TIDMZEG
RNS Number : 8082V
Zegona Communications PLC
11 April 2023
This announcement replaces RNS no 6874V. The reference to
previous market M&A deals in the Chairman's Statement has been
updated.
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ZEGONA COMMUNICATIONS PLC ("Zegona")
LEI: 213800ASI1VZL2ED4S65
11 april 2023
ZEGONA ANNOUNCES 2022 RESULTS
London, England, Zegona Communications PLC (LSE: ZEG) announces
results and publishes its Annual Report [1] for the year ended 31
December 2022 [2] .
Enquiries
Zegona Communications plc
Tel: +44 (0)20 3004 2017
Kim Lowe : kim@zegona.com
Zegona was established in 2015 with the objective of investing
in businesses in the European Telecommunications, Media and
Technology sector and improving their performance to deliver
attractive shareholder returns. Zegona is led by former Virgin
Media executives Eamonn O'Hare and Robert Samuelson.
ZEGONA COMMUNICATIONS PLC
Annual Report
For the Year Ended 31 December 2022
STRATEGIC REPORT | CHAIRMAN'S STATEMENT
I am pleased to present Zegona's annual report for 2022.
Searching for the next Buy-Fix-Sell Opportunity
In the past year we have continued to focus on finding the right
opportunity within the European telecommunications market where we
can again successfully apply our proven "buy-fix-sell" strategy to
generate attractive returns for our shareholders. We believe that
we sold our investment in Euskaltel at a particularly good time and
despite plenty of opportunities to make an acquisition in 2022, we
instead chose to stay patient and disciplined as we believed more
attractive opportunities would emerge later in the year and in
early 2023. This has indeed been the case and while we are not yet
in a position to announce a new acquisition, we are currently
actively working on a short-list of opportunities which we believe
offer significant upside potential.
The past year has been marked by significant geo-political and
macro-economic developments that have impacted European economies.
In particular, the ongoing war in Ukraine has created uncertainty
and has led to increased commodity prices and inflation. Other
developments, such as changes in government leadership and trade
policies, have also resulted in more constrained financial market
conditions.
These developments had an impact on the telecommunications
sector in 2022. While the sector has performed well overall, it has
not been immune to the broader economic and political trends. In
particular, the market for mergers and acquisitions in European TMT
assets has been affected. Overall, the level of European TMT
mergers and acquisitions in 2022 has been lower than in the
previous three years in terms of both deal value and volume.
However, there have been several notable deals announced in the
space, including the merger of Orange and MásMóvil in Spain (July
2022) and Vodafone's sale of its Hungarian business to 4iG (August
2022) .
During the second half of the year in particular, macro-economic
challenges such as the rapid increase in interest rates by central
banks have had a significant impact on the availability and pricing
of debt and equity funding for businesses seeking to make
acquisitions. This has made it more challenging for companies to
pursue their desired acquisition targets. In addition, the
availability of acquisition targets was affected by these factors,
with some companies delaying their sales processes while they
waited for financial market conditions to improve. Since the end of
2022, however, we have seen new targets becoming available as
businesses have adjusted to the new market dynamics. This allied
with significant improvements in the availability of debt funding
and with equity markets also having recovered, means we are now far
more confident in our ability to find and complete a new
acquisition.
Throughout the last year, we have continued to search for new
opportunities. We have been active on a number of proprietary
transactions where we see material upside potential. However, we
have maintained our strong financial discipline and have not been
prepared to make an acquisition if it does not meet our strict
financial criteria.
As discussed in Note 2 to the financial statements, we believe
we have sufficient time and resources to continue to be patient and
disciplined in our search for the right opportunity. We also
believe that this approach will be rewarded as market conditions
stabilise. While challenges remain in the current environment, we
are optimistic that we will be able to make an acquisition during
the coming year which can deliver attractive returns for our
shareholders.
Annual general meeting
The next AGM will be held at 10 Snow Hill, London, EC1A 2AL at
10:30 am on 20 June 2023. The AGM is an opportunity for
shareholders to vote on certain aspects of Zegona's business. The
Directors will also be available to answer any shareholder
questions prior to and after the meeting.
Eamonn O'Hare
Chairman and Chief Executive Officer
6 April 2023
STRATEGIC REPORT | STRATEGY AND BUSINESS MODEL
Vision
* Execute our Buy-Fix-Sell strategy in the European TMT
sector
* Focus on businesses that require active change and
fundamental improvement to realise their full value
* Target significant long-term growth in shareholder
value
Opportunity
Changing market dynamics in the TMT industry create multiple
investment opportunities:
* Demand for data and speed : Data consumption is
growing strongly with customers willing to pay for
speed and reliability. Gigabit broadband is
increasingly offered in many markets but network
roll-outs and upgrades need to be efficient.
* Digital convergence: The fixed/mobile divide is
increasingly disappearing for users, meaning
significant growth in more valuable triple and quad
play [3] customers who are combining mobile and fixed
services. This has driven an increase in merger and
acquisition (" M&A ") activity and improvements in
economics for converged players since mobile data
delivery is heavily dependent on high capacity fixed
networks.
* Industry consolidation: The sector has seen
heightened M&A activity. Many private equity owners
are looking to sell assets as economies return to
growth and industry players are focusing on their
core regions, delivering cost reductions and price
repair to rebuild margins. Consolidation has also
created opportunity as businesses are spun out by the
major industry players to meet regulatory
requirements and strategic objectives, creating
opportunity for Zegona.
* Infrastructure monetisation: The opportunity to
enhance value through separating off and monetising
infrastructure assets, started with mobile towers but
has expanded to other assets including fixed
networks. This creates new commercial options, both
through providing a route for incremental value
creation and in the remaining 'servco' operations
which may not have been the main focus of attention
in the initial infrastructure led transaction.
* Broad range of attractive assets: Our flexibility in
terms of size, geography and category opens a broad
universe of attractive target assets across the TMT
market. We have identified many businesses of an
appropriate scale, including operators which are
active in one or more of the mobile, mid-sized cable,
fixed fibre network, B2B [4] , and network
infrastructure sectors.
Advantage
A number of factors make Zegona well positioned to access attractive
deals and deliver value:
* Strong, aligned management team: Our management team
has a proven track record of delivering superior
business performance and investor returns. During
2017, it successfully sold Telecable and was then
instrumental in returning Euskaltel to growth. This
enabled us to initiate consolidation discussions with
MásMovíl that lead to it acquiring
Euskaltel in July 2021. The team has extensive
real-world experience in senior operational roles in
large public telecommunications companies and its
interests are also strongly aligned with shareholders
through a long-term incentive scheme that links
remuneration directly to growth in shareholder value.
* Entrepreneurial focus: We have considerable freedom
in the projects we pursue and the ways we create
value. Unlike most private equity businesses, Zegona
is free to choose the optimal period to hold assets
and can realise value using a range of approaches, of
which a sale of the asset is only one. This also
permits a focus on fundamental business improvements
that are value accretive rather than relying on high
leverage and multiple expansion. We are also able to
act quickly on acquisition opportunities while still
maintaining financial discipline. This is especially
attractive to potential sellers and a key
differentiator.
* Major global investors : Zegona benefits from having
a number of global public equity asset managers [5]
with a long-term outlook as shareholders. The strong
support which we have from such shareholders was
illustrated by our successful placement of over
GBP100 million of equity in February 2019 which
enabled us to become Euskaltel's largest shareholder
and drive change within the business. We have an
effective investor relations programme which
maintains regular contact with our major current and
potential shareholders.
Strategy
We seek to provide shareholders with an attractive total return,
primarily through appreciation in the value of Zegona's assets.
Our strategy focuses on making investments in strategically sound
businesses within the European TMT sector that require active
change to realise their full value, thereby creating significant
long-term returns through fundamental business improvements.
The main elements of Zegona's strategy are set out below but
our overall approach is to deal with each opportunity and situation
individually as it arises. For example, in the case of the investment
in Euskaltel, our successful strategy was to increase our ownership
position and work constructively with the Euskaltel Board and
management to improve the performance of the business and make
it more attractive to potential buyers, thereby encouraging industry
consolidation.
We evaluate potential investments using a disciplined set of
financial and strategic criteria. We focus on:
* Target businesses with an enterprise value range of
GBP1-5 billion, although we may deviate outside of
this range if we believe the returns are sufficiently
attractive;
* TMT, network-based communications and entertainment
businesses, primarily in Europe;
* Strategically sound businesses with established
market positions and limited expected downside risk,
but which have scope for fundamental improvement that
is realistically achievable;
* Appropriate financial leverage (usually 3-4x EBITDA
[6] ); and
* Multiple viable exit options pre-identified .
Many businesses across the TMT sector currently deliver sub-optimal
returns which could be significantly improved. We work with management
to deliver fundamental business improvements, such as:
* Changing the business market position;
* Being actively involved in the management of the
business to drive operational improvements;
* Instilling strong discipline around cost efficiency;
* Investing in products, services and other
value-accretive activities to drive top line growth;
* Focusing on operating profitability and cash
generation;
* Ensuring a balanced and efficient capital structure;
* Innovative techniques to separate and monetise
infrastructure assets; and
* Value enhancing bolt-on acquisitions/divestments.
Buyer interest is stimulated as the performance of each investment
improves, providing Zegona with a range of options to crystallise
the value it has created:
* We identify the optimal time to crystallise the value
we have created, with flexibility to adapt to market
changes and other opportunities;
* Zegona's publicly listed structure allows
shareholders to realise value at any time and
provides multiple options for value delivery; and
* Following a successful crystallisation, the value
created will be reinvested or returned to
shareholders
STRATEGIC REPORT |BUSINESS AND FINANCIAL REVIEW
Review of Zegona's continuing corporate and other activities
Loss for the period from continuing operations
Zegona's corporate and other activities resulted in a net loss
for the period from continuing operations of EUR3.3 million (2021:
EUR34.3 million net loss) which principally comprised:
Operating loss
Operating loss totalled EUR3.3 million (2021: EUR34.0 million)
and included:
-- EUR3.3 million (2021: EUR4.6 million) for Zegona's ongoing
corporate operations, with the reduction mainly driven by the
retirement of one of the members of Zegona's senior management
during the period. The management team have performed a
comprehensive review of operating costs during 2022, seeking to
ensure the business is operating as efficiently as possible by
eliminating expenditure where possible, reducing headcount and
re-negotiating key supplier terms. As a result, we expect the costs
of Zegona's ongoing corporate operations to reduce by approximately
10% in 2023 compared to 2022 and circa 30 - 35% compared to the
average of 2020-2022.
-- EUR34 thousand (2021: EUR29.1 million) of Incentive scheme
costs which were the amortisation of the fair value of the Third
Calculation Period of the Management Incentive Scheme. The
substantial reduction in the period is due to the EUR25.7 million
payments to management in 2021 upon the redemption of the Second
Calculation Period (see note 17 to the financial statements).
-- EUR26 thousand (2021: EUR0.3 million) for significant project
costs, principally professional fees paid in conjunction with
exploring new opportunities.
Net finance income
Net finance income totalled EUR21 thousand (2021: EUR0.2 million
of costs) and comprises interest earned on cash deposits recognised
within Finance Income net of bank charges and overdraft interest
recognised within Finance Costs.
Other Comprehensive Income
Exchange differences on translation resulted in a loss of EUR0.6
million (2021: gain EUR0.6 million). The variance year on year
arises as a result of movements in the closing EUR:GBP exchange
rates as the functional currency of Sterling ("GBP") is translated
into the presentational currency of euro ("EUR").
Financial Position
Zegona's Net Assets at 31 December 2022 were EUR10.5 million
(2021: EUR14.5 million) which substantially comprised the Income
tax receivable of EUR4.9 million and Cash and cash equivalents of
EUR5.9 million. The reduction in the period is due to the use of
cash to pay for Zegona's ongoing operating expenses during 2022 and
the settlement of accruals and other payables at 31 December
2021.
Zegona's ongoing prospects
While Zegona has undertaken a comprehensive exercise to minimise
its ongoing operating costs, it will continue to incur operating
losses until it is able to make a new investment in a profitable
business. We continue to see a very healthy environment for
acquisitions across the industry, which has continued to see
significant deal activity despite the war in Ukraine and the
economic challenges it has created. While there are some short-term
challenges, especially with raising debt financing, we believe we
will be rewarded by remaining patient and disciplined and will not
pursue a transaction unless we are confident that it meets our
strict financial criteria.
Until we are able to make such an investment, Zegona will need
to fund its operations with its current cash reserves or raise
additional capital. We believe we have retained sufficient capital
to provide adequate time and resources to remain patient and secure
another attractive investment opportunity without raising
additional capital and have GBP4.5 million (EUR5.3 million) of cash
on hand at 6 April 2023. While we continue to search for our next
investment, our ongoing costs are reasonably predictable and
controllable and we expect that as long as Zegona does not incur
any material unforeseen costs, its cash reserves can fund the
business until the first quarter of 2025.
As further discussed in Note 2 to the financial statements
however, there are certain risks which are unlikely, but could
threaten Zegona's ability to continue as a going concern if they
transpire. As a result, we have concluded that it is appropriate to
prepare the financial statements on a going concern basis, but
there is a material uncertainty that may cast significant doubt on
our ability to continue as a going concern.
Shareholder remuneration
Up to the sale of Euskaltel, Zegona was committed to paying
dividends to shareholders and in 2021 continued to pass through
100% of dividends it received from Euskaltel. Zegona declared a
first interim dividend on 21 December 2020 at a rate of 2.2p per
share, totalling GBP4.8 million (EUR5.6 million) which was paid on
9 March 2021. Zegona also paid a second interim dividend of 2.6p
per share, totalling GBP5.7 million (EUR6.7 million) on 23 July
2021.
Following the sale of Euskaltel, Zegona has ceased paying
dividends and expects not to pay further dividends until such time
as it has an income generating asset.
Principal and emerging risks
We have carried out robust assessments of the principal and
emerging risks facing Zegona including those that would threaten
our business model, future performance, solvency or liquidity.
Detailed consideration is given to all of these risk factors by the
Audit and Risk Committee and the board of Directors (the " Board
").
STRATEGIC REPORT |RISKS
Principal and emerging risks
Change in risk assessment
since the last Annual
Risk title Risk rating Report
------------------------------- ------------ ----------------------------
Ability to maintain sufficient High Increased
resources to identify and
complete new acquisitions
------------ --------------------------
Ability to create value in Moderate No change
acquired businesses
------------ --------------------------
Loss of key management Low No change
------------ --------------------------
Foreign exchange Moderate No change
------------ --------------------------
The description, impact and mitigation of these risks are set
out below:
Ability to maintain sufficient resources to identify and
complete new acquisitions
Following the sale of its investment in Euskaltel, Zegona meets
its day to day working capital requirements, including the costs of
evaluating new acquisitions, from cash balances. At 6 April 2023,
Zegona had approximately EUR5.3 million of cash and we are making
progress on finding another attractive investment opportunity
within the European TMT sector where we can again apply our
successful Buy-Fix-Sell strategy.
The success of Zegona's future investment strategy following the
disposal of our interest in Euskaltel depends on our ability to
acquire a suitable target at a price that allows for acceptable
returns. Zegona's current cash resources are enough to allow us to
continue searching for new acquisitions for a reasonable period of
time, but we cannot be certain how long this will take. The passage
of time and the consequent reduction in Zegona's cash reserves has
caused this risk to increase during the year. There is also no
guarantee that we will be successful in making a further investment
during this period for a number of reasons, which could
include:
-- We may face competition for attractive assets from other
investors with greater resources than us;
-- We may not receive sufficient support from our existing
Shareholders to raise additional equity, and new equity investors
may be unwilling to invest;
-- Lenders may be unwilling to extend sufficient debt financing on reasonable term; and
-- We may fail to complete an agreed acquisition for reasons beyond our control.
If we do attempt an acquisition which is ultimately unsuccessful
this would result in us incurring related costs for items such as
legal and due diligence fees. These costs could be a significant
proportion of our remaining cash and could materially adversely
affect subsequent attempts to identify and acquire another target
business, or even threaten our ability to continue as a going
concern without raising further capital.
Ability to create value in acquired businesses
If Zegona is successful in acquiring a new business, there is a
risk of unforeseen liabilities being later discovered which were
not uncovered or known at the time of the transaction which may
have an impact on the value created for shareholders.
In addition, the success of Zegona's acquisitions depends on our
ability to implement the necessary strategic, operational and
financial change programmes in order to refocus the acquired
business and improve its performance. Implementing these change
programmes may require significant modifications, including changes
to business assets, operating and financial processes, business
systems, management techniques and personnel, including senior
management. There is a risk that we will not be able successfully
to implement such change programmes within a reasonable timescale
and cost.
We have a disciplined approach to valuation and, ultimately, we
are only prepared to make investments at the right price and after
undertaking a thorough due diligence process. When evaluating
potential investments, we focus on targets that have strong
fundamentals, high-quality customer offerings and strong market
positions but which are underperforming their potential and have
scope to generate long term sustainable performance and cash flow
improvements.
Loss of key management
Zegona's operations are currently managed by the Chief Executive
Officer, supported by the Chief Operating Officer, the Investment
Director and the Chief Financial Officer. The absence or loss of
key management could significantly impede our financial plans,
though there has been no such absence or loss since Zegona was
founded.
We aim to retain our key staff by offering remuneration packages
at market rates, as well as long term incentives through the issue
of Management Shares and other management incentive plans. The
management team is small which places a natural limit on the volume
of deal flow that can be addressed. The management team itself
along with the Non-Executive Directors continually challenge the
focus of the business and the allocation of resources amongst
projects.
Foreign exchange
Foreign currency translation risk exists due to the Company
operating, and having equity denominated, in a different functional
currency (GBP) to that of many of its likely acquisition targets.
Since the disposal of Euskaltel and the Return of Capital, there
are no material assets or liabilities denominated in foreign
currencies or transactions in foreign currencies. This means there
is currently minimal risk to Zegona's results of operations,
however fluctuations in the exchange rate between Sterling and
other European currencies could cause potential future acquisitions
to become more expensive in Sterling, and therefore potentially
less desirable.
The Board and the Chief Financial Officer control and monitor
financial risk management, including foreign currency risk, in
accordance with the internal policy and the strategic plan defined
by the Board.
STRATEGIC REPORT | VIABILITY STATEMENT
Longer term viability statement
Zegona's prospects
In accordance with provision 31 of the 2018 UK Corporate
Governance Code, we have assessed Zegona's prospects over a longer
period than the twelve months required by the "going concern"
provision. This assessment has taken into account Zegona's current
position, its strategy, the risk appetite of the Board and the
principal risks and uncertainties which are described in detail in
this Strategic Report.
Zegona's position changed fundamentally in 2021 with the sale of
its investment in Euskaltel and the Return of Capital. Zegona no
longer has an investment in an underlying operating business and is
now solely focussed on identifying another attractive investment
opportunity within the European TMT sector where we can again apply
our successful Buy-Fix-Sell strategy. Until Zegona identifies and
successfully executes a new investment, it meets its day to day
working capital requirements, including the costs of evaluating new
acquisitions, from its cash balances. While Zegona does have a
small overdraft facility, this is repayable on demand, and it does
not currently have other assets upon which it can raise additional
liquidity.
The assessment period
We continue to believe that three years - in this case the three
years to December 2025 - is the appropriate period over which
Zegona should assess its viability for the following reasons:
-- Three years allows us to assess a full range of possibilities
and covers Zegona's investment cycle; and
-- A three-year period enables us to make an appropriate
assessment of Zegona's principal risks.
The assessment process and key assumptions
The Directors approve a 3-year forecast on an annual basis which
is sufficiently detailed to explain all cash inflows (primarily
interest on cash deposits) and outflows (which are primarily
corporate costs) and includes a description of all reasonably
possible risks and opportunities. Each month, an analysis of actual
performance against the forecast is performed and updated
frequently. The most recent forecast is used as the base case
("Base Case") for the viability assumption without any significant
adjustment except for the addition of a GBP120 thousand per year
contingency to account for unforeseen day-to-day expenditure.
Zegona's operations are now focused on finding the next
investment opportunity and its ongoing running costs have been
comprehensively reviewed during 2022 to ensure they are as low as
possible with the result that ongoing costs in 2023 are expected to
be circa 10% lower than in 2022. Costs are also relatively
predictable as the most significant ongoing costs are the salary
costs of the Board and management team. Until a new investment is
made, no management bonuses will be paid. The most significant
element of uncertainty is whether Zegona will incur substantial
professional fees for costs such as legal advice and due diligence
related to an unsuccessful attempt to acquire a new investment.
Such costs are inherently unpredictable, so while a contingency is
included in the base case for routine professional fees that would
be expected to support Zegona's day-to-day operations, no amounts
are included for any significant aborted transactions. To further
increase prudence, no cash inflow is assumed for the recovery of
the Income Tax Receivable (see note 14 to the financial
statements).
Equally, completing a new acquisition would likely represent a
significant upside to the viability assessment since the addition
of an income generating asset would deliver cash inflows to allow
Zegona to fund its operation as well as giving the opportunity to
raise additional capital in connection with the funds to complete
the acquisition. The ability to execute such acquisitions, their
timing and size are however inherently uncertain so no amounts have
been included in the base case.
We believe that this approach fairly represents the future
prospects of Zegona while also properly considering the principal
and emerging risks (as discussed on page 6). In terms of risks, we
believe that the principal consequence should any of the risks
occur would be to make it more difficult for Zegona to execute a
new acquisition. Since the Base Case already assumes that there
will be no new acquisition, there is no need to add any additional
downside to the Base Case
In addition to the Base Case, the Directors identified a severe
but plausible downside scenario in which Zegona incurs significant
costs on unsuccessful acquisitions which was further used to stress
test the base numbers. Given the nature of Zegona's current
operations, the day-to-day contingency included in the base case
and generally high level of predictability of its costs, the
downside scenario differs from the Base Case only by the inclusion
of GBP 2.0 million for aborted costs on unsuccessful acquisitions,
assumed to be incurred by the end of 2023. Zegona believes the
GBP2.0 million represents costs associated with a
medium-to-significant sized failed transaction and is consistent
with costs it has previously incurred on similar sized
transactions.
