5,102)

1,729

5,265

6,052

Operating expenses

(5,020)

(5,911)

(6,883)

Loss before income tax

(3,291)

(646)

(831)

39

(21)

(16)

(3,252)

(667)

(847)

Revenue Cost of sales

Income tax (credit) / expense Loss after income tax of discontinued operation

(1,818)

-

-

Loss from discounted operation

(5,070)

(667)

(847)

Net cash outflow from operating activities

(3,190)

(667)

(847)

Loss on sale of the subsidiary after income tax

Net cash inflow from investing activities

2,591

-

-

Net decrease in cash generated by the subsidiary

(599)

(667)

(847)

The loss on sale of subsidiary amounting to £1,818 is presented in discontinued operations net of related income tax. The carrying amounts of assets and liabilities as at the date of sale (30 October 2020) were: 2020 £’000 Consideration received or receivable 2,591

- Cash Total disposal consideration

2,591 4,409

Carrying amount of net assets sold Loss on sale of subsidiary

1,818 2020 £’000

Property, plant and equipment Trade and other receivables Inventory Cash Total assets Trade and other creditors Deferred tax liabilities

2019 £’000

2018 £’000

403

681

663

2,486

3,242

6,501

28

28

28

233

778

1,071

3,150

4,729

8,263

(1,603)

(2,234)

(5,830)

-

(58)

(48)

-

(87)

(87)

(1,603)

(2,379)

(5,965)

Goodwill

2,862

6,814

8,752

Net assets

4,409

9,164

11,050

Provisions Total liabilities

66

Notes to the financial statements (continued) 20. Interests in other entities Subsidiaries The group’s subsidiaries at 31 December 2020 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group. The country of incorporation or registration is also their principal place of business.

Name of entity

Place of business/ country of incorporation

Ownership interest held by the group

Ownership interest held by noncontrolling interest

2020 %

2019 %

2018 %

2020 %

2019 %

2018 %

Principal activities

JT (Jersey) Limited

Jersey, Channel Islands

100

100

100

0

0

0

Provision of telecommunication services

JT (Guernsey) Limited

Guernsey, Channel Islands

100

100

100

0

0

0

Provision of telecommunication services

JT (Global) Limited (previously Jersey Telecom UK Limited, change effective 21 December 2020)

United Kingdom

100

100

100

0

0

0

Holding company for eKit.com Inc

JT (International) Limited

Jersey, Channel Islands

100

100

100

0

0

0

Provision of telecommunication services

Gigabit Field Force Limited (dissolved 25 February 2020)

Jersey, Channel Islands

100

100

100

0

0

0

Provision of telecommunication services

eKit.com Inc

United States of America

100

100

100

0

0

0

Low cost roaming solutions to business and other travellers

eKit.com Pty

Australia

100

100

100

0

0

0

Low cost roaming solutions to business and other travellers

United Kingdom

100

100

100

0

0

0

Low cost roaming solutions to business and other travellers

Australia

100

100

100

0

0

0

Supply of telecommunications services and equipment

eKit.com Limited JT (Australasia) Pty Limited

Denmark

100

100

100

0

0

0

Development, consultancy, education, production, sales and investment in IT-services and products

JT USA Inc (incorporated 25 February 2020)

United States of America

100

100

100

0

0

0

Provision of IoT services primarily to the US

JT (IOT) Limited (incorporated 9 December 2020)

Jersey, Channel Islands

100

100

100

0

0

0

Provision of IoT services

JT IOT UK Limited (incorporated 24 December 2020)

United Kingdom

100

100

100

0

0

0

Provision of IoT services

JT Denmark ApS

67

Notes to the financial statements (continued) Interests in associates and joint ventures In October 2016, the group acquired a 20% equity interest in NeoConsult ApS and Nomad IP ApS (the “entities”), unlisted Denmark based IT and software services companies. The total purchase consideration, including transaction costs was £0.8m. The unamortised portion of the goodwill was included in the investment in associate undertaking’s carrying amount. The group’s proportionate share of the net results of the associate amounted to £0.03m for the year ended 31 December 2018 and was recognised in the consolidated statement of profit or loss.

On 17 August 2018, the group completed a step acquisition transaction by acquiring the remaining 80% equity of the entities, obtaining full control effective from that date, and combining the two entities into JT Denmark ApS. For more information on the acquisition refer to note 18.