Results of the assessment
The assessment showed that in the Base Case, Zegona would have
sufficient cash to continue in operation for at least 12 months
from the date of issuance of this report throughout the assessment
period without taking any mitigating actions available to it in the
base-case. In the downside scenario, Zegona would only be able to
absorb around GBP1.7 million of abort costs.
Over the full 3 year assessment period however, both the Base
Case and the downside scenario showed that without the upside
impact of completing a new acquisition Zegona will need to seek
additional funding during the viability assessment period, even if
it takes further liquidity enhancing actions that are in its
control such as reducing discretionary expenditure. Without such
actions, the Base Case assumes Zegona would need to seek additional
funding during the first quarter of 2025.
Statement of viability
Taking into account Zegona's current position and principal and
emerging risks and uncertainties, the Directors confirm that we
expect Zegona will be able to continue in operation and meet its
liabilities as they fall due over the three years from the issuance
of this annual report only if it is able to successfully complete a
new acquisition and obtain financing to do so or otherwise obtain
additional funding during the period.
The Strategic Report was approved by the Board on 6 April 2023
and is signed on its behalf by:
Eamonn O'Hare
Chairman and Chief Executive Officer
DIRECTORS' REPORT | CORPORATE RESPONSIBILITY
Corporate social responsibility
We recognise our obligations to act responsibly, ethically and
with integrity in our dealings with staff, suppliers and the
environment as a whole. We are committed to being a socially
responsible business.
Our people
We value and respect the unique contributions of each
individual, and we are committed to ensuring that every employee is
treated with dignity and respect and has a meaningful opportunity
to contribute to Zegona's success.
Zegona's employees are encouraged actively to engage with
charitable activities.
Zegona recognises that a productive workforce requires a breadth
of experience and perspectives which is achieved through hiring
individuals with diversity of age, gender or educational and
professional backgrounds. Given the size of the business and the
very limited turnover of staff, Zegona achieves this on a
case-by-case basis by ensuring that when it does appoint new
members of staff or the board, it places diversity at the heart of
its decision-making process to ensure it achieves both a diverse
and a high performing workforce.
Board Directors and senior managers have been appointed to bring
required skills, knowledge and experience. During 2022 and 2021,
all individuals that have been appointed have diverse backgrounds
including, two female independent Non-Executive Directors. The
Nomination and Remuneration Committee will continue to consider the
diversity of the Board for further new appointments.
The table below shows the breakdown of our workforce at the end
of 2022.
Male Female Total
---- ------ -----
Board Directors 4 2 6
Senior management 2 - 2
Other staff - 2 2
==== ====== =====
Total 6 4 10
==== ====== =====
Culture
Ethical values and behaviours are embedded in the corporate
culture which the Board upholds. The Directors foster a culture
where transparency, openness, integrity and constructive challenge
are actively encouraged, and the Board works closely with senior
management to ensure a positive culture.
Human rights
As part of our effort to conduct business in an ethical manner,
Zegona has not engaged in and will not engage in business practices
or activities that compromise fundamental human rights.
Environmental and climate matters
Climate risk management
The Chairman and the Zegona Board oversees and has ultimate
responsibility for Zegona's sustainability initiatives,
disclosures, and reporting. This includes, but is not limited to,
climate risks and opportunities. As a shell company, Zegona is
exempt from providing the disclosures required by the Taskforce on
Climate-related Financial Disclosures ("TCFD"), however this
section provides an overview of Zegona's approach to managing the
very limited climate risks it currently faces. Details of how the
Board delegates risk management authority across the business is
described in the Risk management overview on pages 6 and 7. The
Zegona management team have day-to-day responsibility for assessing
and managing climate-related risks and opportunities.
We are committed to minimising Zegona's impact on the
environment. As it is presently constituted, Zegona's environmental
impact is minimal and climate-related risks and opportunities are
extremely limited until it acquires another business. At present,
Zegona has no operating investments and only 6 full time employees.
These employees perform largely information-based roles and they
all work from home as Zegona no longer maintains business premises.
The only environmental impact currently is from business travel,
which has been extremely limited in the past three years and is
expected to continue to be lower than previously as a result of the
post-pandemic shift towards virtual tools.
Zegona's overall environmental impact is therefore minimal, with
total CO(2) emissions less than the average for a single UK
household. Zegona's approach is therefore to seek to maintain lean
working arrangements, use technology to minimise business travel
and encourage employees to recycle, minimise energy wastage, and do
their part to ensure that Zegona acts responsibly.
If Zegona continues to operate as it is presently constituted it
is therefore difficult to identify any climate related risks in the
short, medium or long term that could significantly impact the
business. For this reason, Zegona does not presently feel it is
appropriate or necessary to apply metrics or targets to assess
climate related risks beyond the Greenhouse gas reporting presented
below.
Clearly, Zegona does not intend to continue operating in its
present form indefinitely, we intend to make acquisitions and
disposals that will profoundly change the scale and climate-related
risk profile of the business and the process for identifying and
managing them. Is not possible to reach any sensible conclusions
today about which risks Zegona may be exposed to in the future
without knowing what businesses it will acquire. While it may be
possible to identify generic risks across the European TMT market,
the climate-related risks of each business will differ enormously,
as will the processes to identify, assess and manage them.
While it is not possible to know today what climate related
risks it will inherent, Zegona is conscious that such risks and
opportunities will exist in any potential acquisition and considers
that the most important objective is to ensure these are properly
understood in the due diligence phase of any transaction so
appropriate decisions can be taken on risk mitigation tools.
Zegona's Board have concluded that the most appropriate way to
address this is to ensure that climate-related risk are
specifically scoped in when undertaking due diligence on
acquisition targets.
Greenhouse gas emissions
Considering the non-material environmental impacts of Zegona's
business as described in this report, management takes the view
that greenhouse gas emissions are the most important metric to
track and against which future targets may be set.
We have compiled our greenhouse gas ("GHG") emissions in
accordance with the Companies Act 2006 (Strategic Report and
Directors' Report) Regulations 2013 ("SECR"). Calculations follow
the GHG Protocol Corporate Accounting and Reporting Standard
(revised edition). The GHG reporting period aligns with the
financial statements and boundaries are defined using the financial
control approach. GHG emissions are broken down into three
categories; reporting is required only on scope 1 and 2:
Scope 1 emissions : Direct emissions from sources owned or
controlled by Zegona.
Scope 2 emissions : Indirect emissions attributable to Zegona
due to its consumption of purchased electricity.
Scope 3 emissions : Other indirect emissions associated with
activities that support or supply Zegona's operations.
Zegona has no Scope 1 emissions. Zegona Scope 2 and Scope 3
emissions for the year to 31 December 2022 and comparative previous
period are shown below:
Global tonnes of CO
2 e
2022 2021
------------------- ------------------
Scope 2 (electricity) - -
------------------- ------------------
Per EURm operating expenses - -
------------------- ------------------
Scope 3 (water consumption, business
travel) 4.5 4.5
------------------- ------------------
Per EURm operating expenses 1.35 0.12
------------------- ------------------
All emission factors have been selected from the emissions
conversion factors published annually by the Department for
Environment, Food and Rural Affairs and the International Energy
Agency. Scope 2 and Scope 3 emissions have decreased in 2022 due to
homeworking arrangements and restrictions on travel imposed in
response to the COVID-19 pandemic.
No further energy and carbon information is disclosed as the
Group is exempt on the grounds of being a low energy user within
the meaning of SECR.
At the present time, Zegona does not consider it appropriate to
set emissions reduction targets, particularly given the low levels
of emissions already achieved. Zegona does not currently hold any
investments. When investments are held, Zegona will keep under
review whether it would be appropriate to support investee
companies in tracking metrics and setting targets.
Board engagement with our key stakeholders
Section 172 of the Companies Act 2006 requires a Director of a
company to act in the way he or she considers, in good faith, would
be most likely to promote the success of the company for the
benefit of its members as a whole. In doing this, section 172
requires a Director to have regard, among other matters, to: the
likely consequences of any decision in the long term; the interests
of the company's employees; the need to foster the company's
business relationships with suppliers, and others; the impact of
the company's operations on the community and the environment; the
desirability of the company maintaining a reputation for high
standards of business conduct; and the need to act fairly with
members of the company.
The Directors give careful consideration to the factors set out
above in discharging their duties under section 172. More
information about who our key stakeholders are and how we engage
with them is provided on page 23.
DIRECTORS' REPORT | OTHER MATTERS
General
Details of the directors can be found on pages 17 to 19. A
discussion on the role of the board, including the powers of the
company's directors can be found in the Corporate Governance
Statement beginning on page 19.The rules relating to the
appointment and replacement of directors and details of any
agreements with the company and its directors or employees for
compensation for loss of office or employment that occurs because
of a takeover bid can be found in the Directors' Remuneration
Report beginning on page 31.
Result
For the year ended 31 December 2022, Zegona's loss before tax
from continuing operations was EUR 3.3 million (2021: EUR34.3
million). Other comprehensive loss was EUR0.6 million (2021: gain
of EUR0.6 million). Therefore, the total comprehensive loss for
2022 was EUR4.0 million (2021: gain of EUR80.5 million). Reviews of
performance and likely future developments are set out in the
Strategic Report on pages 1 to 9.
Dividends
In accordance with its policy of not paying any dividends until
it owns a material operating asset, the Company did not declare or
pay any dividends in 2022 (2021: EUR12.3 million).
Contracts of significance
There were no significant contracts to report.
Events since the end of the financial year
There have been no material events since the end of the
financial year.
Capital structure
The Company's capital structure is comprised of 6,172,424
ordinary shares of GBP0.01 each ("Ordinary Shares"). The holders of
Ordinary Shares have the right to receive notice of, attend and
vote at all general meetings of the Company. Holders of Ordinary
Shares have the right to participate in dividends and any surplus
capital on a winding up pari passu as amongst themselves. Where the
winding up of the Company entails or is concurrent with the winding
up of the Company's subsidiary, Zegona Limited, the assets
available for distribution among the holders of Ordinary Shares
will be reduced by such amount as is required to satisfy the rights
(if exercised) of Management Shares (as defined in the Directors'
Remuneration Report on page 31, with further details set out in
note 17 to the financial statements).
Share buy-back programme
The shareholders passed a resolution to authorise Zegona to make
market purchases of up to 15% of its current issued ordinary share
capital (within specified price parameters) in the 2022 AGM, which
expires on the earlier of the end of 2023 AGM or 18 months after
the date of 2022 AGM. A resolution to renew this authority is
proposed for the 2023 AGM. It is intended that we will exercise
this authority only if the Board considers that it is in the best
interests of Zegona at the time, for instance if the traded price
of the Company's ordinary shares is substantially below the value
of its net assets. Any shares repurchased by Zegona may be held in
treasury and subsequently resold for cash, cancelled or used for
employee share scheme purposes.
Internal control and Financial Risk Management
A description of the main features of Zegona's internal control
and risk management arrangements in relation to the financial
reporting process can be found in the Audit and Risk Report on page
24. Details of the company's financial risk management activities
and use of financial instruments can be found in note 10 and note
11 to the financial statements.
Significant agreements subject to change of control
provisions
Zegona Limited has issued Management Shares as part of Zegona's
incentive arrangements. On a change of control of Zegona, subject
to the requirements of the Articles of Association of Zegona
Limited, the Management Shares can be exercised with their value
being delivered either through the issue of ordinary shares or in
cash.
Substantial shareholders
At 31 December 2022 and up to the date of approval of this
report, Zegona had been notified under DTR 5 of the following
holdings in 3% or more of the issued ordinary shares, which are all
held indirectly by asset managers:
% of ordinary % of ordinary
share capital Shareholding share capital
Shareholding as at 6 at 31 December as at 31
Asset manager at 6 April April 2023 2022 December
2023 2022
------------------------------ -------------- -------------- ---------------- --------------
Zegona board and management
[7] 1,803,294 29.22% 1,804,336 29.33%
Marwyn Asset Management 774,321 12.54% 774,321 12.54%
Artemis Investment Management 586,691 9.51% 586,691 9.51%
Fidelity Management &
Research 403,107 6.53% 403,107 6.53%
Fidelity Investments
Limited 398,717 6.46% 398,717 6.46%
Credit Suisse 255,969 4.15% 255,969 4.15%
Aberforth Partners LLP 243,744 3.95% 243,744 3.95%
4,465,843 72.36% 4,466,885 72.47%
============== ============== ================ ==============
Independent audito r
KPMG has expressed its willingness to continue to act as auditor
to Zegona and a resolution for its re-appointment will be proposed
at the 2023 AGM. KPMG has confirmed that it remains independent of
Zegona.
Political donations
Zegona does not make any political donations or contributions to
political parties and has no intention of altering this policy.
Disclosure of information to the auditor
Each of the persons who is a Director at the date of approval of
this report confirms that, so far as the Director is aware, there
is no relevant audit information of which Zegona's auditor is
unaware; and each Director has taken all the steps that he ought to
have taken as a Director in order to make himself aware of any
relevant audit information and to establish that Zegona's auditor
is aware of that information.
Statement of going concern
The Directors have considered all available information,
including specific consideration of forecast financial information,
about the possible future outcomes of events and changes of
conditions, and the realistically possible responses to such events
and conditions that are available to the Directors. The Board
believes it is appropriate to prepare the Financial Statements on
the going concern basis but, as discussed in note 2 to the
financial statements, has concluded that there is a material
uncertainty affecting Zegona's ability to continue in business or
meet its liabilities as they fall due for the next 12 months.
By order of the Board
Eamonn O'Hare
Chairman and Chief Executive Officer
6 April 2023
DIRECTORS' REPORT | DIRECTORS' RESPONSIBILITY STATEMENTS
Statement of Directors' responsibilities
The Directors are responsible for preparing the Strategic
Report, Directors' Report, Directors' Remuneration Report,
Corporate Governance Report and the Zegona group and parent company
Financial Statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare Group and parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with UK-adopted international accounting standards and
applicable law and have elected to prepare the parent Company
financial statements on the same basis.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent Company and of
the Group's profit or loss for that period. In preparing each of
the Group and parent Company financial statements, the directors
are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant, reliable and prudent;
-- state whether they have been prepared in accordance with
UK-adopted international accounting standards;
-- assess the Group and parent 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 Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent Company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. 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
Group 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 on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdiction
Responsibility statement of the Directors in respect of the
Annual Financial Report
We confirm that to the best of our knowledge:
-- The Financial Statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the parent company and the undertakings included in the
consolidation taken as a whole;
-- The Strategic Report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
-- The Annual Report as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess Zegona's position and performance, business
model and strategy.
By order of the Board
Eamonn O'Hare
Chairman and Chief Executive Officer
6 April 2023
GOVERNANCE | PROFILES OF THE DIRECTORS
Eamonn O'Hare, Chairman and CEO (appointed 19 January 2015)
Eamonn has spent over two decades as a board member and senior
executive of some of the world's fastest growing consumer and
technology businesses. From 2009 to 2013 he was CFO and main board
director of the UK's leading entertainment and communications
business, Virgin Media. Eamonn helped lead the successful
transformation of this business and its strategic sale to Liberty
Global for US$24 billion, crystallising US$14 billion of
incremental shareholder value. From 2005 to 2009, he served as the
CFO for the UK division of one of the world's largest retailers,
Tesco plc. Before joining Tesco, Eamonn was CFO and main board
director of Energis Communications and helped lead the turnaround
of this high profile UK telecommunications company. Prior to this,
he spent 10 years at PepsiCo Inc. in senior executive roles in
Europe, Asia and the Middle East. Eamonn's early career was spent
in the aerospace industry with companies that included Rolls Royce
and British Aerospace.
Eamonn has a degree in Aerospace Engineering from the Queen's
University Belfast and an MBA from the London Business School.
Robert Samuelson, Executive Director and COO (appointed 19
January 2015)
Robert was Executive Director Group Strategy of Virgin Media
from 2011 to 2014, during which time he was centrally involved in
the sale of the business to Liberty Global and in the post-merger
integration process. Prior to this, Robert was a managing partner
at Virgin Group with global responsibility for developing and
realising returns from Virgin's telecommunications and media
businesses. Before joining Virgin Group, Robert was a director at
Arthur D Little Ltd, where he co-led the European corporate finance
practice, providing strategic advice to major European
telecommunications operators. His early career was spent with
British Aerospace and Royal Ordnance in engineering and production
management roles.
Robert studied Natural Sciences at Cambridge University and has
an MBA from Cranfield School of Management.
Richard Williams, independent Non-Executive Director (appointed
9 November 2015)
Richard is an experienced Non-Executive Director with
significant board level experience in both public and private
companies and currently holds a number of Non-Executive Director
roles. Richard spent most of his executive career in European
telecommunications, most recently as a Director of Investor
Relations at Altice, and prior to that, Virgin Media. Richard led
Virgin Media's investor relations activity through to the
acquisition of the company by Liberty Global in 2013. Richard then
joined Altice, where he supported the company's IPO and Altice's
acquisition of SFR and Portugal Telecom.
Richard is a member of both the Nomination and Remuneration
Committee and the Audit and Risk Committee. Richard is a qualified
Chartered Accountant.
Ashley Martin, independent Non-Executive Director (appointed 6
February 2017)
Ashley brings a wealth of complementary experience to the Board.
Ashley was Audit Committee Chair at Rightmove plc from 2009 to 2018
and, in that role, gained valuable insight into an entrepreneurial,
high-growth consumer technology business. On 1 September 2018,
Ashley was appointed as a non-executive director of the
international research data and analytics group YouGov plc. Ashley
has also enjoyed a successful executive career spanning 35 years in
larger listed companies, with a particular focus on mergers and
acquisitions. Ashley was Global Chief Financial Officer of private
equity-backed Engine Holding LLC, and was previously the Group
Finance Director of Rok plc, the building services group, and Group
Finance Director of the media services company, Tempus plc.
Ashley is a qualified Chartered Accountant and is Chair of the
Audit and Risk Committee and a member of the Nomination and
Remuneration Committee.
Kjersti Wiklund, independent Non-Executive Director (appointed 5
February 2020)
Kjersti brings significant experience from a series of senior
global telecommunications roles, including as director of group
technology operations at Vodafone and chief operating officer of
VimpelCom Russia. Kjersti has also held senior executive positions
at Kyivstar, Digi Telecommunications and Telenor.
Kjersti has also gained valuable insight into an
entrepreneurial, high growth consumer technology company as
Remuneration Committee Chair at Trainline plc. She was previously a
non-executive director of Laird plc in the UK, Cxense ASA and Fast
Search & Transfer ASA in Norway and Telescience Inc in the USA
and is currently a non-executive director of Babcock International
Group PLC and Spectris PLC.
Kjersti is a member of the Audit and Risk Committee.
Suzi Williams, independent Non-Executive Director (appointed 5
February 2020)
Suzi brings skills and experience from over 25 years in
telecommunications, media and consumer businesses in the UK and
internationally. This includes a decade as Chief Brand and
Marketing Officer at BT plc. Prior to that, she was Commercial
Development Director at Capital Radio Group and held senior
commercial leadership roles at Orange, the BBC, KPMG Consulting,
and Procter & Gamble.
Suzi is currently a non executive director and chair of
remuneration at FTSE 100 JD Sports plc, and NED and Chair of
nominations at Telecom Plus plc. She also advises a number of early
stage technology and AI businesses and is an advisor to Gresham
House private equity.
Previously she held NED and Remco Chair roles at Workspace Group
Plc, and at The AA plc (the latter from 2015 until March 2021).
Suzi was also a member of The Great Advisory board , promoting
British business overseas.
Suzi Chairs the Nomination and Remuneration Committee.
GOVERNANCE | CORPORATE GOVERNANCE STATEMENT
Overview
The corporate governance report, presented here, forms part of
the Directors' Report and as such it has been approved by the Board
and signed on its behalf by the Chairman.
We recognise the importance of sound corporate governance
commensurate with the size of Zegona. Corporate governance provides
the framework within which we form our decisions and build our
business. The Board is focused on creating long-term sustainable
growth for our shareholders and value for all our stakeholders, and
we strongly believe our corporate governance framework helps us
achieve this goal. It is our commitment to continue to seek
opportunities to improve our corporate governance arrangements.
The following sections of this report show how Zegona applies
the main provisions set out in the 2018 UK Corporate Governance
Code (the "Code"), issued by the Financial Reporting Council
("FRC"), as would be required by the Listing Rules of the Financial
Conduct Authority ("FCA") as applicable to non-FTSE 350 companies
if Zegona were admitted to the Premium segment of the Official
List, and how Zegona meets the relevant information provisions of
the Disclosure and Transparency Rules of the FCA (the "DTR").
Zegona's principal risks are described on pages 6 to 7. The
Directors' Report on pages 10 to 16 also contains information
required to be included in this statement of corporate
governance.
The Board of Directors
Zegona is led and controlled by an effective Board. The Board at
the date of approval of this report comprises two Executive
Directors and four independent Non-Executive Directors. The two
Executive Directors are Eamonn O'Hare (Chairman and Chief Executive
Officer ("CEO")) and Robert Samuelson (Chief Operating Officer
("COO")). The Non-Executive Directors are Richard Williams, Ashley
Martin, Kjersti Wiklund and Suzi Williams.
Biographical details of all Directors and details of their
committee membership at the date of approval of this report appear
on pages 17 to 18. Consideration of the Board size and composition
is kept under regular review by the Nomination and Remuneration
Committee.
Powers and operation of the Board
In exercising its duty to promote the success of Zegona, the
Board is responsible for overseeing the management of Zegona and,
in doing so, may exercise its powers, subject to any relevant laws,
regulations and Zegona's Articles of Association. The Board is
presented with papers from management concerning financial
information, information on investor relations and details of
acquisition targets and deal progress, which it takes into account
in discussions and in the decision-making process under section 172
of the Companies Act 2006.
Eamonn O'Hare, as the Chairman and CEO, is primarily responsible
for the running of the Board and for the day-to-day running of
Zegona. All Board members have full access to Zegona's advisers for
seeking professional advice at Zegona's expense and our culture is
to discuss openly any important issues and frequently engage with
Board members outside of formal meetings. The operating and
financial responsibility for all subsidiary companies is the
responsibility of the Board.
The Board has adopted a Board Charter, available on Zegona's
website, which sets out:
-- the Board's collective vision on Zegona's strategy and objectives;
-- the Board's approach to the conduct of its business and the
parameters within which it will operate, including the management
of any Board or investor disagreements; and
-- the Board's agreed focus areas for further action.
The Board meets formally at least six times a year but also
frequently meets additionally on an ad hoc basis where necessary.
The Directors are encouraged to have free and open contact with
management at all levels and full access to all relevant available
information. The Executive Directors actively and constructively
encourage challenge and seek input from the Non-Executive Directors
to draw on their extensive experience and knowledge. The Board
believes that the role of the Non-Executive Directors in providing
independent challenge is a vital component of an effective
Board.
The Board delegates the day to day responsibility for running
Zegona to the executive management, however there are a number of
matters which are required to be or should only be decided by the
Board of directors as a whole in accordance with the UK Corporate
Governance Code. An updated schedule of Matters reserved for the
Board, approved by the Board on 9 June 2020, can be found on
Zegona's website [8] .
Board committees
The Board has established two principal committees, the Audit
and Risk Committee and the Nomination and Remuneration Committee,
to assist it in the execution of its duties. If the need should
arise, the Board may set up additional committees as appropriate.
The committees' terms of reference are available on Zegona's
website, www.zegona.com, or by request from the Company Secretary.
Each of the committees is authorised, at Zegona's expense, to
obtain legal or other professional advice to assist in carrying out
its duties. No person other than a committee member is entitled to
attend the meetings of these committees, except by invitation of
the chairman of that committee.
Current membership of the committees is shown on pages 17 to 19.
The composition of these committees is reviewed regularly, taking
into consideration the recommendations of the Nomination and
Remuneration Committee.
Independence of the Board
The Code specifies that the Board should identify in the annual
report each Non-Executive Director it considers to be independent.
The Board considers that Ashley Martin, Richard Williams, Kjersti
Wiklund and Suzi Williams are independent Non-Executive Directors
for the purposes of the Code and have no relationships or
circumstances which are likely to affect, or could appear to
affect, their judgement as Directors.
Board and committee attendance
Attendance at the Board and committee meetings held during 2022
was:
Audit and Risk
Board Nomination and Remuneration Committee Committee
----------------- --------- --------------------------------------- ------------------
Eamonn O'Hare 5/5 - -
Robert Samuelson 5/5 - -
Richard Williams 5/5 2/2 3/3
Ashley Martin 5/5 2/2 3/3
Suzi Williams 5/5 2/2 -
Kjersti Wiklund 5/5 - 2/3
Directors' terms of service
Zegona's Articles of Association require each Director to retire
from office and offer themself for re-election or election, as the
case may be, at each AGM. Accordingly, each of the Directors will
retire from office at the 2023 AGM and seek to be re-elected by
Zegona's shareholders. The Chairman is satisfied that the
performance of the Directors continues to be effective and
demonstrates their ongoing commitment to the role and as such
supports their re-election.
The Executive Directors have service contracts which may be
terminated on no less than 12 months' notice by either party. The
Non-Executive Directors each have current service contracts which
can be terminated on 6 months' notice. All Non-Executive Directors'
continued service is dependent on annual re-election by
shareholders and the annual Board effectiveness review. Details of
the unexpired terms of the service contracts are set out in the
Directors' Remuneration Report.
Conflicts of interest
Zegona's Articles of Association provide for a procedure for the
disclosure and management of risks associated with Directors'
conflicts of interest. Zegona's Board Charter sets out the process
for managing significant Board or investor disagreements and/or
conflicts. Notwithstanding that no material conflict of interest
has arisen in the year, the Board considers these procedures to
have operated effectively.
Company secretary
Crestbridge Corporate Services Limited was appointed Zegona's
Company Secretary on 24 February 2021. The Company Secretary
assists the directors in ensuring Zegona is managed, controlled and
administered within the parameters of its governing and
constitutional documents. All Directors have access to the advice
of the Company Secretary, which is responsible for guiding the
Board on all governance matters.
Compliance with the UK Corporate Governance Code
The Code sets out a number of principles in relation to board
leadership and company purpose; division of responsibilities;
composition, succession and evaluation; audit, risk and internal
control; and remuneration. A copy of the Code is available on the
FRC's website at www.frc.org.uk.
Following admission to the Main Market the Board has voluntarily
(as Zegona has a Standard Listing) complied with the UK Corporate
Governance Code except in the instances set out below:
Combined Chairman and CEO
Provision 9 of the Code recommends that the roles of Chairman
and the Chief Executive Officer should not be exercised by the same
person and that the Chairman should be independent on appointment.
Zegona does not comply with this requirement. The Board presently
believes that Eamonn O'Hare's skills, knowledge and leadership have
enabled him to effectively perform both roles. Zegona also
maintains a schedule of Matters reserved for the Board which
prevents Eamonn from authorising certain corporate actions without
a formal resolution of the Board which is re-enforced by the
Board's culture of detailed review and robust challenge on
significant matters. As discussed below, the board consider that it
is important that this should continue to be kept under active
review.
Zegona has paid close attention to this matter since its
incorporation and has formally reconsidered it on a number of
occasions. This matter has also been actively reconsidered both as
part of the EY-facilitated exercise to develop Zegona's Board
Charter in 2018/19 and as part of each of Zegona's annual
assessments of Board effectiveness. The Board considers that it is
not appropriate to separate the roles at present given the
significant simplification of the business since the sale of the
investment in Euskaltel and the Return of Capital. The Board
remains aware of this area of non-compliance, and it will ensure
that this matter continues to be kept under active review, in
particular if the structure of Zegona changes again by making
another significant investment.
Appointment of a Senior Independent Director ("SID")
Provision 12 of the Code recommends that one Non-Executive
Director should be appointed as a senior independent director to
provide a sounding board for the chair and serve as an intermediary
for the other Directors and shareholders. Zegona does not currently
have a SID, and this has been the subject of active consideration
since Zegona's formation. The Board fully recognises the value that
can be provided by a SID and was intending to appoint one following
its 2020 AGM, however the difficulties of remote working during the
Covid-19 pandemic and the ongoing shareholder engagement exercise
being led by the Chairs of the two Board committees at the time
meant that Zegona concluded it was not appropriate to make an
appointment. Zegona still considers this conclusion is valid,
especially since the significant simplification of the business
since the sale of the investment in Euskaltel and the Return of
Capital. The Board will reconsider whether it should appoint a SID
in conjunction with its ongoing active consideration of whether it
remains appropriate for the Chairman and CEO roles to be
combined.
Employee engagement
Provisions 2, and 5 provide guidance for the implementation of
procedures meant to ensure Zegona engages with and monitors its
workforce. Given Zegona currently has only five employees
(excluding Directors), the Board believes the implementation of any
formal steps or procedures to engage with the workforce are not
required as informal communications occur regularly between all
employees and the Executive Directors, including weekly team
meetings.
Equalisation of pension arrangements
Provision 38 recommends that the pension contribution rate for
the Executive Directors be the same as for the majority of the
workforce. During the year, this was not the case however, this has
been resolved in 2023, when the rate paid to the Executive
Directors was equalised with the rate paid to the majority of the
workforce.
Evaluation of the Board, committees and individual Directors
The Board has conducted an annual evaluation of its own
performance and that of its committees by means of a questionnaire
requiring written responses from the Directors. To ensure
independence and objectivity, the questionnaire was designed,
administered and reviewed on a confidential basis. The
questionnaire was drafted having regard to the balance of skills,
experience, independence and knowledge contributed by its members,
as well as the successful operation of the Board as a unit, its
diversity and the other key factors relevant to its effectiveness.
The anonymous responses were sent to each Non-Executive Director
for consideration and discussion at a meeting of the full
Board.
The findings of the review were generally positive. The Board
noted that 2022 was significantly less eventful than the previous
year with the board continuing to work well as it supported the
management team in identifying an attractive new investment. The
review also highlighted a number of areas that the Board believe
could be beneficial for it to continue to work on to further
improve its effectiveness. The Board is currently considering which
of these it should prioritise in 2023 and how it should address
them.
Whistleblowing policy
All employees are encouraged to raise genuine concerns about
possible improprieties in the conduct of Zegona's business, whether
in matters of financial reporting or other malpractices, at the
earliest opportunity and in an appropriate way. Zegona has put in
place a whistleblowing policy to facilitate this, and the aims of
this policy are:
-- to encourage employees to report suspected wrongdoing as soon
as possible, in the knowledge that their concerns will be taken
seriously and investigated as appropriate, and that their
confidentiality will be respected;
-- to provide employees with guidance as to how to raise those concerns; and
-- to reassure employees that they should be able to raise
genuine concerns in good faith without fear of reprisals, even if
they turn out to be mistaken.
Share dealing
Zegona has in place systems to ensure compliance by the Board
and its applicable employees in relation to dealings in securities
of Zegona. We believe that the share dealing code adopted by the
Board is appropriate for Zegona's size and complexity and that it
complies with the EU Market Abuse Regulation (2214/596/EU). The
Board complies with these provisions and takes all reasonable steps
to ensure compliance by Zegona's 'applicable employees.
Relations with Zegona's stakeholders
Zegona does not currently have an operating business and, until
it does so again, has a limited number of stakeholders outside of
its shareholders and employees given that Zegona has no customers
and its suppliers are primarily professional advisers. All
Directors have frequent interactions with Zegona's small workforce
and the whole of the workforce are generally intimately involved
with all key operating decisions.
The Board is always available for communication with
shareholders and the Executive Directors frequently engage
constructively with current and potential shareholders, with
feedback regularly discussed in depth at Board meetings. This has
been supplemented in the last two years with the consultations with
major shareholders undertaken by management and the Committee
Chairs.
In addition, all shareholders have the opportunity, and are
encouraged, to attend and vote at the general meetings during which
the Board is available to discuss issues affecting Zegona. Barclays
Bank plc and Canaccord Genuity Limited, as Zegona's joint corporate
broker, provides reports and attend Board meetings, as appropriate,
to provide feedback to the Non-Executive Directors on shareholders'
views.
GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT
I am pleased to present the 2022 report of the Audit and Risk
Committee (the "A&RC"). The A&RC is an essential part of
Zegona's governance framework, to which the Board has delegated
oversight of Zegona's financial reporting, internal controls, risk
management and the relationship with the external auditor.
In discharging its duties, the A&RC embraces its role of
protecting the interests of shareholders with respect to the
integrity of financial information published by Zegona, control
effectiveness and the effectiveness of the audit process [9] .
Committee membership and meetings
The members of the A&RC during 2022 were Ashley Martin
(Chairman), Richard Williams and Kjersti Wiklund, all of whom are
independent Non-Executive Directors as required by provision 24 of
the Code. The Board has determined that Ashley Martin has recent
and relevant financial experience due to his previous CFO roles at
listed and private equity backed businesses. Both Ashley and
Richard qualified as Chartered Accountants. In line with the Code,
the A&RC as a whole possesses competence relevant to the sector
in which Zegona operates through the digital media and consumer
experience of Ashley Martin and the telecommunications experience
of Richard Williams and Kjersti Wiklund.
The A&RC normally meets at least three times a year with
additional meetings arranged if necessary. In 2022, the A&RC
met in March, September and December and has subsequently met in
April. The scheduling of these meetings is designed to be aligned
with the financial reporting timetable, thereby enabling the
A&RC to review the interim financial report, the audit plan
ahead of the year end audit and the annual report, as well as to
maintain a view of the internal controls and risk management
processes throughout the year.
The Company Secretary acts as secretary to the A&RC. The
A&RC invites the Chief Financial Officer to all meetings and
other members of the finance and management team as may be
appropriate for the business of the meeting, as well as senior
representatives of the external auditor. The A&RC meets
separately with the external auditors to seek their views without
management present, and the A&RC Chair keeps in touch with the
Chief Financial Officer as well as other members of the management
team and the lead audit partner periodically outside of formal
meetings. The A&RC has the right to invite any other Directors
and/or employees to attend meetings where this is considered
appropriate.
The A&RC Chair reports formally to the Board on the key
matters considered at each A&RC and minutes of those meetings
are circulated to the Board.
Committee effectiveness
The effectiveness of the A&RC was considered by the Board as
part of the annual Board effectiveness evaluation. The feedback was
positive and confirmed that the A&RC remains effective and
provides robust challenge.
Activities during the year
Since the last Audit and Risk Committee Report, the A&RC has
undertaken the following activities:
Financial reporting:
-- Confirmed that the Financial Statements were fair balanced
and understandable. In this respect, the A&RC considered, inter
alia:
- the key messages in the annual report and their consistent
application in the front and back end of the report;
- whether the whole story is presented and whether any sensitive
material has been omitted; and
- whether there is a clear and cohesive framework for the annual report.
-- Reviewed the going concern assumption and the assessment
forming the basis of the longer-term viability statement. The
A&RC reviewed the work undertaken by management to assess
Zegona's resilience to the principal risks and confirmed that a
3-year assessment period remained appropriate.
-- Considered the key judgements and estimates made by
management in preparing the Financial Statements, as follows:
Going Concern The A&RC reviewed Management's assessment of
the entity's ability to continue as a going concern, which involved
reviewing the underlying assumptions around on-going cash flows and
challenging Management's judgments around Zegona's ability to meet
liabilities as they fall due for a period of at least twelve months
from the approval of the financial statements, including
considering whether these judgements were consistent with Zegona's
strategic position and its current acquisition pipeline. The
A&RC also reviewed the appropriateness of management's
conclusion that the going concern basis is appropriate but that
there is a material uncertainty over Zegona's ability to continue
as a going concern. The A&RC also reviewed the proposed
disclosure around going concern in the annual report.
- Accounting treatment and valuation of the incentive
arrangements - the A&RC reviewed and agreed with management's
estimate of the final value of the Third Calculation Period of the
Management Incentive Scheme.
- Recoverability of the income tax receivable - The A&RC
reviewed the conclusions related to the ongoing activity around the
EU Commission decision that the Group Financing Exemption contained
within the UK's Controlled Foreign Company ("CFC") legislation
constituted State Aid. The Committee noted that Zegona had
recognised an income tax receivable in relation to the two charging
notices paid during 2021 in the amount of GBP4.4 million (EUR5.2
million). The A&RC noted Management's conclusion that while it
is finely balanced, it remains more likely than not that the
appeals made by other UK taxpayers and the UK Government will be
successful and ultimately Zegona will not incur any liability and
therefore the receivable remains recoverable. The A&RC reviewed
the third-party advice and agreed with management's conclusion.
In all of the above judgements, the A&RC also considered
KPMG's audit findings and reports by Management to the A&RC in
support of the positions adopted.
Other activities during the year:
-- Reviewed the effectiveness of Zegona's risk management and
internal controls and disclosures made in the annual report on this
matter, including the review of an annual assurance statement
provided by management assessing the effectiveness of Zegona's risk
management and internal control systems;
-- Reviewed and agreed the scope of the audit work to be
undertaken by the external auditor and assessed the audit and
non-audit fees to be paid, as well as the independence and
objectivity of the auditor;
-- Considered the effectiveness of the external audit process,
following the receipt of feedback from the management team,
Executive Directors, Non-Executive Directors and other service
providers involved in the audit process;
-- Reviewed and made a recommendation to the Board with regard
to the re-appointment of the external auditor, taking into account
auditor effectiveness and independence, the recent partner rotation
and other factors which may impact the external auditor's
re-appointment;
-- Assess any potential threats to independence that were
reported by KPMG. The A&RC considered KPMG to be independent
and KPMG, in accordance with professional ethical standards,
provided the A&RC with written confirmation of its independence
for the duration of 2022;
-- Reviewed the need for an internal audit function and made a recommendation to the Board;
-- Reviewed the interim Financial Statements, including the
critical accounting judgements and estimates used in preparing
them;
-- Reviewed management's updates to Zegona's risk register; and
-- Reviewed Zegona's whistleblowing policy and anti-bribery and anti-corruption policy.
External auditor
Our external auditor, KPMG LLP ("KPMG"), has now completed its
seventh audit and the A&RC was involved in the process to
select the new current audit partner for the 2021 audit. Zegona
will not be required to tender for the audit until the 2026
financial year end. KPMG continues to provide robust challenge to
management and independent reports to the Committee on specific
financial reporting and judgements.
KPMG was appointed as Zegona's external auditor on 15 December
2016. In line with applicable regulations, Simon Richardson was
appointed as the lead engagement partner in April 2021, after the
previous partner had issued his fifth annual audit opinion.
During 2022, there were no non-audit fees paid to KPMG. The
A&RC has set a threshold of EUR11,000 (GBP10,000) for
pre-approving non-audit fees.
Risk management and internal control systems
The Board is responsible for establishing and maintaining
Zegona's system of internal control and reviewing its
effectiveness. The Board has delegated the annual review of the
adequacy and effectiveness of Zegona's internal financial controls
and internal control and risk management systems to the
A&RC.
Internal control systems are designed to meet the needs of
Zegona and the risks to which it is exposed to ensure the integrity
of the financial and accounting information, promote accountability
and prevent fraud. The procedures are designed to manage rather
than eliminate risk and, by their nature, can only provide
reasonable but not absolute assurance against material misstatement
or loss.
Zegona does not have a separate internal audit function as the
Board does not feel this is currently necessary due to the size of
the business and the simplicity and low volume of transactions,
coupled with the nature and the extent of internal controls and
Board oversight and involvement. The A&RC will continue to
regularly review the need for an internal audit function as the
business evolves and develops.
Zegona's risk management framework incorporates a risk
assessment that identifies and assesses the strategic, operational
and financial risks facing the business, mitigating controls, and
appropriate corrective actions, if and when needed. This assessment
is continually updated by management and reviewed and discussed by
the A&RC at least twice per year.
Zegona has in place a robust internal controls system over
financial reporting, which encompasses a mixture of detective,
preventative and corrective controls, including:
-- Entity level controls which encompass guidelines for Zegona's
governance, financial analysis and integrity, and its adherence to
applicable laws and professional standards;
-- Systems and procedures in place to identify, assess, control
and monitor principal and emerging strategic, commercial, financial
and regulatory risks are considered by the Board regularly;
-- A team of professional advisers including legal, capital
markets, M&A, accounting, regulatory, and PR providing advice
to management and the Board;
-- A schedule of Matters reserved for the Board to ensure that
the Board is involved in all critical decisions of Zegona which is
reviewed regularly;
-- A comprehensive system of budgeting, forecasting and monthly
reporting and rigorous analytical review procedures;
-- A comprehensive risk register which is reviewed at least
twice a year and updated to take account of developments within
Zegona; and
-- Segregation of duties for all financial reporting and accounts payable critical tasks.
Through the above procedures, the Board with advice from the
A&RC has reviewed the effectiveness of the internal control
system throughout the year and up to the day of this report. No
significant control findings or weaknesses have been identified
from this review.
Ashley Martin
Chairman of the Audit and Risk Committee
GOVERNANCE | NOMINATION AND REMUNERATION COMMITTEE REPORT
On behalf of the Board, I am pleased to present the Nomination
and Remuneration Committee ("the Committee") Report for the year
ended 31 December 2022.
The Committee met twice during 2022, supported by a number of
full board discussions and the matters we discussed are set out on
page 29. The following pages set out the Committee's activities and
decisions made in the year. Zegona is committed to transparency,
equivalence and engagement with shareholders on these most
important matters and we have continued to make progress this
year.
Zegona's performance and context - Continuing to search for the
next opportunity
Following last year's successful sale of Euskaltel, management
has been looking for Zegona's next investment in the European
Telecommunications market. We have been active on a number of
proprietary transactions where we see material upside potential
while maintaining strong financial discipline. This approach has
served us well in the current macro-economic environment as we are
now seeing an increased pipeline of even better opportunities where
we have the potential to drive significant value.
This success forms the backdrop of the key remuneration matters
that we have dealt with in the year, as detailed below:
Remuneration decisions for 2022- Reviewing outcomes against
company performance
2022 Bonus and salaries
The Committee have concluded that the Executive Director's
salary and benefit arrangements should remain unchanged. After
listening to the views of key shareholders in previous years, and
in accordance with its previously announced policy, both the
Executive Directors and Zegona's senior management team were not
eligible to earn a bonus in 2022.
Application of remuneration policy for 2023
Following a review of the executive remuneration arrangements
for 2023 and listening to shareholder feedback, the Committee
agreed that there would be no increase in base salary for either of
the Executive Directors and as such their salaries will remain
unchanged for the year ahead. In line with corporate governance
best practice, the pension contribution for both of the Executive
Directors has been reduced in 2023 to 19% to be the same as the
contribution available to the majority of the workforce.
The Committee has also agreed that given the fact that Zegona
now has significantly less capital and no underlying asset it would
not be appropriate to put in place the opportunity to earn bonuses
to senior management in 2023 until such time as Zegona makes a new
investment. This will remain under review during 2023.
I would like to take the opportunity again to thank shareholders
for their engagement and feedback and look forward to your support
at the upcoming AGM in June.
Suzi Williams
Chair of the Nomination and Remuneration Committee
The role of the Nomination and Remuneration Committee
The Committee is responsible for nomination and remuneration
matters, from the recruitment and retention of high calibre
individuals to the design of appropriate incentivisation mechanisms
(and the ongoing monitoring of performance against these) while
delivering value creation for shareholders and other key
stakeholders.
The role of the Committee continues to be ensuring that the
Directors are appropriately rewarded, through making
recommendations regarding remuneration policy and framework. The
Committee monitors and reviews the effectiveness of the
Remuneration Policy and considers its impact and compatibility with
remuneration policies across the wider workforce. To facilitate
this remit, the Committee is provided with information and context
on pay, benefits and incentive structures in place across Zegona to
support its decision making.