As at 31 December 2020, the group held no interest associates or joint ventures.

21. Events occurring after the reporting period A final dividend for the year was approved for recommendation to the shareholders, note 17.

Other than as disclosed above, there have been no other subsequent events that require any adjustment or further disclosure since the statement of financial position date.

22. Contingent liabilities and contingent assets Contingent liabilities The group has no contingent liabilities as at 31 December 2020.

The group had a contingent liability at 31 December 2019 in respect of a pending litigation, the decision for which was reached in June 2020, in favour of the group. Details of the position taken in the prior year financial statements are set out below.

During 2016, a tri-party contract was signed between JT Jersey Limited (“JT”), a supplier and a customer. JT was intermediary to this arrangement whereby it purchased voice minutes from the supplier and sold these at a margin to the customer. During 2017, the customer failed to pay JT a cumulative debt of $2.1m (£1.7m) and in JT’s view, in line with the agreed contract, JT were not obliged to pay the supplier for the cost of the voice minutes supplied for $2.1m (£1.7m). The supplier commenced formal arbitrage during 2019 claiming JT is liable for the $2.1m (£1.7m).

The matter was being considered by the courts at the time of signing the prior year financial statements and at the time management considered it to be probable that the judgment would be in JT Jersey’s favour and had therefore not recognised a provision in relation to this claim for the potential undiscounted amount of the total payments that the group could be required to make, if there was an adverse decision related to the lawsuit, was estimated to be approximately £2.13m, which included an estimate of legal fees of £0.43m to cover the legal costs of the plaintiff.

23. Related party transactions Subsidiaries Interests in subsidiaries are set out in note 20.

Key management personnel compensations Key management includes the Directors and members of senior management. The compensation paid or payable to key management for employee services is shown below:

Salaries and other short term benefits Post-employment benefits

2020 £’000

2019 £’000

2018 £’000

2,234

2,851

2,372

152

101

83

2,386

2,952

2,455

68

Notes to the financial statements (continued) Transactions with other related parties The following transactions and balances relating to the States of Jersey departments are reflected in the financial statements.

2020 £’000

2019 £’000

2018 £’000

6,418

4,902

3,977

Transactions Revenue Operating expenses

512

535

524

Preference shares interest

250

250

250

4,105

4,775

4,790

Equity dividends paid

Outstanding balances arising from sales/purchases of goods and services The following balances are outstanding at the end of the reporting period in relation to transactions with the States of Jersey departments: 2020 £’000

2019 £’000

2018 £’000

1,092

679

633

(6)

(6)

(14)

1,086

673

619

-

60

20

2020 £’000

2019 £’000

2018 £’000

10,000

10,000

10,000

-

-

-

Balances Trade receivables Loss allowance Trade receivables less loss allowance Trade payables

Loans to/from related parties

Beginning of the year Amounts advanced Amounts repaid Interest charged (net of tax) Interest paid (net of tax)

-

-

-

200

200

200

(200)

(200)

(200)

10,000

10,000

10,000

Loans to related parties is comprised of the preference shares issued by the group’s shareholder. Refer to note 7 (c) for more information on the terms and conditions relating to the preference shares.

69

24. Directors emoluments Basic Salary/Fees

Bonuses

Total 2020

Total 2019

Total 2018

Graeme Millar

261

-

261

383

407

Hélène Narcy

113

-

113

-

-

John Kent

81

-

81

287

284

Phil Male

57

-

57

56

42

Sean Collins

36

-

36

36

31

Meriel Lenfestey

33

-

33

32

28

Joe Moynihan

31

-

31

30

18

Mark Shuttleworth

11

-

11

-

-

Angus Flett

3

-

3

-

-

626

-

626

824

810

Executive Directors

Non executive Directors

During the year the company made pension contributions of £0.04m (2019: £0.04m 2018: £0.03m) in respect of Mr Millar, and £0.01m in respect of the period for which Mrs Narcy was a director.

70

Notes

71

Notes

72

Stay in Touch JTsocial JTHelp JT Group Limited JTsocial JTHelp JT_Business JTsocial PO Box 53, No1 The Forum, Grenville Street, St Helier Jersey, JE4 8PB

www.jtglobal.com Facts and figures correct at time of publication. April 2021.