Membership, attendance and other activities
The members of the Committee are Suzi Williams (Chairman),
Richard Williams, and Ashley Martin. All members of the Committee
are independent.
In 2022, the Committee met twice and has subsequently met in
April. The Company Secretary attends these meetings and Executive
Directors are invited at the Chairman's discretion. The scheduling
of the formal Committee meetings is designed to be aligned with the
Committee's recurring annual activities, including: setting of
bonus metrics and evaluation of performance against them;
overseeing the performance evaluation of the Board, its principal
Committees and individual directors; overseeing succession planning
for the Board and key members of the senior management team, taking
into account expertise and diversity; and reviewing the annual
nominations and remuneration report contained within the annual
report.
In addition to the matters discussed above, since the last
Nomination and Remuneration Committee Report, the Committee has
also:
-- Reviewed the remuneration package for the Executive Directors
and management team for 2023, including concluding that no bonuses
will be paid until such time as Zegona owns a material underlying
asset;
-- Reviewed the recommendations arising from the 2022 Board
effectiveness review, its committees and its individual Directors
and, where appropriate, proposed actions to address those
recommendations; and
-- Reviewed workforce remuneration and its alignment to Zegona's purpose, values and strategy.
Advisers
The Committee received input and advice from external advisers
on specific topics during 2021. The Committee formally engaged PwC
LLP's ("PwC") as an adviser in 2021, however no advice has been
sought in respect of 2022.
Executive pay at a glance
Base salary
Purpose Current policy 2022 Implementation 2023 Implementation
To reflect market Reviewed every twelve months. No salary No salary
value of the role Base salary increases are applied increases increases
and individual's in line with the outcome of the for either for either
performance and review. In respect of existing Executive Executive
contribution and Executive Directors, it is anticipated Director Director
enable Zegona to that no salary increases will
recruit and retain be considered before Zegona completes
Executive Directors its next investment.
of sufficient calibre
to drive Zegona's
ambitions.
Pension contributions
Purpose Current policy 2022 Implementation 2023 Implementation
To provide a market Pension contributions are made 20% contribution Contribution
competitive pension. to the individual's private pension reduced
arrangements or paid to them to 19%
in cash in lieu of such arrangements.
In 2022, Executive Directors
received a pension contribution
of up to 20% of base salary.
This was reduced in 2023 to 19%,
which is the same as the amounts
available to a majority of the
workforce.
Other benefits
Purpose Current policy 2022 Implementation 2023 Implementation
To provide market Benefits may include car allowances, No change No change
competitive benefits. personal tax advice, private
medical insurance, critical life
and death in service cover. Benefits
may vary by role and individual
circumstances and will be reviewed
periodically.
Annual cash bonus
Purpose Current policy 2022 Implementation 2023 Implementation
To incentivise delivery Performance is measured on an No bonuses No bonuses
of Zegona's annual annual basis for each Executive paid to to be paid
financial and strategic Director in respect of each financial senior management to senior
goals. period. until Zegona management
The maximum annual bonus available owns a material until Zegona
is 100% of base salary per annum. underlying owns a material
The Committee retains discretion asset underlying
to apply malus or clawback provisions. asset
Management Incentive Scheme
Purpose Current policy 2022 Implementation 2023 Implementation
To drive performance, The Committee may allocate Management No change No change
aid retention and Shares in Zegona Limited to Executive
align the interests Directors or senior management.
of Executive Directors Zegona's management incentive
and senior management scheme entitles participants
with shareholders in aggregate to receive up to
over the long term. 15% of the growth in value of
Zegona subject to a shareholders'
5% per annum preferred return.
Incentive may be exercised between
3 and 5 years after each renewal
or on the occurrence of certain
specific events including a sale
of Zegona's main assets and return
of net proceeds to shareholders.
GOVERNANCE | DIRECTORS' REMUNERATION REPORT
All disclosures in the Directors' remuneration report are
unaudited unless otherwise stated. The annual report on
remuneration gives details on the amounts earned in the year ended
31 December 2022 and how the Directors' remuneration policy will be
applied in 2023. This remuneration report will be subject to an
advisory vote at the 2023 AGM.
2022 Executive Directors remuneration summary (Audited)
In the interests of clarity, since the Executive Directors'
salaries are set and paid in Sterling, the table has been presented
in both Sterling and euros (Zegona's presentational currency).
These tables only include remuneration received by the Executive
Directors In respect of their employment by Zegona.
Executive Directors (Sterling)
-----------------------------------------------------
Eamonn O'Hare Robert Samuelson
(Chairman & CEO) (COO)
------------------- --------------------------------
2022 2021 2022 2021
GBP GBP GBP GBP
------- ---------- --------------------- ---------
Base salary 563,000 563,000 419,000 419,000
Pension contributions 112,600 112,600 83,800 83,800
Taxable benefits 21,321 21,321 21,321 21,321
Company health insurance
scheme 8,582 7,271 8,152 6,954
------- ---------- --------------------- ---------
Total fixed pay 705,503 704,192 532,273 531,075
------- ---------- --------------------- ---------
Annual cash bonus - - - -
Management Incentive Scheme
redemptions - 15,218,252 - 7,609,126
------- ---------- --------------------- ---------
Total variable pay - 15,218,252 - 7,609,126
======= ========== ===================== =========
Total fixed and variable
pay 705,503 15,922,444 532,273 8,140,221
======= ========== ===================== =========
Executive Directors (euros)
---------------------------------------
Eamonn O'Hare Robert Samuelson
(Chairman & CEO) (COO)
------------------- ------------------
2022 2021 2022 2021
GBP GBP GBP GBP
------- ---------- ------- ---------
Base salary 658,811 653,582 490,305 486,414
Pension contributions 131,762 130,716 98,061 97,283
Taxable benefits 24,950 24,751 24,950 24,751
Company health insurance
scheme 10,043 8,441 9,539 8,073
------- ---------- ------- ---------
Total fixed pay 825,565 817,490 622,855 616,521
------- ---------- ------- ---------
Annual cash bonus - - - -
Management Incentive Scheme
redemptions - 17,666,748 - 8,833,374
------- ---------- ------- ---------
Total variable pay - 17,666,748 - 8,833,374
------- ---------- ------- ---------
Total fixed and variable
pay 825,565 18,484,238 622,855 9,449,895
======= ========== ======= =========
None of the Executive Directors' remuneration in 2022 was
attributable to Zegona's share price growth. No discretion has been
exercised to determine remuneration as a result of either Zegona's
share price appreciation or depreciation.
Components of remuneration: Base salary
In 2022 and for 2023, following a review of the executive
remuneration arrangements in both periods, the Committee agreed
that there would be no increase in base salary for either of the
Executive Directors and as such their salaries remained unchanged
in 2022 and will do so for 2023.
Components of remuneration: Pension contributions
Implementation in 2022
In 2022 both Executive Directors received a pension contribution
of 20% of their base salary.
Implementation in 2023
In line with corporate governance best practice, the pension
contribution for both of the Executive Directors was reduced from 1
January 2023 to 19% to be the same as the contribution available to
the majority of the workforce.
Components of remuneration: Taxable benefits and Company Health
Insurance Scheme
In 2022 both Executive Directors received car allowances,
personal tax advice, private medical insurance, and death in
service cover, which will continue in 2023.
Components of remuneration: Annual cash bonus
Implementation in 2022
No bonuses were awarded to either the Executive Directors or
other members of Zegona's senior management team in respect of 2022
because the Committee had previously concluded in 2021 that it is
not appropriate for the Executive Directors or of Zegona's senior
management team to receive any bonus for any period when Zegona
does not own a material underlying asset.
Implementation in 2023
The Committee will continue to apply the same policy not to pay
any bonus the Executive Directors or any of Zegona's senior
management team for any period when Zegona does not own a material
underlying asset. Should Zegona make a new acquisition during 2023,
the Committee will develop appropriate bonus targets at the
appropriate time.
Components of remuneration: Management Incentive Scheme
Although the Committee feels it is important to remunerate and
incentivise the Executive Directors through their basic pay,
benefits and annual bonus, it also feels very strongly that
Executive Directors' long-term incentives should be linked to the
creation and delivery of real returns to shareholders. A key
element of Zegona's remuneration policy for the Executive Directors
and senior management is Management Shares in Zegona Limited, which
were put in place when Zegona was founded and were designed to
provide ongoing remuneration closely aligned with shareholders.
Overview of the scheme
The holders of the Management Shares are entitled to 15% of the
growth in value of Zegona during a series of up to five separate
Calculation Periods, provided that ordinary shareholders achieve a
5% per annum Preferred Return [10] in each Calculation Period. The
first Calculation Period began in 2015 and ended in 2020. The
second Calculation Period ended during 2021, at which point the
third Calculation Period began.
Holders have the right to end each Calculation Period by
redeeming 99% of their Management Shares at any time between the
third and fifth anniversaries of the beginning of the Calculation
Period, although a Calculation Period may also end upon certain
specified events such as a winding up, takeover, or a change of
control of Zegona, or if Zegona sells all or substantially all of
its assets and distributes the net proceeds to shareholders.
Upon redemption, if the Preferred Return has been met, holders
of the Management Shares receive 15% of the increase in value of
Zegona in either Zegona ordinary shares or cash at the discretion
of Zegona's Board at the time of the exercise on advice from the
Committee in accordance with the Articles. If the Preferred Return
has not been achieved, no payment is made. It is currently
anticipated that the exercise of Management Shares could result in
management receiving ordinary shares, which, depending on the
amount of value created, could potentially lead to management
becoming a significant shareholder.
Upon redemption of the Management Shares, a new Calculation
Period automatically begins with the remaining shares retaining the
entitlement to 15% of the growth in value of Zegona for the next
Calculation Period, provided the Preferred Return is achieved over
this period. The starting value against which the growth in value
and the Preferred Return are calculated (the "Baseline") at the
beginning of the new Calculation Period is set at the higher of the
Market Capitalisation of Zegona, defined as 30-day VWAP, and the
Net Shareholder Invested Capital on that date.
Each time a new Calculation Period begins, the renewal of the
Management Shares' rights is subject to a vote by Zegona's
shareholders at the next Annual General Meeting ("AGM"). If
shareholders representing 75 per cent or more of the shares vote
against the renewal at the AGM, the Management Shares are redeemed
for no value. There was such a vote at the 2022 AGM to ratify the
commencement of the Third Calculation Period, with 98.03% of votes
in favour.
Scheme developments in 2022
There was a vote at the 2022 AGM to ratify the commencement of
the Third Calculation Period, with 98.03% of votes in favour.
Illustration of scheme value
To explain how Zegona's Management Incentive Scheme operates, we
have set out here an illustration of how much value would be earned
by the management team assuming a hypothetical exercise date of 31
December 2022, even though the Management Shares were not
exercisable at that date [11] .
The illustration assumes that the exercise was based on the
market value of Zegona's ordinary shares at the hypothetical
exercise date and, since the deemed market capitalisation of GBP4.9
million was lower than both the Preferred Return target and the net
invested capital, the holders of the Incentive Shares would have
received no payment.
Since 14 October 2021 (GBP)
Net invested capital
[12] 9,194,592
-------------------------------------- ------------------------
At 31 December 2022 (GBP)
Number of shares 6,172,424
Average share price
[13] 0.795
Deemed market capitalisation 4,907,103
-------------------------------------- -------------- ------------
Shortfall in value per the incentive
scheme (4,287,489)
Split between:
-------------------------------------- -------------- ------------
Management Shares 15% -
-------------------------------------- -------------- ------------
Ordinary Shares 85% (4,287,489)
====================================== ============== ============
Shareholders' net invested capital at 31 December 2022 was
calculated as follows:
Net invested 5% pa Preferred Preferred Return
capital Return hurdle
(unadjusted) at 31 Dec 2022 at 31 Dec 2022
GBP GBP GBP
------------- --------------- ----------------
Baseline Value - 14
October, 2021 6,700,452 408,827 7,109,279
Share Issue - October
2021 1,276,360 75,493 1,351,853
Share Issue - November
2022 1,217,780 8,613 1,226,393
As at 31 December
2022 9,194,592 492,933 9,687,525
------------- --------------- ----------------
Shares outstanding 6,172,424 6,172,424 6,172,424
Per share (GBP) 1.490 0.080 1.569
2022 Non-Executive Directors remuneration summary (Audited)
The remuneration of the Non-Executive Directors during the year
is detailed below. Non-Executive Directors fee is a basic fixed
salary of GBP50,000 with a fixed increment of GBP10,000 if the
Non-Executive Director is Chair of a Committee. In the interest of
clarity, since the Non-Executive Directors' salaries are set and
paid in Sterling, the table has been presented in both Sterling and
euros (Zegona's presentational currency). There have been no
payments to anyone who was not a director of the company at the
time the payment was made, but who had been a director of the
company before that time.
Non-Executive Directors fees [14]
----------------------------------------
2022 2021 2022 2021
GBP GBP EUR EUR
--------- --------- -------- --------
Richard Williams 50,000 50,000 58,509 58,045
As hley Martin 60,000 60,000 70,211 69,654
Kjersti Wiklund 50,000 50,000 58,509 58,045
Suzi Williams 60,000 60,000 70,211 69,654
Total 220,000 220,000 257,439 255,398
========= ========= ======== ========
There is no element of the Non-Executive Directors' remuneration
that is linked to the performance of the business.
Summary of total shareholder return and Chief Executive
remuneration.
The total shareholder return graph below shows the value as at
31 December 2022 of GBP100 invested on IPO on 19 March 2015,
compared with GBP100 invested in the OMSCI Europe/Communication
Telecom Services Index. The Committee considers this index to be
appropriate for the purposes of this comparison because it includes
mostly European telecommunications companies. The data shown below
assumes that all cash returns to shareholders made by Zegona
(including the share buyback) are immediately reinvested in
ordinary shares. The maximum value of GBP159.6 in October 2021
reflects the return Zegona achieved from the disposal of its
investment in Euskaltel before reducing its share capital by 98%.
The reduction in the shaded area reflects the trading value of
Zegona's significantly reduced capital base since October 2021.
The single figure remuneration for the Chief Executive over the
same period, together with the outcomes of the respective annual
incentive awards, is presented in the following table
2015
[15] 2016 2017 2018 2019 2020 2021 2022
-------- -------- -------- ----------- -------- -------- ----------- --------
Total
remuneration
EURm 0.67 0.77 1.29 0.71 1.25 1.27 18.48 0.83
Annual bonus
(% of maximum) 0% 0% 100% 0% [16] 94% 75% 0% [17] 0% [18]
Comparison of Directors' and employees' pay and relative
importance of spend on pay
The following table compares the changes in each Director's pay
with changes in employee pay between 2021 and 2022:
Annual cash
Base salary Taxable benefits bonus
change % change % change %
----------- ---------------- ---------------
Executive Directors
Eamonn O'Hare 0% 4.6% n/a
Robert Samuelson 0% 4.2% n/a
Non-executive Directors
Richard Williams 0% n/a n/a
Ashley Martin 0% n/a n/a
Kjersti Wiklund 0% n/a n/a
Suzi Williams 0% n/a n/a
Employees 0% 0% 0%
The table below shows the relative importance of the spend on
remuneration paid to or receivable by all employees in Zegona when
compared to distributions to shareholders by way of dividend or
share buyback:
2022 2021
EUR000 EUR000
------------------------ -------- ---------
Employee pay 2,212 32,776
Returns to shareholders - 400,698
Of which:
Dividends - 12,169
Capital Return - 388,529
Directors' terms and conditions
Service contract duration
Director Contract duration Notice period
---------------- ------------------------------------------------ -------------
Eamonn O'Hare Unlimited* 12 months
Robert Samuelson Unlimited* 12 months
Richard Williams Unlimited* 6 months
Ashley Martin Unlimited* 6 months
Kjersti Wiklund Unlimited* 6 months
Suzi Williams Unlimited* 6 months
* Under the terms of the service agreements, these appointments
are contingent on annual re-election by shareholders and completion
of the annual Board effectiveness review.
Other than payments for notice periods, the service agreements
contain no entitlements to termination payments. There are no malus
or clawback provisions in respect of base salary, pension
contributions or benefits, however, the Committee retains
discretion to apply such provisions in the case of any bonus award
paid to an Executive Director whose appointment is subsequently
terminated.
External appointments
Executive Directors are allowed to accept external appointments
with the consent of the Board as long as these are not likely to
lead to conflicts of interests or significant time commitments.
Executive Directors are allowed to retain the fees paid.
Reappointment
Under the terms of Zegona's Articles of Association, all
Directors will be proposed for re-election at the 2023 AGM. All
Board members have service contracts and details of the unexpired
terms of these service contracts are set out above.
Compensation for loss of office (Audited)
The Directors are not entitled to any special compensation for
loss of office pursuant to their directorship or employment
contracts following a change of control. However, certain changes
of control will entitle the Directors to exercise rights held by
them as holders of Management pursuant to the long-term incentive
plan in force in respect of Zegona. No payments for loss of office
were made in either 2022 or 2021.
Directors' interests in ordinary shares (Audited)
The Committee intends to keep under consideration the need to
adopt formal requirements or guidelines in connection with the
building of shareholdings in Zegona by Executive Directors. During
the year, no such formal requirements or guidelines were adopted
and the Committee remains of the view that no such requirements or
guidelines are currently needed given that the Executive Directors
acquired ordinary shares in the Placing and their interests are
significantly aligned with shareholders through their participation
in the Management Incentive Scheme.
The shareholdings of the Directors at 31 December 2022 are set
out below. There have been no changes in the shareholdings of the
Directors from 31 December 2022 to the date of this report.
Director Number % of issued
of shares share capital
------------------ ----------- ---------------
Eamonn O'Hare 1,067,462 17.29%
Robert Samuelson 525,561 8.51%
Richard Williams 1,153 0.02%
Ashley Martin 212 0.00%
Kjersti Wiklund - -
Suzi Williams - -
In addition the directors owned the following Management Shares
in Zegona Limited
Participation Number of Nominal value
in Management of Management
growth in Shares Shares
value
------------------------- ------------- ----------- --------------
Eamonn O'Hare 8.88% 305,000 GBP305
Robert Samuelson 4.44% 152,500 GBP153
Zegona senior management 1.68% 57,964 GBP58
=========== ==============
515,464 GBP516
=========== ==============
The following information provided in this part of the
Directors' Remuneration Report is not subject to audit.
Review of workforce remuneration matters
Although there are only a small number of employees in Zegona,
in line with the provisions of the UK Corporate Governance Code,
the Committee continues to review the effectiveness of the
remuneration framework for Zegona's workforce. This involves being
kept up to date with changes in workforce remuneration and ensuring
that workforce remuneration continues to remain aligned to Zegona's
purpose, values and strategy.
Statement of voting at General Meetings
The following table sets out the voting results in respect of
the resolutions to approve the Directors' Remuneration Report and
the Directors' Remuneration Policy:
Date of For the Against Votes
AGM resolution the resolution withheld
------------------------- --------- ------------ ---------------- -----------
Directors' Remuneration
Report
for the year ended 31 28 June
December 2021 2022 98.21% 1.79% -
(Votes cast) 3,704,882 67,352 13,223,833
Directors' Remuneration 28 June
Policy 2022 98.21% 1.79% -
(Votes cast) 3,704,882 67,352 13,223,833
Suzi Williams
Chair of the Nomination and Remuneration Committee
6 April 2023
FINANCIAL STATEMENTS |CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
2022 2021
Notes EUR000 EUR000
Continuing Operations
Administrative and other operating expenses:
Corporate costs 5 (3,271) (4,643)
Management Incentive Scheme costs 17 (34) (29,072)
Significant project costs 6 (26) (295)
======= ========
Operating loss (3,331) (34,010)
Finance income 7 25 158
Finance costs 7 (4) (376)
Net foreign exchange (loss) / gain (3) (30)
======= ========
(Loss) for the year before income tax (3,313) (34,258)
Income tax expense 8 - -
------- --------
(Loss) for the period from continuing
operations (3,313) (34,258)
Discontinued Operations
Profit for the period from discontinued
operation, net of tax 12 - 114,171
(Loss)/Profit for the period attributable
to equity holders of the parent (3,313) 79,913
======= ========
EUR EUR
Earnings per share - total operations
Basic and diluted earnings per share
attributable to equity holders of the
parent 22 (0.61) 0.47
Earnings per share - continuing operations
Basic and diluted earnings per share
attributable to equity holders of the
parent 22 (0.61) (0.22)
Earnings per share - discontinued operations
Basic and diluted earnings per share
attributable to equity holders of the
parent 22 - 0.68
The notes on pages 57 to 80 form an integral part of these
Consolidated Financial Statements.
FINANCIAL STATEMENTS |CONSOLIDATED STATEMENT OF OTHER
COMPREHENSIVE INCOME
2022 2021
EUR000 EUR000
(Loss) for the year (3,313) 79,913
Other comprehensive income / (loss) -
items that will or may be reclassified
subsequently to profit or loss
Exchange differences on translation of
foreign operations (638) 1,484
Exchange differences on translation of
discontinued operations - (884)
Total other comprehensive (loss) / income (638) 600
Total comprehensive loss / (income) for
the year, net of tax,
attributable to equity holders of the
parent (3,951) 80,513
======= ======
The notes on pages 57 to 80 form an integral part of these
Consolidated Financial Statements.
FINANCIAL STATEMENTS |CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
As at 31 As at
December 31
December
2022 2021
Notes EUR000 EUR000
Assets
Non-current assets
Property, plant and equipment 13 30
Income tax receivable 14 4,961 5,234
========= =========
4,974 5,264
Current assets
Prepayments and other receivables 13 75 197
Cash and cash equivalents 10 5,890 10,556
========= =========
5,965 10,753
========= =========
Total assets 10,939 16,017
========= =========
Equity and liabilities
Equity
Share capital 19 311 301
Capital redemption reserve 20 2,565 2,565
Share premium reserve 20 3,049 1,616
Other reserve 20 - -
Shares to be issued 20 - 1,443
Share-based payment reserve 20 65 31
Foreign currency translation reserve 20 (6,922) (6,284)
Retained earnings 20 11,469 14,782
========= =========
Total equity attributable to equity
holders of the Parent 10,537 14,454
Current liabilities
Accruals and other payables 17 402 1,457
Bank borrowings 18 - 106
========= =========
Total liabilities 402 1,563
========= =========
Total equity and liabilities 10,939 16,017
========= =========
The notes on pages 57 to 80 form an integral part of these
Consolidated Financial Statements.
The Financial Statements of Zegona Communications plc
(registered number 09395163) were approved by the
Board of Directors on 6 April 2023 and were signed on its behalf
by:
Eamonn O'Hare
Director
Robert Samuelson
Director
FINANCIAL STATEMENTS |COMPANY STATEMENT OF FINANCIAL
POSITION
As at 31 As at
December 31 December
2022 2021
Notes EUR000 EUR000
Assets
Non-current assets
Property, plant and equipment 13 30
Investment in subsidiaries 9 3,655 6,824
3,668 6,854
Current assets
Prepayments and other receivables 13 1,805 3,821
Cash and cash equivalents 337 16
---------- -----------------
2,142 3,837
---------- -----------------
Total assets 5,810 10,691
========== =================
Equity and liabilities
Equity
Share capital 19 311 301
Capital redemption reserve 20 2,565 2,565
Share premium reserve 20 3,049 1,616
Other reserve 20 - -
Shares to be issued 20 - 1,443
Share based payment reserve 20 65 31
Foreign currency translation reserve 20 - (61,477)
Retained earnings 20 (415) 65,486
---------- -----------------
Total equity attributable to the
shareholders of the Company 5,575 9,965
Current liabilities
Accruals and other payables 15 235 620
Bank borrowings 16 - 106
---------- -----------------
Total liabilities 235 726
---------- -----------------
Total equity and liabilities 5,810 10,691
========== =================
The notes on pages 57 to 80 form an integral part of these
Consolidated Financial Statements..
As permitted by section s408 of the Companies Act 2006, no
profit and loss account for the company is presented. The company's
loss for the financial year was EUR4.0 million (2021 EUR124.2
million profit)
The Financial Statements of Zegona Communications plc
(registered number 09395163) were approved by the Board of
Directors on 6 April and were signed on its behalf by:
Eamonn O'Hare Robert Samuelson
Director Director
FINANCIAL STATEMENTS |CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
Foreign
Share-based currency Capital Share Shares
Share payment translation Retained redemption premium to be Total
capital reserve reserve earnings reserve reserve issued equity
Note EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Balance at 1
January
2022 301 31 (6,284) 14,782 2,565 1,616 1,443 14,454
Loss for the
year - - - (3,313) - - - (3,313)
Other
comprehensive
loss - - (638) - - - - (638)
Share-based
payment
expense 17 - 34 - - - - - 34
Issuance of
shares 18 10 - - - - 1,433 (1,443) -
Balance at 31
December
2022 311 65 (6,922) 11,469 2,565 3,049 - 10,537
========= ============ ============ ========== =========== ========= ========= ========
The notes on pages 57 to 80 form an integral part of these
Consolidated Financial Statements
FINANCIAL STATEMENTS |CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
Foreign
Share-based currency Capital Share Shares
Share payment translation Retained redemption premium Other to be Total
capital reserve reserve earnings reserve reserve reserve issued equity
Note EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Balance at 1
January
2021 2,821 799 (6,884) 46,072 34 108,793 180,816 - 332,451
Profit for the
year - - - 79,913 - - - - 79,913
Other
comprehensive
income - - 600 - - - - - 600
Dividends paid 23 - - - - - - (12,169) - (12,169)
Share-based
payment
expense 17 - 763 - - - - - - 763
Reclassification
of incentive
arrangements 17 - (1,562) - - - - - - (1,562)
Renewal of
incentive
scheme 17 - 31 - - - - - - 31
Reduction of
share
premium 18 - - - - - (108,679) 108,679 - -
Redemption of
shares 18 (2,531) - - (111,223) 2,531 - (277,326) - (388,529)
Issuance of
shares 18 11 - - - - 1,502 - 1,443 2,956
Balance at 31
December
2021 301 31 (6,284) 14,782 2,565 1,616 - 1,443 14,454
========= ============ ============ ========== =========== ========== ========== ======= ==========
The notes on pages 57 to 80 form an integral part of these
Consolidated Financial Statements.
FINANCIAL STATEMENTS |COMPANY STATEMENT OF CHANGES IN EQUITY
Foreign
Share-based currency Capital Share Shares
Share payment translation Retained redemption premium to be Total
capital reserve reserve earnings reserve reserve issued equity
Note EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Balance at 1
January
2022 301 31 (61,477) 65,486 2,565 1,616 1,443 9,965
Loss for the
year - - - (4,046) - - - (4,046)
Other
comprehensive
loss - - (378) - - - - (378)
Share-based
payment
expense 17 - 34 - - - - - 34
Issuance of
shares 18 10 - - - - 1,433 (1,443) -
Reserves
transfer 20 - - 61,855 (61,855) - - - -
Balance at 31
December
2022 311 65 - (415) 2,565 3,049 - 5,575
========= ============ ============ ========== =========== ========= ========= ========
The notes on pages 57 to 80 form an integral part of these
Consolidated Financial Statements.
FINANCIAL STATEMENTS |COMPANY STATEMENT OF CHANGES IN EQUITY
Foreign
Share-based currency Capital Share Shares
Share payment translation Retained redemption premium Other to be Total
capital reserve reserve earnings reserve reserve reserve issued equity
Note EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Balance at 1
January
2021 2,821 694 (79,268) 52,510 34 108,793 180,816 - 266,400
Profit for the
year - - - 124,179 - - - - 124,179
Other
comprehensive
income - - 17,791 - - - - - 17,791
Dividends paid 23 - - - - - - (12,169) - (12,169)
Share-based
payment
expense 17 - 763 - - - - - - 763
Reclassification
of incentive
arrangements 17 - (1,457) - - - - - - (1,457)
Renewal of
incentive
scheme 17 - 31 - - - - - - 31
Reduction of
share
premium 18 - - - - - (108,679) 108,679 - -
Redemption of
shares 18 (2,531) - - (111,223) 2,531 - (277,326) - (388,529)
Issuance of
shares 18 11 - - - - 1,502 - 1,443 2,956
Balance at 31
December
2021 301 31 (61,477) 65,486 2,565 1,616 - 1,443 9,965
========= ============ ============ ========== =========== ========== ========== ======= ==========
The notes on pages 57 to 80 form an integral part of these
Consolidated Financial Statements
FINANCIAL STATEMENTS |CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
31 December 31 December
2022 2021
Note EUR000 EUR000
Operating activities
(Loss) before income tax from continuing
operations (3,313) (34,258)
Adjustments to reconcile profit before
income tax to operating cash flows:
Depreciation of property, plant and
equipment 16 16
Management Incentive Scheme costs 17 35 31
Net foreign exchange losses 3 30
Finance income 7 (25) (158)
Finance costs 7 4 376
Working capital adjustments:
Decrease/(increase) in prepayments
and other receivables 395 (5,261)
(Decrease)/increase in accruals and
other payables (1,055) 334
Interest received 25 21
Interest paid - (273)
------------- -------------
Net cash flows used in operating
activities (3,916) (39,142)
------------- -------------
Investing activities
Purchase of property, plant and equipment - (34)
Net cash flows used in investing
activities - (34)
------------- -------------
Net cash flows from discontinued
investing activities 12 - 439,547
Financing activities
Dividends paid to shareholders 23 - (12,169)
Repurchase and cancellation of shares 18 - (388,529)
Issuance of shares and shares to be
issued 18 - 2,956
Repayment of bank borrowing 16 (106) (11,028)
------------- -------------
Net cash flows (used in) financing
activities (106) (408,770)
------------- -------------
Net (decrease) in cash and cash equivalents (4,022) (8,399)
Net foreign exchange difference (644) 3,711
Cash and cash equivalents at the beginning
of the year 10,556 15,244
------------- -------------
Cash and cash equivalents at the
end of the year 5,890 10,556
============= =============
The notes on pages 57 to 80 form an integral part of these
Consolidated Financial Statements.
FINANCIAL STATEMENTS |COMPANY STATEMENT OF CASH FLOWS
Year ended Year ended
31 December 31 December
2022 2021
Note EUR000 EUR000
Operating activities
(Loss) / Profit before income tax
from continuing operations (4,046) 127,049
Adjustments to reconcile profit before
income tax to operating cash flows:
Depreciation of property, plant &
equipment 16 16
Net foreign exchange losses 3 69
Finance income 7 - (418,079)
Finance costs 7 - 376
Impairment of investment in subsidiary 9 2,951 288,806
Working capital adjustments:
(Increase) / decrease in prepayments
and other receivables 2,016 (3,637)
(Decrease) / increase in accruals
and other payables (385) 59
Interest received - 21
Interest paid - (273)
------------- -------------
Net cash flows (used in)/from operating
activities 555 (5,593)
------------- -------------
Investing activities
Purchase of property, plant and equipment - (34)
Dividends received from subsidiary 9 - 417,921
------------- -------------
Net cash flows from/ (used in) investing
activities - 417,887
------------- -------------
Net cash flows from/ (used in) discontinued
investing activities 543
Financing activities
Dividends paid to shareholders 23 - (12,169)
Repurchase and cancellation of shares 18 - (388,529)
Issuance of shares and shares to be
issued 18 - 2,956
Repayment of credit facility 16 (106) (11,028)
Payment of intercompany loan 9 - (21,907)
------------- -------------
Net cash flows (used in) financing
activities (106) (430,677)
------------- -------------
Net Increase / (decrease) in cash
and cash equivalents 449 (17,840)
Net foreign exchange differences (128) 2,707
Cash and cash equivalents at the beginning
of the year 16 15,149
------------- -------------
Cash and cash equivalents at the
end of the year 337 16
============= =============
The notes on pages 57 to 80 form an integral part of these
Consolidated Financial Statements.
FINANCIAL STATEMENTS |NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
The Consolidated Financial Statements of Zegona Communications
plc (the "Company") and its subsidiaries (collectively, "Zegona")
for the year ended 31 December 2022 (the "Consolidated Financial
Statements") were authorised for issue in accordance with a
resolution of the Directors on 6 April 2023. The Company was
incorporated and is domiciled in England and Wales and has its
registered office at 8 Sackville St, Mayfair, London W1S 3DG.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The Company and Consolidated Financial Statements for the year
ended 31 December 2022 have been prepared in accordance with
UK-adopted international accounting standards and with those parts
of the Companies Act 2006 as applicable to companies reporting
under international accounting standards.
The Company Financial Statements present information about the
Company as a separate entity and not about its group. The Company
is taking advantage of the exemption in section 408 of the
Companies Act 2006 not to present its individual Statement of
Comprehensive Income and related notes that form a part of the
Company Financial Statements.
The Consolidated Financial Statements include the results of all
subsidiaries wholly owned by the Company as listed in note 9.
Certain of these subsidiaries, which are listed below, have taken
the exemption from preparing individual accounts for the year ended
31 December 2022 by virtue of section 394A of Companies Act 2006.
In order to allow these subsidiaries to take the exemption, the
Company has given a statutory guarantee of all these companies'
outstanding liabilities as at 31 December 2022:
-- Zegona Spanish Holdco Limited (Registered Number: 10159232)
-- Zegona Borrower Limited (Registered Number: 10159347)
-- Zegona Holdco Limited (Registered Number: 10159604).
The Consolidated Financial Statements and the Company Financial
Statements have been prepared under the historical cost convention
except for certain financial assets that have been measured at fair
value, as disclosed in note 11. The functional currency of the
Company is British pounds sterling ("Sterling" or GBP). The
Directors have chosen to present the Consolidated Financial
Statements and the Company Financial Statements in euros (EUR)
since it has previously owned investments denominated in euros and
expects to make future acquisitions in euro, or euro-correlated
assets. All values are rounded to the nearest thousand (EUR000)
except where otherwise indicated.
The principal accounting policies adopted in the preparation of
the Consolidated Financial Statements are set out below. The
policies have been consistently applied throughout the years
presented.
(b) Going concern
The Consolidated Financial Statements have been prepared on the
going concern basis, which the directors consider to be appropriate
for the reasons outlined below.
Zegona's Directors have assessed the going concern assumptions
during the approval of the Consolidated Financial Statements. This
assessment included the review of Zegona cashflow forecast and
budget which encompassed expected developments in liquidity, debt
and capital, together with reasonable contingencies for routine
professional fees that would be expected to support Zegona's
day-to-day operations. Additionally, the Directors have also
considered other potential severe but plausible downside scenarios
and other factors that could indicate possible threats to its
ability to continue in operation for a period of at least twelve
months from the date of approving the Consolidated Financial
Statements.
Zegona is continuing to execute its Buy-Fix-Sell strategy which
currently involves actively searching for another
attractive investment opportunity within the European TMT sector
and it now meets its day to day working capital requirements while
it does this from cash balances.
During this period, Zegona's ongoing costs are reasonably
predictable and controllable and in 2022 Zegona also performed a
comprehensive review of operating costs to ensure the business is
operating as efficiently as possible by eliminating expenditure
where possible, reducing headcount and re-negotiating key supplier
terms. Following this review, the Directors are reasonably
comfortable that provided Zegona does not incur any material
unforeseen costs, Zegona's cash holdings of GBP4.5 million (EUR5.3
million) at 6 April 2023 should be sufficient to fund the business
until at least the first quarter of 2025, which is significantly
more than twelve months after the approval of these Consolidated
Financial Statements.
In performing their assessment, the Directors however also
recognized that Zegona's ability to continue as a going concern
could be compromised in each (or a combination of) two main
scenarios which it does not necessarily consider likely, but which
are plausible:
1. While Zegona currently believes the European TMT market does
provide for a number of attractive investment opportunities in the
coming years, it is still possible that Zegona may be unable, for a
number of reasons, to
(a) identify and successfully negotiate an acceptable agreement
to acquire of a new investment that it feels is able to meet its
financially disciplined criteria for attractive returns to its
investors in a reasonable period of time
(b) Secure sufficient equity and/or debt financing for the
identified acquisition on terms that still allow Zegona to create
sufficient value to deliver those attractive investor returns.
If this does happen, the Directors and the Management team could
conclude that it is no longer in investors' best interests to
continue to seek alternative investments.
2. Zegona may incur costs in connection with an unsuccessful
deal or deals ("abort costs") large enough to exhaust its cash
reserves. The Directors' going concern review suggests that without
taking any other cost saving actions, Zegona could absorb
approximately GBP1.7 million in such abort costs during the next
twelve months without exhausting its cash reserves. The Directors
considered this unlikely, since expenditure at this level would
only happen on a relatively small sub-set of transactions and
Zegona has historically been successful in minimizing transaction
fees and controlling them during the negotiation and diligence
phase such that costs are only incurred when the likelihood of
success is high. It is however possible in some larger and more
complex transactions which fail at a very late stage that fees in
excess of GBP1.7 million could be incurred, or that Zegona could
have multiple failed transactions with cumulative abort costs in
excess of this level.
Due to the existence of these two scenarios , the Directors
believe that it is still appropriate to prepare the financial
statements on a going concern basis. However, there are indications
of the existence of a material uncertainty related to events or
conditions that may cast significant doubt on the group's and the
company's ability to continue as a going concern and, therefore,
that the group and company may be unable to realise their assets
and discharge their liabilities for at least twelve months from the
date of approving the Consolidated Financial Statements. The
financial statements do not include any adjustments that would
result from the basis of preparation being inappropriate.
(c) New standards and amendments to IFRS
Standards, amendments and interpretations effective and adopted
by Zegona:
There are no standards that are issued but not yet effective
that would be expected to have a material impact on the entity in
the current or future reporting periods and on foreseeable future
transactions
(d) Basis of consolidation
Subsidiaries are entities controlled by the Company, either
directly or indirectly. Control exists when the Company 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 over the entity. The financial information of subsidiaries is
included in the Consolidated Financial Statements from the date
that control commences until the date that control ceases.
Intragroup balances, any gains and losses or income and expenses
arising from intragroup transactions, and intragroup cash flows are
eliminated on consolidation.
(e) Interests in associates
An associate is an entity over which Zegona has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not
control or joint control over those policies. Zegona evaluates the
extent to which it has significant influence in investees on a
case-by-case basis, considering all relevant facts and
circumstances. Evaluations are updated when there any changes in
those facts and circumstances. These evaluations are often subject
to significant judgement and the key judgements and considerations
underlying material evaluations are more fully discussed in note
3.
Zegona classifies investments in entities over which it has
significant influence as associates and accounts for them using the
equity method. Under the equity method, the investment in an
associate is initially recognised at cost. The carrying amount of
the investment is increased or decreased to recognise changes in
Zegona's share of the profit or loss of the investee after the date
of acquisition. Goodwill relating to the associate is included in
the carrying amount of the investment and is not tested for
impairment separately.
The Consolidated Statement of Comprehensive Income reflects
Zegona's share of the results of operations of the associate. Any
change in Other Comprehensive Income ("OCI") of those investees is
presented as part of Zegona's OCI.
Investments in associates are assessed at each reporting period
date and tested for impairment when there is an indication that the
recoverable amount has fallen below the carrying value of the
investment; i.e. that the investment may be impaired. The
recoverable amount of an asset is the higher of its fair value less
costs of disposal and its value in use. Impairment losses are
recognised within 'Share of profit of associate' in the
Consolidated Statement of Comprehensive Income.
f) Discontinued Operations
Zegona classifies non-current assets and assets and liabilities
within disposal groups ('assets') as held for sale if the assets
are available immediately for sale in their present condition,
management is committed to a plan to sell the assets under usual
terms, it is highly probable that their carrying amounts will be
recovered principally through a sale transaction rather than
through continuing use and the sale is expected to be completed
within one year from the date of the initial classification.
Assets and liabilities classified as held for sale are presented
separately as current items in the consolidated statement of
financial position and are measured at the lower of their carrying
amount and fair value less costs to sell. Property, plant and
equipment and intangible assets are not depreciated or amortised
once classified as held for sale; this also applies in respect of
assets held by equity accounted associates and joint ventures.
Discontinued operations are excluded from the results of
continuing operations and are presented as a single amount as
profit or loss after tax from discontinued operations in the Group
consolidated income statement. Discontinued operations are also
excluded from segment reporting. All other notes to the financial
statements include amounts for continuing operations, unless
indicated otherwise.
g) Foreign currencies
Foreign currency transactions
Sterling is the functional currency of the Company. Transactions
in foreign currencies are recorded at the rates of exchange ruling
at the transaction dates.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency spot rates of
exchange at the reporting date. Differences arising on settlement
or translation of monetary items are recognised in the Statement of
Comprehensive Income.
Non-monetary items denominated in foreign currencies are
translated at the functional currency spot rates of exchange at
each reporting date.
Foreign operations
The euro is the presentation currency of the Consolidated
Financial Statements. For the purpose of presenting the
Consolidated Financial Statements, the assets and liabilities of
Zegona's non-euro-denominated functional entities (including
subsidiaries, associates and joint ventures) are translated at
exchange rates prevailing on the balance sheet date. Income and
expense items are translated at the average exchange rates for the
period.
Currency translation adjustments arising on the restatement of
opening net assets of Zegona's non-euro denominated functional
entities, together with differences between the entities' results
translated at average rates versus closing rates, are recognised in
the Statement of Other Comprehensive Income and transferred to the
foreign currency translation reserve. All resulting exchange
differences are classified as equity until disposal of the foreign
operation. On disposal, the cumulative amounts of the exchange
differences are recognised as income or expense.
h) Revenue and expenses
Finance income
Interest income from financial assets is recognised using the
effective interest method as finance income in the Consolidated
Statement of Comprehensive Income.
Dividend income from financial assets including from subsidiary
undertakings is recognised as finance income in the Consolidated
Statement of Comprehensive Income when Zegona's right to receive
the payment is established, which for listed securities is when the
shares are quoted ex-dividend, and are presented gross of any
non-recoverable withholding taxes.
Gains or losses on financial instruments measured at fair value
through profit or loss comprise the net change in fair value,
excluding interest or dividend income.
i) Administrative and other operating expenses
Administrative and other operating expenses are recognised on an
accruals basis, i.e. when the actual flow of the services they
represent occurs, regardless of when the resulting monetary or
financial flow arises.
Significant project costs are those incurred on projects that
are considered to be one-off or non-recurring in nature, where the
costs are so material individually or collectively that the
Directors believe that they require separate presentation and
disclosure to avoid distortion of the comparability of corporate
costs between periods. These are recognised on an accruals basis
and expensed in the Statement of Comprehensive Income unless they
are directly related to the issuance of equity instruments in which
case they are recognised as a deduction from equity. If qualifying
transaction costs are incurred in anticipation of, and directly
related to, the issuance of equity instruments and span more than
one reporting period, they are deferred until equity instruments
are recognised. If the equity instruments are not subsequently
issued, the costs are expensed.
j) Fair value measurement
Zegona measures certain financial instruments at fair value at
each balance sheet date.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The fair value measurement is based on the presumption that the
transaction to sell the asset or transfer the liability takes place
either:
-- In the principal market for the asset or liability; or
-- In the absence of a principal market, in the most
advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible
by Zegona.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest. Zegona uses valuation techniques that are
appropriate in the circumstances and for which sufficient data is
available to measure fair value, maximising the use of relevant
observable inputs and minimising the use of unobservable
inputs.
All assets and liabilities for which fair value is measured or
disclosed in the Financial Statements are categorised within the
fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a
whole:
-- Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities;
-- Level 2 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable; and
-- Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the Financial
Statements at fair value on a recurring basis, Zegona determines
whether transfers have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end
of each reporting period.
k) Financial instruments - initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as
subsequently measured at fair value through profit or loss
("FVPL"), amortised cost, or fair value through other comprehensive
income ("FVOCI").
The classification of a financial asset at initial recognition
depends on the financial asset's contractual cash flow
characteristics and Zegona's business model for managing it. In
order for a financial asset to be classified and measured at
amortised cost or FVOCI, it needs to give rise to cash flows that
are 'solely payments of principal and interest' on the principal
amount outstanding (the "SPPI Criterion").
Financial assets are initially recognised at their fair value
plus, for those financial assets not at fair value through profit
or loss, transaction costs.
Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention
in the marketplace (regular way trades) are recognised on the
settlement date, being the date that an asset is delivered to or by
Zegona.
Subsequent measurement
Zegona's financial assets are classified into categories:
-- Financial assets at amortised cost comprise assets that are
held within a business model with the objective to hold the
financial assets in order to collect contractual cash flows that
meet the SPPI Criterion. These assets are subsequently measured at
amortised cost using the effective interest method. The amortised
cost is reduced by impairment losses. Interest income, foreign
exchange gains and losses and impairment losses are recognised in
the Statement of Comprehensive Income. Any gain or loss on
derecognition is recognised in the Statement of Comprehensive
Income.
-- Financial assets at FVPL comprise quoted equity instruments
which Zegona had not irrevocably elected, upon initial recognition,
to classify at FVOCI and debt instruments whose cash flow
characteristics fail the SPPI Criterion. These assets are carried
in the Statement of Financial Position at fair value with net
changes in fair value recognised as either finance income or
finance costs in the Statement of Comprehensive Income.
Derecognition
A financial asset is primarily derecognised and removed from the
Statement of Financial Position when:
-- The rights to receive cash flows from the asset have expired; or
-- Zegona has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) Zegona has transferred
substantially all the risks and rewards of the asset, or (b) Zegona
has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the
asset.
When Zegona has transferred its rights to receive cash flows
from an asset or has entered into a pass-through arrangement, it
evaluates if, and to what extent, it has retained the risks and
rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor
transferred control of the asset, Zegona continues to recognise the
transferred asset to the extent of its continuing involvement and
also recognises an associated liability. The transferred asset and
the associated liability are measured on a basis that reflects the
rights and obligations that Zegona has retained.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
Subsequent measurement
Financial liabilities are subsequently measured at amortised
cost and in the case of interest-bearing financial liabilities at
amortised cost using the effective interest rate method. Gains and
losses are recognised in the Statement of Comprehensive Income when
the liabilities are derecognised.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability, the difference of
the respective carrying amounts is recognised in the Consolidated
Statement of Comprehensive Income.
Equity instruments
An equity instrument is any contract that provides a residual
interest in the assets of the Group after deducting all of its
liabilities and includes no obligation to deliver cash or other
financial assets.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the Statement of Financial Position if
there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net
basis to realise the assets and settle the liabilities
simultaneously.
l) Impairment of financial assets
For trade receivables, Zegona applies a simplified approach in
calculating expected credit losses ("ECLs") and recognises a loss
allowance based on lifetime ECLs at each reporting date using
Zegona's historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and the economic
environment.
A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows.
m) Property, plant and equipment
Property, plant and equipment is measured initially at
acquisition cost and subsequently carried net of any accumulated
depreciation and any impairment losses.
The costs of upkeep and maintenance of property, plant and
equipment are charged to the administrative and other operating
expenses in the Statement of Comprehensive Income in the year in
which they are incurred.
Replacements or renewals are recorded as an addition to
property, plant and equipment and the units replaced or renewed are
derecognised.
Property, plant and equipment in operation is depreciated
systematically on the basis of the estimated useful economic life
of the items, and the cost of the assets is distributed on a
straight-line basis over the estimated useful economic lives. For
fixtures and fittings, which comprises primarily computer hardware,
the estimated useful economic live is 3 years.
Derecognition of property, plant and equipment
Items of property, plant and equipment are derecognised when
they are sold or when no future economic benefit is expected to be
obtained from their continuing use. The gain or loss arising on the
disposal or derecognition of an item of property, plant and
equipment is determined as the difference between the proceeds from
the sale and the carrying amount of the asset and is recognised in
the Consolidated Statement of Comprehensive Income.
n) Leases
Zegona assesses at contract inception whether a contract is, or
contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration.
Following adoption of IFRS 16 Leases, Zegona has taken the
exemption contained under IFRS 16 to not apply IFRS 16 requirements
to any of its leases as these leases are short-term in nature (less
than 12 months) or low in value.
o) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits with an original maturity of three months or less.
p) Investments in subsidiaries
Investments in subsidiaries within the Company's separate
Statement of Financial Position are stated at cost less provision
for impairment.
At the end of each reporting year, or whenever there are
indications of impairment, the Company tests its investments in
subsidiaries for impairment to determine whether their recoverable
amount has fallen below their carrying amount. The recoverable
amount is the greater of fair value less costs to sell and value in
use. An impairment loss is recognised when the carrying amount
exceeds the recoverable amount. Value in use is the present value
of expected future cash flows, calculated using a risk-free market
rate of interest, adjusted for the risks specific to the asset.
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount; however, the increased carrying amount may not
exceed the carrying amount that would have been determined had no
impairment loss been recognised in previous years. This reversal of
an impairment loss is recognised as income.
The Company makes appropriate provision when the recoverable
value is less than the carrying amount, provided the latter cannot
be recovered by generating sufficient income to cover all the costs
and expenses incurred by usage of the asset.
q) Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in other
reserves as a deduction from the initial measurement of the equity
instrument.
r) Dividends payable
The Company recognises a liability to pay a dividend when the
distribution is authorised and the distribution is no longer at the
discretion of the Company. A corresponding amount is recognised
directly in equity.
s) Corporation tax
Corporation tax represents the sum of current and deferred tax
for the year.
Current tax is the expected tax payable on the taxable income
for the year. Taxable profit differs from profit reported in the
Consolidated Statement of Comprehensive Income because some items
of income and expense are taxable or deductible in different years
or may never be taxable or deductible. Zegona's current tax is
calculated using tax rates enacted or substantially enacted at the
balance sheet date, and any adjustment to taxes payable in respect
of previous periods.
Deferred tax is the tax expected to be payable or recoverable in
the future arising from temporary differences between the carrying
amounts of assets and liabilities in the Financial Statements and
the corresponding tax bases used in the computation of taxable
profit. It is accounted for using the balance sheet liability
method.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
Deferred tax is calculated on the tax rates that are expected to
apply in the year when the liability is settled or the asset
realised, based on tax rates that have been enacted or
substantively enacted by the year end date, and is not
discounted.
t) Pension benefits
Zegona pays contributions to externally administered pension
plans on behalf of employees, or the equivalent contribution is
paid in cash to the employee. Zegona has no further payment
obligations once the contributions have been paid. The
contributions are recognised as an expense on the accrual
basis.
u) Earnings per ordinary share
Basic earnings per share ("EPS") is calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company
by the weighted average number of ordinary shares outstanding
during the year.
Diluted EPS is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all
potentially dilutive ordinary shares.
v) Share-based transactions
Equity-settled share-based payments are measured at the fair
value of the equity instruments at the grant date. The grant date
is the date on which an employer and an employee agree upon the
most essential terms and conditions associated with the award. If
shareholder approval is needed, then the grant date is delayed
until that approval has been obtained, unless shareholder approval
is considered to be perfunctory.
Share based payment schemes in which Zegona has a choice of
settlement are classified as either equity settled share-based
payments or cash-settled share-based payments, depending on
Zegona's ability and intent to settle in shares, which Zegona has
previously communicated its intention to do.
The fair value is expensed through administrative and other
operating expenses, with a corresponding increase in equity through
the share-based payment reserve, on a straight-line basis over the
period that the employees or others providing similar services
become unconditionally entitled to the awards or vesting
period.
The vesting period for these schemes may commence before the
legal grant date if the employees have started to render services
in respect of the award before the legal grant date, where there is
a shared understanding of the terms and conditions of the
arrangement. Expenses are recognised when the employee starts to
render service to which the award relates. The fair value of the
awards is calculated at each accounting reporting period until the
final fair value is measured at the legal grant date.
The dilutive effect of outstanding share-based payments is
reflected as share dilution in the computation of diluted EPS.
3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The Consolidated Financial Statements reflect management's
choice of accounting policies, assumptions and estimates. Estimates
and judgements are continually evaluated and are based on
historical experience and other factors including expectations of
future events that are believed to be reasonable under the
circumstances. In view of the inherent uncertainties and the high
level of subjectivity involved in the recognition or measurement of
items outlined below, it is possible that the outcomes in the next
financial year could differ from those on which management's
estimates are based. This could result in materially different
estimates and judgement from those reached by management for the
purpose of these Consolidated Financial Statements.
The main accounting judgements and estimates used by the
Directors in applying the accounting policies of Zegona that had
the greatest impact on the Consolidated Financial Statements in the
current year are:
Accounting judgements
-- The recoverability of the income tax receivable. During 2021,
Zegona was required to pay two charging notices totalling GBP4.4
million issued by HMRC in respect of the EU Commission's decision
that the Group Financing Exemption contained within the UK's
Controlled Foreign Company legislation constituted State Aid. In
prior periods, Zegona had concluded that no provision was required
on the basis that it was not probable that there would ultimately
be an outflow of resources required to settle the obligation.
Consequently, Zegona has continued to record an income tax
receivable on payment of the charging notices and has continued to
evaluate the receivable for recoverability. The determination of
whether an outflow is more likely than not requires judgement. An
explanation of the key judgements made in determining that the
receivable continues to be recoverable is provided in Note 14.
-- Going concern. Zegona's assessment of the entity's ability to
continue as a going concern involves judgment with respect to its
ability to meet liabilities as they fall due for a period of at
least twelve months from the approval of the financial statements,
including considerations around the ongoing trade of the group
which is to make strategic telco investments. An explanation of the
key judgements made in determining that the Zegona continues to be
a going concern, albeit with a material uncertainty related to
events or conditions that may cast significant doubt on its ability
to continue as a going concern is provided in Note 2.
Accounting estimates
-- Measurement of share-based payments transactions. Valuation
techniques are used in determining the fair value of the management
incentive award, which feature significant unobservable inputs and
are subject to substantial uncertainty. The main estimates and
assumptions used in determining the GBP0.28 per share fair value of
the management incentive are detailed in Note 17.
4. SEGMENTAL ANALYSIS
Following the disposal of Euskaltel in 2021 (see note 12),
Zegona and its subsidiaries is organised a single business which
seeks to generate shareholder returns by applying its Buy-Fix-Sell
strategy to European TMT assets. The chief operating decision maker
is considered to be the Board, who only receive consolidated
information which does not does not include an analysis of either
profit and loss or assets and liabilities to any lower level.
Zegona has therefore concluded that it only has a single operating
segment for which the measure of performance is Zegona's
consolidated loss for the period from continuing operations and all
amounts required to be disclosed in accordance with paragraph 23-24
of IFRS 8 Operating Segments are the same as the equivalent
consolidated amounts disclosed elsewhere in these financial
statements. All non-current assets are domiciled in the United
Kingdom.
5. ADMINISTRATIVE AND OTHER OPERATING EXPENSES - CORPORATE COSTS
Consolidated Consolidated
2022 2021
EUR000 EUR000
Salaries, bonuses and staff benefits 2,212 2,918
Employment related taxes 333 423
Pension costs 239 311
Other operating expenses 487 991
Corporate costs 3,271 4,643
============ ============
Staff numbers
The average number of employees (including Executive Directors
but excluding Non-Executive Directors) during the year by activity
was as follows:
Consolidated Consolidated
2022 2021
Operations 6 6
Administration 1 1
============ ============
7 7
============ ============
Further information in relation to pay and remuneration of the
directors can be found in the Directors' Remuneration Report,
starting on page 31.
6. ADMINISTRATIVE AND OTHER OPERATING EXPENSES - SIGNIFICANT PROJECT COSTS
Significant project costs are those incurred on projects that
are considered to be one-off or non-recurring in nature, where the
costs are so material individually or collectively that the
Directors believe that they require separate presentation and
disclosure to avoid distortion of the comparability of corporate
costs between periods. The classification of projects as
significant is subjective in nature and therefore judgement is
required in its determination and is a matter of qualitative
assessment. Significant projects are usually related to acquisition
or joint venture transactions where incremental and identifiable
external costs are incurred by Zegona in order to make or evaluate
the potential transaction, even if it is not consummated.
The EUR26 thousand (2021: EUR0.3 million) of significant project
costs recognised in 2022 were principally professional fees in
relation to potential acquisition opportunities. In addition,
significant project costs were recognised within discontinued
operations in 2021 (see note 12).
7. FINANCE INCOME AND COSTS
Note Consolidated Consolidated
2022 2021
EUR000 EUR000
Net gain on currency forward instruments - 137
Bank interest 25 21
Finance income 25 158
============ ============================
]
Interest on bank borrowings and bank
charges (4) (376)
============ ============================
Finance costs (4) (376)
============ ============================
8. TAXATION
Consolidated Consolidated
2022 2021
EUR000 EUR000
Current tax expense
Current year - -
============ ============
Income tax expense for the year - -
============ ============
Zegona believes that no accruals for tax liabilities are
required for all open tax years based on its assessments of many
factors, including interpretations of tax law and prior experience.
The normal UK statute of limitations is four years from the end of
the accounting period.
Reconciliation of effective tax rate
Consolidated Consolidated
2022 2021
EUR000 EUR000
(Loss) before tax from continuing operations (3,312) (34,258)
============ ============
At UK statutory income tax rate (19% (2021:
19%)) (629) (6,509)
Expenses not deductible for tax purposes* 26 5,916
Unrecognised tax losses* 602 593
============ ============
Income tax expense - -
============ ============
* At UK statutory income tax rate (19% (2021: 19%))
Income relating to the investment in Euskaltel during 2021,
including dividends and gains in fair value and foreign exchange,
is not taxable as the dividends are in respect of non-redeemable
ordinary shares and the investment is expected to meet the
substantial shareholdings exemption which provides an exemption
from corporation tax for capital gains. The majority of significant
project costs is not deductible for tax purposes as the projects
relate to acquisitions or disposals and are therefore capital in
nature.
Unrecognised deferred tax assets
Deferred tax assets of the UK tax-resident companies of EUR9.4
million (2021: EUR7.7 million) have not been recognised in respect
of tax losses, because it is not probable that future taxable
profit will be available against which the companies can maximise
the benefits therefrom. Under UK law there is no expiry for the use
of tax losses.
In the UK 2021 Budget Statement it was announced that the UK
corporation rate will increase to 25% from 1 April 2023.
Consequently, Zegona has remeasured its unrecognised UK deferred
tax assets at the end of the reporting period at the rate of
25%.
9. INVESTMENT IN SUBSIDIARIES
The Consolidated Financial Statements in the current year
include the following subsidiaries:
Shares Shares
Country of held directly held indirectly
Subsidiary Nature of business incorporation by the Company by the Company
Zegona Limited Incentive company Jersey (1) 100% -
Zegona Spanish Holdco
Limited Dormant UK (2) - 100%
Zegona Borrower Limited Dormant UK (2) - 100%
Zegona Holdco Limited Dormant UK (2) - 100%
The registered office addresses of the subsidiaries are:
1. 47 Esplanade, St Helier, Jersey, JE1 0BD
2. 8 Sackville St, Mayfair, London, W1S 3DG
There are no restrictions on the Company's ability to access or
use the assets and settle the liabilities of the Company's
subsidiaries, other than immaterial assets controlled by
liquidators.
Carrying value of the Company's direct investment in
subsidiary
2022
During 2022, Zegona Limited continued to pay cash expenses on
behalf of the group. These outflows prompted Zegona to review
whether the carrying value of the investment in subsidiary was
recoverable as at 31 December 2022.
Following these reviews, the carrying value of the investment
was impaired by EUR3.0 million in total, which has been recognised
in the profit or loss of the Company and included within the
movement in retained earnings in the Company's statement of
financial position.
The recoverable amount of the Company's investment in subsidiary
at 31 December 2022 was EUR3.7 million, being its fair value less
costs of disposal. The fair value measurement is categorised within
level 3 of the fair value hierarchy. The fair value was based on an
adjusted net asset method, whereby the fair values of the
recognised and unrecognised assets and liabilities of Zegona
Limited were directly measured.
2021
During 2021, the Company performed an impairment review of
Zegona limited on the same basis and impaired its investment by
EUR288.8 million to its recoverable amount of EUR6.8 million,
principally because on 11 August 2021, Zegona Limited paid a
distribution of GBP360 million (equivalent to EUR417.9 million) out
of a combination of its share premium account and retained earnings
to fund the Company's tender offer.
10. FINANCIAL RISK MANAGEMENT
Zegona's activities expose it to market risk, principally
interest rate risk and currency risk, however these have been
significantly reduced since the sale of its investment in Euskaltel
(see note 12) and the Return of Capital (see note 18).
Interest rate risk
Interest rate risk is the risk that the fair value of future
cash flows of a financial instrument will fluctuate because of
changes in market interest rate. Zegona's exposure to interest rate
risk is extremely limited as it only has a small overdraft
facility, which bears interest at 1.5% per annum over the Bank of
England base rate but is currently undrawn.
Zegona seeks to minimise interest rate risk through maintaining
the minimum amount of leverage , however in the opinion of the
Directors, even a significant movement in LIBOR would not have a
material impact on the cash flow of Zegona. The Executive Directors
and the Chief Financial Officer regularly review the placing of
cash balances and Zegona's leverage.
Foreign currency risk
The Board and the Chief Financial Officer control and monitor
financial risk management, including foreign currency risk, in
accordance with internal policy and the strategic plan defined by
the Board. Zegona is exposed to three types of exchange risk:
transaction, translation and economic risk.
Transaction risk is the risk of loss that Zegona bears when it
enters into monetary transactions denominated in currencies other
than Sterling, the currency in which Zegona operates. A loss (or
gain) may occur due to the change in relative value of currencies
from the date on which the transaction is entered to the date the
settlement takes place.
Zegona is also exposed to foreign exchange translation risk
which is accounting in nature. It is the risk that the value of net
assets and net profit will change as a result of translation of the
Financial Statements of companies within the group with a different
functional currency to the presentational currency from one period
to the next. In the case of Zegona, this is the conversion of
Sterling into euro.
The table below show the impact of a 10% movement in Sterling
against the euro on the translation of Zegona's reported financial
position as at 31 December 2022 and reported financial performance
for the year.
+/- 10% movement
Currency impact EUR000
Profit before tax gain/loss -/+ 331
Equity gain/loss -/+ 1,054
Credit risk
Credit risk arises from cash and cash equivalents, prepayments
and other. Zegona's objective is to minimise credit risk as far as
possible and uses the ratings awarded by independent agencies,
where available, otherwise Zegona assesses the counterparty's
credit rating taking into account its financial situation, past
experience and other factors. There are no material financial
assets that are written down, past due or impaired as at 31
December 2022, and there is no collateral or other credit
enhancement feature on Zegona's financial assets.
The material exposures to credit risk by credit quality
classification and external rating at 31 December 2022 are shown in
the table below:
Cash and
Quality classification External credit cash equivalents Total
rating EUR000 EUR000
Strong A- and above 5,890 5,890
5,890 5,890
=================== =========
Credit quality classification definitions:
-- Strong exposures demonstrate a strong capacity to meet
financial commitments, with negligible or low probability of
default and/or low levels of expected loss.
The Directors consider that the carrying amounts best represent
the maximum exposure to credit risk.
Liquidity risk
Prudent liquidity risk management implies holding sufficient
cash and marketable securities and the availability of financing
through a sufficient level of available credit lines. Management
assesses regularly Zegona's liquidity forecasts which consider
cashflow projections and existing facilities.
At 31 December 2022, Zegona had cash balances held with banks
amounting to EUR5.8 million (2021: EUR10.6 million), compared to
Zegona's total liabilities amounting to EUR0.4 million (2021:
EUR1.5 million). In addition at both 31 December 2022 and 31
December 2021, Zegona had an undrawn overdraft facility of GBP1.5
million, equivalent to EUR1.7 million although this is repayable on
demand.
11. FINANCIAL INSTRUMENTS
The following tables shows the carrying amounts and the fair
values of financial assets and financial liabilities, including
their levels in the fair value hierarchy. It does not include fair
value information for financial assets and financial liabilities
measured at amortised costs as their carrying amount is a
reasonable approximation of fair value.
Financial instrument classification and fair values -
Consolidated
Fair Amortised Fair Amortised
Value cost value cost
2022 2022 2021 2021
EUR000 EUR000 EUR000 EUR000
Prepayments and other receivables - 75 - 197
Cash and cash equivalents - 5,890 - 10,556
------ ------------------ ------ ---------
Total current financial
assets - 5,965 - 10,753
====== ================== ====== =========
Fair Amortised Fair Amortised
Value cost value cost
2022 2022 2021 2021
EUR000 EUR000 EUR000 EUR000
Accruals and other payables - 402 - 1,457
Bank borrowing - - - 106
Total current financial
liabilities - 402 - 1,563
====== ========= ====== =========
The Directors consider that the carrying amounts of the
financial instruments measured at amortised cost equate to their
fair values.
Financial instrument classification and fair values -
Company
Fair Amortised Fair Amortised
Value cost value cost
2022 2022 2021 2021
EUR000 EUR000 EUR000 EUR000
Prepayments and other receivables - 1,805 - 3,821
Cash and cash equivalents - 337 - 16
------ --------- ------ ---------
Total current financial
assets - 2,142 - 3,837
====== ========= ====== =========
Fair Amortised Fair Amortised
Value cost value cost
2022 2022 2021 2021
EUR000 EUR000 EUR000 EUR000
Accruals and other payables - 235 - 620
Bank borrowings - - - 106
Total current financial
liabilities - 235 - 726
====== ========= ====== =========
12. PROFIT FROM DISCONTINUED OPERATIONS
For part of 2021, Zegona owned 21.44% of in Euskaltel S.A.
("Euskaltel"), a Spanish telecommunications company incorporated in
Spain and operating in the Basque Country, Asturias and Galicia
under regional brands and nationally across Spain under the Virgin
telco brand.
This investment was sold to a subsidiary of MásMóvil Ibercom,
S.A.U ("MásMóvil"), the Spanish fourth national operator who
launched a tender offer to acquire all of the outstanding shares of
Euskaltel on 28 March 2021. The tender offer completed successfully
and Zegona received EUR421.3 million in cash on 11 August 2021.
The amounts recorded in the Consolidated statement of
comprehensive income in respect of discontinued operations were as
follows:
Consolidated Consolidated
2022 2021
EUR000 EUR000
Gain on sale of discontinued operation - 110,240
Share of loss of associate - (454)
Realised foreign exchange gains - 8,391
Significant project costs - (2,910)
Finance costs - (1,096)
Discontinued operations - 114,171
============ ============
The amounts recorded in the Consolidated statement of cash flows
in respect of discontinued operations were
as follows:
Consolidated Consolidated
2022 2021
EUR000 EUR000
Proceeds from sale of investment in Euskaltel - 421,275
Dividends received from Euskaltel - 11,872
Proceeds from sale of contingent consideration - 6,400
Net cash flow from discontinued investing
activities - 439,547
============ ============
Gain on sale of discontinued operation and Share of loss of
associate
Up to the announcement of MásMóvil's tender offer on 28 March
2021, Zegona had accounted for its investment in Euskaltel as an
associate and recorded its share of Euskaltel's loss for this
period of EUR454 thousand. The investment in Euskaltel ceased to be
an associate on 28 March 2021 and from this date became an asset
held for sale with Zegona no longer recognising a share of
Euskaltel's profit from that date.
During 2021, Zegona recognised a gain on disposal of Euskaltel
that was calculated as follows:
EUR000
Consideration received 421,275
Carrying amount of investment in associate (310,410)
Recycling of historical exchange differences on
sale of discontinued operations (625)
----------
Gain on sale of discontinued operations 110,240
==========
The disposal of Euskaltel did not attract a tax charge as it
qualifies for the Substantial Shareholding Exemption in Schedule
7AC of the Taxation of Chargeable Gains Act 1992.
Realised foreign exchange gains
On 7 April 2021, Zegona entered into a Deal Contingent Forward
Purchase Agreement ("DCF") with Barclays Bank PLC to ensure it
would receive a fixed Sterling value if the tender offer to acquire
Euskaltel was completed successfully.
The realised foreign exchange gains are the gains on this
instrument, calculated as the difference between the GBP value
received under the DCF and the GBP value of the euros received at
the prevailing spot rate. Since this instrument has been entered
into entirely to fix the Sterling value of the Euskaltel proceeds,
changes in fair value are recognised within discontinued
operations. This line also includes EUR0.4 million of foreign
exchange gains arising from the revaluation of the Euro-denominated
contingent consideration.
Significant project costs
Significant project costs are those incurred on projects that
are considered to be one-off or non-recurring in nature, where the
costs are so material individually or collectively that the
Directors believe that they require separate presentation and
disclosure to avoid distortion of the comparability of corporate
costs between periods. In 2021, EUR2.9 million of significant
project costs related to the disposal of the Euskaltel investment
and the Return of capital were recognised with discontinued
operations which were principally legal fees and stamp duty.
Finance costs
Up to 10 August 2021, Zegona recorded a financial asset
designated at fair value for contingent consideration receivable
from Euskaltel in relation to the sale of Telecable in 2017. This
asset was always recorded at fair value using a
probability-weighted discounted cash flow model [19] and the loss
of EUR1.1 million reflects the change in the fair value of the
asset between 1 January 2021 and 10 August 2021, when it was sold
to a third party for EUR6.4 million in cash, which was received on
10 August 2021. As the sale of Euskaltel would not have been
undertaken without the settlement of the contingent consideration
Zegona concluded that the contingent consideration was part of the
discontinued operation.
13. PREPAYMENTS AND OTHER RECEIVABLES
Consolidated Consolidated
31 December 31 December
2022 2021
EUR000 EUR000
Prepayments 19 46
Accrued interest on bank deposits 24 -
VAT recoverable 32 151
Total 75 197
============ ============
Company Company
31 December 31 December
2022 2021
EUR000 EUR000
Prepayments 19 42
Amounts due from subsidiary undertakings 1,754 3,629
VAT recoverable 32 150
Total 1,805 3,821
=========== ===========
14. INCOME TAX RECEIVABLE
In August 2019, the European Commission (the "EC") concluded
that the Group Financing Exemption contained within the UK's
Controlled Foreign Company ("CFC") legislation amounted to illegal
state aid to the extent that there were UK Significant People or
Function ("SPF") activities involved in generating non-trading
finance profits.
Zegona engaged an independent tax adviser to undertake a review
of its historic financing structures which identified a small
proportion of activities performed by UK personnel. On this basis,
Zegona estimated that if the conclusion is upheld, a potential tax
liability of between EUR1m and EUR1.8m may exist.
The UK Government is required to recover the state aid in the
meantime and Zegona paid two charging notices issued by HMRC in
February and June of 2021 for GBP4.4 million, (EUR4.9 million)
which is 100% of the CFC tax relief received and interest thereon.
These notices are a charging mechanism only and if the decision is
annulled the money will be repaid.
Zegona submitted an appeal against the charging notices which
was accepted by HMRC on 8 March 2021. This appeal is likely to be
stayed until the final outcome of all appeals to the EU Courts in
respect of the EU Commission's original decision are known, which
may take several years.
Both the UK Government and a number of other impacted taxpayers
have submitted appeals to the EU General Court to annul the
Commission's findings. On 8 June 2022, the General Court of the
Court of Justice of the European Union ("CJEU") found in favour of
the Commission's decision. The UK Government has now announced that
it has lodged an appeal of the decision with the Court of Justice.
If the UK Government's appeals are ultimately successful, Zegona
will be entitled to recover the amounts already paid and will
suffer no loss.
Despite the decision of the General Court, based on its current
assessment and also supported by external professional advice,
Zegona believes that the UK Government's appeal will likely be
successful. As a result, Zegona continues to believe that it has no
liability. A long-term current tax receivable of EUR4.9 million
(2021: EUR5.2 million [20] ).has therefore continued to be
recognized in respect of the amounts paid. Any appeal of the
General Court decision to the Court of Justice, and the progress of
the UK Tax Authority challenge into the historic financing
arrangements of the Group, will continue to be monitored by
Management.
15. ACCRUALS AND OTHER PAYABLES
Consolidated Consolidated
31 December 31 December
2022 2021
EUR000 EUR000
Trade payables 208 250
Other accruals 194 1,227
402 1,457
============ ============
Company Company
31 December 31 December
2022 2021
EUR000 EUR000
Trade payables 41 47
Accruals 194 573
235 622
=========== ===========
16. BANK BORROWINGS
Zegona has a GBP1.5 million overdraft facility with HSBC PLC
which is generally undrawn, however at 31 December 2021, GBP90.8
thousand (EUR106.4 thousand) of the facility was drawn for a brief
period to cover short-term working capital requirements. The
interest rate on the overdraft facility was 0.25% and it is
repayable on demand. The overdraft was repaid on 13(th) January
2022.
17. MANAGEMENT INCENTIVE SCHEME
Incentive scheme arrangements were put in place at Zegona's
inception in 2015 to create incentives for Zegona's management team
who have been issued Class A Ordinary Shares in the Company's
subsidiary, Zegona Limited
("Management Shares").
The holders of the Management Shares are entitled to 15% of the
growth in value of Zegona during a series of five separate
Calculation Periods, provided that ordinary shareholders achieve a
5% per annum Preferred Return [21] in each Calculation Period.
Holders have the right to end each Calculation Period by
redeeming 99% of their Management Shares at any time between the
third and fifth anniversaries of the beginning of the Calculation
Period, although a Calculation Period may also end upon certain
specified events such as a winding up or takeover, or a change of
control of Zegona.
When a Calculation Period ends, a new Calculation Period
automatically begins with the remaining 1% of unredeemed shares
retaining the entitlement to 15% of the growth in value of Zegona
for the next Calculation Period.
At 31 December 2022, 515,464 Management Shares in Zegona Limited
remain allotted, issued and fully paid as shown in the table
below:
Participation Number of Nominal value
in Management of Management
growth in Shares Shares
value
Eamonn O'Hare 8.88% 305,000 GBP305
Robert Samuelson 4.44% 152,500 GBP153
Zegona senior management 1.68% 57,964 GBP58
=========== ==============
515,464 GBP516
=========== ==============
The First Calculation Period
The First Calculation Period began on 14 August 2015 and ended
on 25 June 2020 when the holders of the shares redeemed 99% of them
for no value because the preferred return had not been met.
The Second Calculation Period
Accounting as an equity settled instrument:
The Second Calculation Period automatically began on 25 June
2020 with the renewal subsequently approved by Zegona's
shareholders on 30 June 2021.
Under IFRS 2 Share Based Payment, the new Calculation Period
constituted a new share-based payment award for which the holders
of the Management Shares began to render services from June 25,
2020. However, because the renewal of the scheme required
shareholder approval, the grant date of the award could not be
until 30 June 2021.
The fair value of the award was therefore estimated at each
balance sheet date, and an expense recognised from the date that
holders begin to render services. This estimate was then
recalculated and adjusted at each balance sheet date prior to the
grant date (30 June 2021), and finally at the grant date. Zegona
applied this treatment up to 24 May 2021, recording EUR0.8 million
of share-based payment expense in 2020 and further EUR0.8 million
in 2021, with a cumulative EUR1.6 million recognised in the
Share-based payment reserve.
On 24 May 2021, Zegona concluded that the Management Shares no
longer qualified as an equity settled instrument.
Accounting as a cash settled instrument:
Zegona Limited's Articles of Association (the "Limited
Articles") allows the Management Shares to be redeemed within three
years of the beginning of a Calculation Period if certain criteria
("Takeover Provisions") are met. One of these Takeover Provisions
is if Zegona sells all, or substantially all, of its assets and
distributes the net proceeds (the "Substantial Sale and Return
Provision"). If any of these Takeover Provisions are met, then any
redemption must be in cash.
The announcement on 24 May 2021 that Zegona intended to return
GBP335 million to shareholders, (see note 12), meant that the
Substantial Sale and Return provision was expected to be met and a
cash payment of GBP25.7 million would be due to holders of the
Management Shares, provided the Capital Return was completed
successfully.
Consequently, Zegona concluded that from 24 May 2021, the
Management Incentive Scheme no longer met the criteria to be
recognised as an equity settled transaction under IFRS 2 and must
be accounted for as a cash settled transaction.
On 24 May 2021 Zegona therefore reclassified the EUR1.6 million
of cumulative share-based payment expense that it had recognised in
the share-based payment reserve as a liability instrument.
At the same time, an incremental liability was recorded that was
eventually equal to the GBP25.7 million (EUR30.3 million on the
transaction date) actually paid on 14 October 2021.
A Management Incentive Scheme cost of EUR29 million for 2021 was
recognised in the Consolidated Statement of Comprehensive Income in
respect of the Second Calculation Period, being equal to the
liability recorded in excess of the amount reclassified from the
Share based payment reserve plus the EUR0.8 million recognised in
2021 prior to the instrument being reclassified as a cash settled
instrument.
The Third Calculation Period
The Third Calculation Period automatically began on 14 October
2021, with the Baseline Value Per Share for the new Calculation
Period being GBP1.51 per share, which was equal to volume weighted
average mid-market price of Zegona shares for the previous 30
trading days. During the Third Calculation Period, the Management
Shares may be redeemed between 14 October 2024 and 14 October 2026.
All other terms remain the same as for the other Calculation
Periods and the renewal of the scheme was subject to a shareholder
vote at Zegona's 2022 AGM which passed with 98.03% of votes in
favour.
Similar to the Second Calculation Period, this constituted a new
award with services rendered from 14 October 2021, however the
grant date of the award under IFRS 2 could not be until
shareholders ratified the renewal of the scheme at Zegona's 2022
AGM. Between 14 October 2021 and 28 June 2022 therefore, Zegona
estimated the fair value of the award at each balance sheet date
and recognised an expense reflecting the date that holders began to
render services. Accordingly, On 28 June 2022, Zegona engaged an
independent valuation specialist to estimate the fair value of the
award and has recorded an expense that is equal to the expense that
would have been recognised for the period from 14 October 2021 and
31 December 2022 using the revised fair value of the award and the
amount that was previously recognised in the financial statements
for the period 14 October 2021 and 31 December 2021.
The fair value of the award was GBP0.28 per Management Share and
was calculated using a Monte Carlo model. The fair value uses a
volatility of 18% and an expected term of three years. The
Incentive Shares are subject to the Preferred Return being
achieved, which is a market performance condition, and as such has
been taken into consideration in determining their fair value. A
risk-free rate of 1% has been applied, based on the implied yield
available at the measurement date on the zero-coupon government
issues with a remaining term equal to the expected term of the
Awards. The model incorporates a range of probabilities for the
likelihood of a successful acquisition being made of a given size
in a range of GBP0.5 billion - GBP1.5 billion and includes a number
of discounts of 90% in aggregate to reflect the risks inherent in
the instrument such as the competition for assets and the need to
raise capital within a short timeframe.
During 2022, one member of the management team retired and on 1
April 2022 the company repurchased and cancelled 28,981 shares for
consideration of GBP1 in aggregate. EUR1.7 thousand of expense that
had been recognised in respect of the period between 14 October
2021 and 1 April 2022 was reversed.
On 13 June 2022, 28,981 shares were issued to a second member of
the management team in return for consideration of GBP10 thousand.
The value of these awards and the assumptions used in the Monte
Carlo model used to value them were the same as for the other
awards valued on 30 June 2022. No expense in respect of these
shares has been recognised because the consideration paid was in
excess of the fair value.
For the period to 31 December 2022 a total expense of EUR34
thousand was recognised (2021: EUR31 thousand), with a
corresponding amount recognised in the Share based payment
reserve.
Zegona expects that any amounts due under the third calculation
period will be settled in equity, therefore has concluded that the
Management Shares are equity settled instruments [22] .
18. 2021 RETURN OF CAPITAL AND RELATED TRANSACTIONS
On 24 May 2021, Zegona announced its intention to return GBP335
million to its shareholders in cash via a capital return once it
had received the proceeds from the disposal of Euskaltel, and that
its management team would re-invest a portion of the proceeds from
the exercise of the Management Shares into newly issued Zegona
shares.
The first portion of this capital return was delivered on 23
July 2021 when Zegona paid a GBP5.7 million (EUR6.7 million)
dividend. The rest of the commitment was delivered by:
Tender Offer
On 13 August 2021, Zegona announced a Return of Capital of up to
GBP329.3 million to shareholders by way of a tender offer (the
"tender offer") at a price of GBP1.535 per share. On 14 October
2021, Zegona successfully repurchased and cancelled 214,532,103
shares under the tender offer, returning the full balance of the
GBP335 million, being GBP329.3 million, on 14 October 2021.
Reduction of share premium account
In order to complete a share buyback of at least GBP329.3
million, the Company needed to have distributable reserves of at
least that amount and in order to achieve this, on 8 September the
Company reduced its share premium account from GBP95,339,759 to
GBP100,000 (the "Capital Reduction") following approval by
Shareholders and confirmation by the High Court. Upon the reduction
of the share premium account, the balance was transferred to the
Other reserve, which forms part of the distributable reserves of
the Company.
Management Subscription
The Zegona management team committed to re-invest up to GBP4.0
million of the proceeds of the exercise of the Management Shares
back into Zegona by subscribing for new shares. The subscription
price was agreed as the adjusted net asset value per share of
Zegona immediately prior to completion of the subscriptions. To the
extent that the aggregate number of shares to be subscribed for
would exceed 28.1% of the issued share capital of the Company
immediately following the subscription, the subscriptions were to
be scaled back pro rata. The subscriptions were also conditional on
the admission to trading ("Admission") of these shares by the
Financial Conduct Authority ("FCA") and Zegona had been advised
that the company should not be required to issue a prospectus for
Admission. The subscriptions were approved by Zegona's shareholders
at a General Meeting of the Company on 30 June 2021.
Following the completion of the tender offer, the subscription
price was confirmed as GBP1.438 per share, meaning the management
team were able to subscribe for 1,734,451 shares which would have
been 28.1% of the Company immediately following the subscription.
The aggregate total investment would have been GBP2.5 million,
which was paid by the management team on 14 October 2021.
Upon applying for Admission of the new shares, Zegona was
informed that Admission was limited to a maximum of 20% of its
shares in issue immediately following its tender offer without
publishing a prospectus. Zegona, together with Eamonn O'Hare and
Robert Samuelson (the affected members of the management team),
elected to issue and Admit 887,594 shares on 27 October 2021 [23]
with the remaining 846,857 shares to be issued once they could be
lawfully Admitted. Zegona entered into a revised Subscription
Agreement ("Subscription Agreement (as Amended)") with Eamonn
O'Hare and Robert Samuelson that confirmed they were both committed
to complete the subscription for the agreed number of shares at the
agreed price under any circumstances.
During 2021 Zegona concluded that the Subscription Agreement (as
Amended) is an equity instrument as it is defined in IAS 32
Financial Instruments: Presentation on the basis that (a) there is
no contractual obligation to deliver cash or another financial
asset to another party (b) there is no obligation to exchange
financial assets or liabilities with another party and (c) the
agreement is a non-derivative and obliges Zegona to deliver a fixed
number of shares.
The value of shares to be issued (being the cash paid) was
therefore recognised within a new reserve, Shares to be issued. On
9 November 2022, the remaining 846,857 shares were issued and
Admitted to trading on 16 November 2022 as the restrictions
preventing their Admission had expired. The balance on the Shares
to be issued reserve was therefore reduced to zero.
19. CALLED UP SHARE CAPITAL
2022 2022 2021 2021
Allotted, called up and
fully paid Number EUR000 Number EUR000
At 1 January 5,325,567 301 218,970,076 2,821
Shares issued 846,857 10 887,594 11
Shares repurchased and
cancelled - - ( 214,532,103) (2,531)
----------- -------- --------------- --------
At 31 December 6,172,424 311 5,325,567 301
=========== ======== =============== ========
The nominal value of the total ordinary shares is GBP0.01 and
the total allotted, called up and fully paid equates to GBP61,724
(2021: GBP53,256).
During 2022, 846,857 shares were issued to members of the
management team as described in note 18.
During 2021 the Company repurchased 214,532,103 ordinary shares
at a price of GBP1.535 per share by way of a tender offer which
completed on 14 October 2021. Subsequently, on 27 October 2021,
members of the management team subscribed for 887,594 ordinary
shares at a price of GBP1.438 per share
All ordinary shares confer identical rights including in respect
of capital, dividends and voting. There are no restrictions on the
distributions of dividends or the repayment of capital
20. RESERVES
Distributable reserves
Retained earnings
The retained earnings reserve includes cumulative net profits.
This is typically a distributable reserve.
Other reserve
The Other reserve is a distributable reserve which is comprised
of transfers from the Share premium reserve in 2016 and 2021
following court approved reductions of capital (see note 18) , net
of all historical dividends paid and the total costs of buying back
shares (the nominal value of the shares and any premium paid),
which are charged against distributable reserves.
During 2021 the full amount then outstanding in the Other
reserve was utilised to fund the tender offer (see note 18).
Total distributable reserves
While the Other reserve continues to be distributable, its
balance is zero, therefore the Company's total distributable
reserves are now solely the Retained earnings reserve. At 31
December 2022 the Company's Retained earnings reserve in Sterling
(Zegona's functional currency) was negative GBP37 thousand.
Distributable reserves at 31 December 2021 were GBP3.5 million.
A balance of EUR61.3 million remained in this reserve on
translation to Euro (Zegona's presentational currency) with an
offsetting amount in the foreign currency translation reserve. This
is because, in accordance with IAS 21 The Effects of Changes in
Foreign Exchange Rates, equity items are translated each period at
their historical exchange rates and not subsequently retranslated
and the remaining balance reflects the difference between the Euro
value of all previous amounts recorded in all distributable
reserves and the Euro value of the amount debited to the Retained
earnings reserve to fund the tender offer.
Non - distributable reserves
Share-based payment reserve
The share-based payment reserve is a non-distributable reserve
that represents the cumulative build-up of the Management Incentive
Scheme costs over the vesting period as the employees gradually
render service while the Management Incentive Scheme is considered
to be an equity settled instrument.
The current balance of the reserve reflects the amortisation of
a portion of the fair value of the third Calculation Period as
discussed in Note 17.
Foreign currency translation reserve
The foreign currency translation reserve is a non-distributable
reserve that includes the foreign exchange differences arising from
the translation of the Consolidated Financial Statements functional
currency of Sterling ("GBP") to presentational currency euro
("EUR"). The movement in this reserve for the period is driven
primarily by the movement in the closing EUR:GBP exchange rates
from 1.19 at 31 December 2021 to 1.13 at 31 December 2022.
Following the disposal of Euskaltel, an amount remained in the
foreign currency translation reserve as a result of the translation
from its functional currency to the group functional currency which
will never be recycled because it does not represent the disposal
of a foreign operation. Accordingly, in the year EUR61.9 million
has been transferred to the Company's retained earnings
reserve.
Capital redemption reserve
The capital redemption reserve is a requirement under s692 of
the Companies Act 2006 to preserve the Company's capital and is a
non-distributable reserve. When the Company buys back shares out of
profits and those shares are immediately cancelled, the amount by
which the Company's issued share capital is reduced must be
transferred to the capital redemption reserve.
During 2022, there were no transactions impacting the Capital
Redemption Reserve. During 2021, GBP2.1 million (EUR2.5 million at
the rate prevailing at the transaction date) has been transferred
to the capital redemption reserve which represents the nominal
value of the 214,532,103 shares repurchased in the tender offer
(see note 18).
Share premium reserve
The share premium reserve is a requirement under s610 of the
Companies Act 2006 and is a non-distributable reserve. The reserve
comprises amounts subscribed for share capital in excess of nominal
value less costs directly attributable to the issue of new
shares.
During 2022, the share premium reserve was increased by EUR1,443
to reflect the issuance of the 846,857 shares to Eamonn O'Hare and
Robert Samuelson that were intended to be issued in 2021 (see note
18).
During 2021, the share premium account of the Company was
reduced to GBP100,000 (EUR114.1 thousand) with GBP95.239 million
(EUR108.7 million) being transferred to the Other reserve (see note
18). This was offset by GBP1.2 million, being the proceeds received
in excess of the nominal value of the 887,594 shares subscribed for
by Eamonn O'Hare and Robert Samuelson on 27 October 2021 (see note
18).
Shares to be issued
The Shares to be issued reserve is a non-distributable reserve
that relates solely to the GBP1.2 million (EUR1.4 million) of cash
received from Robert Samuelson and Eamonn O'Hare in October 2021 to
subscribe for shares which were not admitted in 2021. As discussed
in note 18, these shares were issued on 9 November 2022 and the
balance on the reserve was reduced to zero.
21. CAPITAL MANAGEMENT
Our objective when managing capital is to maintain a flexible
capital structure that optimises the costs and availability of
capital at acceptable risk with the primary objective of maximising
shareholder value. In the management of capital and its definition,
we include share capital and all equity reserves attributable to
the equity holders of the Company.
Zegona manages its capital structure and makes adjustments in
light of changes in economic conditions and the requirements of any
covenants. To maintain or adjust the capital structure, Zegona may
adjust the dividend payment to shareholders, return capital to
shareholders, make distributions of non-cash assets to shareholders
or issue new shares.
The Company currently has authorisation to make market purchases
of up to 798,302 ordinary shares (within specified price
parameters) which was 15% of the issued ordinary share capital at
the date of issuance of its 2021 Annual Report. This authorisation
will continue until the end of the 2023 AGM. Any shares repurchased
by the Company pursuant to this authority may be held in treasury
and subsequently resold for cash, cancelled or used for employee
share scheme purposes.
Throughout 2021, Zegona met the financial covenants associated
to the facilities described in note 18 which were repaid on 13
August 2021 .
22. EARNINGS PER ORDINARY SHARE
Basic EPS is calculated by dividing the profit attributable to
ordinary shareholders of the Company by the weighted average number
of ordinary shares in issue during the year.
Diluted EPS is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all
potentially dilutive ordinary shares. As more fully detailed in
note 17, Management Shares in the share capital of Zegona Limited
have been issued and, on exercise, the value of these shares is
expected to be delivered by the Company issuing new ordinary
shares. Hence, the Management Shares could have a dilutive effect,
although the Company has the right at all times to settle such
value in cash. No adjustment to EPS has been made in respect of the
Management Shares as, (a) they were anti-dilutive for the years
ended 31 December 2022 and 2021 and (b) the result from Continuing
Operations in 2021 was a loss.
2022 2021
Loss for the year attributable to equity
holders of the parent
- Total Operations (EUR000) (3,313) 79,913
Loss for the year attributable to equity
holders of the parent
- Continuing Operations (EUR000) (3,313) (34,258)
Profit for the year attributable to equity
holders of the parent
- Discontinued Operations (EUR000) - 114,171
Weighted average number of ordinary shares 5,446,215 168,580,851
Basic and diluted EPS - Total Operations
(EUR) (0.61) 0.47
Basic and diluted EPS - Continuing Operations
(EUR) (0.61) (0.22)
Basic and diluted EPS - Discontinued Operations
(EUR) - 0.68
23. DIVIDS PAID
No dividends were declared or paid in 2022.
In the comparative period, the Company declared a first interim
dividend on 21 December 2020 at a rate of 2.2p per share, totalling
GBP4.8 million (EUR5.6 million). The dividend was paid on 9 March
2021. The Company also declared a second interim dividend on 21
June 2021 at a rate of 2.6p per share, totalling GBP5.7 million
(EUR6.7 million). The dividend was paid on 23 July 2021.
24. RELATED PARTY TRANSACTIONS
In the opinion of the Directors, there is no one single
controlling party, nor any transactions with related parties for
the years ended 31 December 2022 or 2021. Parties are considered to
be related if one party has the ability to control the other party
or exercise significant influence over the other party, or the
parties are under common control or influence, in making financial
or operational decisions.
Transactions with key management personnel
The Board considers the Executive Directors and Non-Executive
Directors of the Company to be the key management personnel of
Zegona. Details of the amounts paid to key management personnel are
detailed in the Directors' Remuneration Report on pages 31 and 35.
Holdings of Management Shares and subscriptions for shares by
management are detailed in note 17.
25. AUDITOR'S REMUNERATION
2022 2021
EUR000 EUR000
Fees for the audit of the Company's annual
accounts 129 200
Total audit fees 129 200
====== ======
Fees for procedures on interim financial
statements - 15
Agreed upon procedures - 29
Total non-audit fees - 44
====== ======
26. POST BALANCE SHEET EVENTS
There have been no material post balance sheet events that would
require disclosure or adjustment to these financial statements.
OTHER INFORMATION |NOTICE OF ANNUAL GENERAL MEETING
NOTICE is hereby given that the Annual General Meeting (the
"AGM") of Zegona Communications plc (the "Company") will be held at
the offices of Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL on
20 June 2023 at 10:30 a.m. for the transaction of the following
business:
To consider and, if thought fit, to pass the following
resolutions, numbers 1 to 11 of which will be proposed as ordinary
resolutions and numbers 12 to 15 of which will be proposed as
special resolutions:
1. THAT the Company's financial statements for the year ended 31
December 2022, together with the Directors' report and the
auditor's report on those financial statements and on the auditable
part of the Directors' remuneration report, be received.
2. THAT Eamonn O'Hare be re-elected as a Director.
3. THAT Robert Samuelson be re-elected as a Director.
4. THAT Richard Williams be re-elected as a Director.
5. THAT Ashley Martin be re-elected as a Director.
6. THAT Kjersti Wiklund be re-elected as a Director.
7. THAT Suzi Williams be re-elected as a Director.
8. THAT KPMG LLP be re-appointed as auditor to the Company until
the conclusion of the next annual general meeting of the
Company.
9. THAT the Directors be authorised to fix the auditor's remuneration.
10. THAT the Directors' remuneration report, which is set out in
pages 31 to 38 of the annual report of the Company for the year
ended 31 December 2022, be approved.
11. THAT for the purposes of section 551 Companies Act 2006 (the
"Act") (and so that expressions used in this resolution shall bear
the same meanings as in the said section 551), the Directors be and
are generally and unconditionally authorised to exercise all powers
of the Company to allot:
11.1 shares and to grant such subscription and conversion rights
as are contemplated by sections 551(1)(a) and (b) of the Act
respectively up to a maximum nominal amount of GBP22,574 to such
persons and at such times and on such terms as they think proper;
and further
11.2 equity securities (as defined in section 560 of the Act) in
connection with a rights issue in favour of the holders of equity
securities and any other persons entitled to participate in such
issue where the equity securities respectively attributable to the
interests of such holders and persons are proportionate (as nearly
as may be) to the respective number of equity securities held by
them up to a maximum nominal amount of GBP22,574 ,
subject only to such exclusions or other arrangements as the
Directors may consider necessary or expedient to deal with treasury
shares, fractional entitlements or legal or practical problems
under the laws of any territory or requirements of any recognised
regulatory body or stock exchange in any territory, provided that
such authority shall expire at the conclusion of the next annual
general meeting of the Company or the date which is 18 months after
the date on which this resolution is passed, whichever is the
earlier, save that the Company be and is hereby authorised to make,
prior to the expiry of such periods, any offer or agreement which
would or might require such shares or rights to be allotted or
granted after the expiry of the said periods and the Directors may
allot such shares or grant such rights under any such offer or
agreement as if the authority had not expired.
12. THAT if resolution 11 set out in the Notice convening this
Meeting is passed, the Directors be and are hereby authorised to
allot equity securities (as defined in section 560 of the Act) for
cash under the authority given by that resolution and/or to sell
ordinary shares held by the Company as treasury shares for cash as
if section 561 of the Act did not apply to any such allotment or
sale, such authority to be limited to:
12.1 the allotment of equity securities in connection with an
issue or offering in favour of holders of equity securities (but in
the case of an allotment pursuant to the authority granted under
resolution 11.2, such power shall be limited to the allotment of
equity securities by way of a rights issue only) and any other
persons entitled to participate in such issue or offering where the
equity securities respectively attributable to the interests of
such holders and persons are proportionate (as nearly as may be) to
the respective number of equity securities held by or deemed to be
held by them on the record date of such allotment, subject only to
such exclusions or other arrangements as the Directors may consider
necessary or expedient to deal with treasury shares, fractional
entitlements or legal or practical problems under the laws of any
territory or requirements of any recognised regulatory body or
stock exchange in any territory; and
12.2 the allotment (otherwise than pursuant to paragraph 12.1
above) of equity securities up to a nominal amount of GBP6,172,
such authority, unless renewed, to expire at the conclusion of
the next annual general meeting of the Company or the date which is
18 months after the date on which this resolution is passed,
whichever is the earlier, but in each case, prior to its expiry the
Company may make offers, and enter into agreements, which would, or
might, require equity securities to be allotted (and treasury
shares to be sold) after the authority expires and the Directors
may allot equity securities (and sell treasury shares) under any
such offer or agreement as if the authority had not expired.
13. THAT if resolution 11 set out in the Notice convening this
Meeting is passed, the Directors be and are hereby authorised in
addition to any authority granted under resolution 11 to allot
equity securities (as defined in section 560 of the Act) for cash
under the authority given by that resolution and/or to sell
ordinary shares held by the Company as treasury shares for cash as
if section 561 of the Companies Act 2006 did not apply to any such
allotment or sale, such authority to be:
13.1 limited to the allotment of equity securities or sale of
treasury shares up to a nominal amount of GBP6,172; and
13.2 used only for the purposes of financing (or refinancing, if
the authority is to be used within six months after the original
transaction) a transaction which the Board of the Company
determines to be an acquisition or other capital investment of a
kind contemplated by the Statement of Principles on Disapplying
Pre-Emption Rights most recently published by the Pre-Emption Group
prior to the date of this notice;
such authority, unless renewed, to expire at the conclusion of
the next annual general meeting of the Company or the date which is
18 months after the date on which this resolution is passed,
whichever is the earlier, but in each case, prior to its expiry the
Company may make offers, and enter into agreements, which would, or
might, require equity securities to be allotted (and treasury
shares to be sold) after the authority expires and the Directors
may allot equity securities (and sell treasury shares) under any
such offer or agreement as if the authority had not expired.
14. THAT the Company be and is hereby generally and
unconditionally authorised for the purpose of section 701 Companies
Act 2006 to make market purchases (as defined in section 693 of the
said Act) of ordinary shares of GBP0.01 each in the capital of the
Company ("ordinary shares") provided that:
14.1 the maximum number of ordinary shares hereby authorised to
be purchased is 925,864, being equal to 14.99 per cent. of the
issued ordinary shares;
14.2 the minimum price (exclusive of expenses) which may be paid
for such ordinary shares is GBP0.01 per share, being the nominal
amount thereof;
14.3 the maximum price (exclusive of expenses) which may be paid
for such ordinary shares shall be an amount equal to the higher of
(i) 5% above the average of the middle market quotations for such
shares taken from The London Stock Exchange Daily Official List for
the five business days immediately preceding the day on which the
purchase is made and (ii) the higher of the price of the last
independent trade of an ordinary share and the highest current
independent bid for an ordinary share as derived from the London
Stock Exchange Trading System (SETS);
14.4 the authority hereby conferred shall (unless previously
renewed or revoked) expire on the earlier of the end of the next
annual general meeting of the Company and the date which is 18
months after the date on which this resolution is passed; and
14.5 the Company may make a contract to purchase its own
ordinary shares under the authority conferred by this resolution
prior to the expiry of such authority, and such contract will or
may be executed wholly or partly after the expiry of such
authority, and the Company may make a purchase of its own ordinary
shares in pursuance of any such contract.
15. THAT the Company be and is hereby authorised to provide
notice to shareholders of general meetings of the Company of at
least 14 clear days' notice.
BY ORDER OF THE BOARD
Secretary: Crestbridge Corporate Services Ltd
Date: 6 April 2023
Registered Office: 47 Esplanade, St Helier, Jersey, JE1 0BD
Notes:
(i) A member entitled to attend and vote at the Meeting convened
by the above Notice is entitled to appoint a proxy to exercise all
or any of the rights of the member to attend and speak and vote on
his behalf. A proxy need not be a member of the Company. A member
may appoint more than one proxy in relation to the Meeting,
provided that each proxy is appointed to exercise the rights
attached to a different share or shares held by that member. The
right to appoint a proxy does not apply to any person to whom this
notice is sent who is a person nominated under section 146 of the
Companies Act 2006 (the "Act") to enjoy information rights (a
"Nominated Person").
(ii) To ap point a proxy, you may:
(a) Submit your proxy online at www.signalshares.com (the
"Website") by following the on-screen instructions, in particular
at the "Proxy Voting" link, by no later than 10:30am on Friday 16
June 2023. In order to appoint a proxy using the Website, members
will need to log into their Signal Shares account, or register if
they have not previously done so. To register members will need to
identify themselves with their Investor Code which is detailed on
their share certificate or available from our Registrar, Link
Group, on Tel: 0371 664 0300. Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. Lines
are open between 09:00 - 17:30, Monday to Friday excluding public
holidays in England and Wales.
(b) Link Group, the company's registrar, has launched a
shareholder app: LinkVote+. It's free to download and use and gives
shareholders the ability to access their shareholding record at any
time and allows users to submit a proxy appointment quickly and
easily online rather than through the post. The app is available to
download on both the Apple App Store and Google Play, or by
scanning the relevant QR code below.
Apple App Store GooglePlay
(c) If you are an institutional investor you may also be able to
appoint a proxy electronically via the Proxymity platform, a
process which has been agreed by the Company and approved by the
Registrar. For further information regarding Proxymity, please go
to www.proxymity.io. Your proxy must be lodged by 10:30am on 16
June 2023 in order to be considered valid or, if the meeting is
adjourned, by the time which is 48 hours before the time of the
adjourned meeting. Before you can appoint a proxy via this process
you will need to have agreed to Proxymity's associated terms and
conditions. It is important that you read these carefully as you
will be bound by them and they will govern the electronic
appointment of your proxy. An electronic proxy appointment via the
Proxymity platform may be revoked completely by sending an
authenticated message via the platform instructing the removal of
your proxy vote.
(d) You may request a hard copy form of proxy directly from our
Registrar, Link Group, on Tel: 0371 664 0300 or by emailing
shareholderenquiries@linkgroup.co.uk . Calls are charged at the
standard geographic rate and will vary by provider. Calls outside
the United Kingdom will be charged at the applicable international
rate. Lines are open between 09:00 - 17:30, Monday to Friday
excluding public holidays in England and Wales.
To be effective the completed and signed form of proxy must be
lodged at the office to Link Group, PXS1 Central Square, 29
Wellington Street, Leeds, LS1 4DL (together with any power of
attorney or other authority under which it is signed or a
notarially certified copy of such power or authority) by no later
than 10:30am on Friday 16 June 2023.
Please indicate in the appropriate box how you wish your votes
to be cast. In the absence of any specific direction, the proxy
will vote (or abstain from voting) at his or her discretion. On any
other business which properly comes before the Annual General
Meeting (including any motion to amend any resolution or to adjourn
the Meeting) the proxy will vote or abstain at his or her
discretion.
(e) if you hold your shares in uncertificated form, use the
CREST electronic proxy appointment service as described in the
CREST manual or in the Explanatory Notes to the resolutions set out
below.
(iii) Completion of the Form of Proxy or appointment of a proxy
through CREST will not prevent a member from attending and voting
in person if he/she wishes to do so.
(iv) Any corporation which is a shareholder in the Company may
appoint one or more corporate representatives who may exercise on
its behalf all of that corporation's powers as a shareholder of the
Company provided that, where there is more than one corporate
representative appointed, they do not attempt to exercise the
corporation's rights in respect of the same shares.
(v) Any member or his corporate representative or proxy
attending the Meeting has the right to ask any question at the
Meeting relating to the business of the Meeting.
(vi) Pursuant to section 360B of the Act and Regulation 41 of
the Uncertificated Securities Regulations 2001 (as amended), only
shareholders registered in the register of members of the Company
as at close of business on Friday 16 June 2023 shall be entitled to
attend and vote at the AGM in respect of the number of shares
registered in their name at such time. If the Meeting is adjourned,
the time by which a person must be entered on the register of
members of the Company in order to have the right to attend and
vote at the adjourned Meeting is close of business, 48 hours before
the time fixed for the adjourned Meeting. Changes to the register
of members after the relevant times shall be disregarded in
determining the rights of any person to attend and vote at the
Meeting.
(vii) In the case of joint holders, the vote of the senior
holder who tenders a vote whether in person or by proxy shall be
accepted to the exclusion of the votes of the other joint holders
and, for this purpose, seniority shall be determined by the order
in which the names stand in the register of members of the Company
in respect of the relevant joint holding.
(viii) From the date of this notice, copies of the terms and conditions of appointment of the Non-Executive Directors and the service contracts of the Zegona Chairman and Executive Directors are available for inspection at the registered office of the Company, 8 Sackville Street, Mayfair, London, W1S 3DG, during usual business hours on any weekday (Saturdays, Sundays and public holidays excluded) until the conclusion of the AGM and will be available for inspection at the place of the AGM for at least 15 minutes prior to and during the Meeting.
(ix) Save as set out in these notes, members who have general
queries relating to the AGM should contact Link Group on 0371 664
0300. Calls are charged at the standard geographic rate and will
vary by provider. Calls outside the United Kingdom will be charged
at the applicable international rate. Lines are open between 09:00
- 17:30, Monday to Friday excluding public holidays in England and
Wales. Please note that you may not use any electronic address or
other contact details provided in this notice of AGM, or any
related documents (including the Chairman's letter and Form of
Proxy), for any purpose other than those expressly stated.
(x) As at 6 April 2023 (being the last business day prior to the
publication of this notice) the Company's issued share capital
consists of 6,172,424 ordinary shares, carrying one vote each.
Therefore, the total voting rights in the Company as at 6 April
2023 are 6,172,424.
(xi) The information required to be published by section 311A of
the Act (information about the contents of this notice and numbers
of shares in the Company and voting rights exercisable at the AGM
and details of any members' statements, members' resolutions and
members' items of business received after the date of this notice)
may be found at www.zegona.com . Sub ject to the limitations of the
resolution approved at the AGM of the Company on 15 April 2016, the
Company does not intend to post or email hard copies of shareholder
related documents, such as this Report and Notice of Annual General
Meeting, to shareholders. All documents will be made available on
the Company's website, www.zegona.com .
(xii) A Nominated Person may under an agreement between him/her
and the member who nominated him/ her, have a right to be appointed
(or to have someone else appointed) as a proxy entitled to attend
and speak and vote at the Meeting. Nominated Persons are advised to
contact the member who nominated them for further information on
this and the procedure for appointing any such proxy.
(xiii) Submission of a Proxy vote shall not preclude a member
from attending and voting in person at the meeting in respect of
which the proxy is appointed or at any adjournment thereof.
(xiv) Unless otherwise indicated on the Form of Proxy, CREST,
Proxymity or any other electronic voting instruction, the proxy
will vote as they think fit or, at their discretion or withhold
from voting.
OTHER INFORMATION |EXPLANATORY NOTES TO THE RESOLUTIONS
The purpose of these notes is to explain the resolutions and
business to be conducted at the Company's AGM. Resolutions 1 to 13
set out in the Notice detail the ordinary resolutions and
resolutions and 15 to 18 detail the special resolutions. Further
explanation in relation to the resolutions is set out below.
Resolution 1 - To approve the Annual Report and Financial
Statements
Resolution 1 proposes the receipt and adoption of the Annual
Report, which includes the Financial Statements of the Company for
the year ended 31 December 2022, together with the Directors'
report and auditor's report on those Financial Statements.
The Company's Annual Report, including the Financial Statements
for the year ended 31 December 2022, is available on the Company's
website, www.zegona.com . The Annual Report was prepared in
compliance with the requirements of the Act and the requirements of
the Listing Rules of the Financial Conduct Authority that would
apply if the Company was listed on the Premium segment of the
Official List as at the date of their approval by the Board.
Resolutions 2 to 7 - Election of Directors
Resolutions 2 to 7 deal with the re-election of each Director of
the Company that, subject to the Articles of Association of the
Company (the "Articles"), is required to retire at every annual
general meeting of the Company. All Directors on the Board will
retire at the AGM for this reason. Each of such Directors is
offering himself for re-election and resolutions 2 to 7 propose the
re-election of such Directors. Biographies of each of the Directors
retiring in accordance with the Articles are set out on pages 17
and 18 of the Annual Report. Suzi Williams is the chair of the
Nomination and Remuneration Committee. Ashley Martin is the chair
of the Audit and Risk Committee and, if re-elected, will continue
in this role.
The Chairman has confirmed that, following a performance review
in line with the UK Corporate Governance Code, all of the Directors
continue to perform effectively and contributed positively to the
Board meetings that they attended during 2022 as set out on page 19
of the Annual Report and subsequently to the date of this
notice.
Resolutions 8 and 9 - Re-appointment and remuneration of
auditor
The appointment of KPMG LLP as auditor of the Company, which
started on 18 November 2016, terminates at the conclusion of the
AGM. KPMG LLP has indicated its willingness to stand for
re-appointment as auditor of the Company until the conclusion of
the annual general meeting to be held in 2023. The Directors, as
well as the Audit and Risk Committee, recommend that KPMG LLP be
re-appointed and that its remuneration be fixed.
Resolution 10 - Directors' remuneration report
In accordance with the requirements under the Act, shareholders
are being asked to approve the Directors' remuneration report set
out on pages 31 to 38 of the Annual Report. The actual remuneration
paid to Directors in 2022 was made within the boundaries of the
Directors' remuneration policy approved by shareholders at the 2022
Annual General Meeting.
Resolution 11 - Directors' authority to allot shares
The existing power granted to the Directors to allot ordinary
shares expires at the conclusion of the AGM. Accordingly,
resolution 11 is proposed to renew the Directors' authority to
allot ordinary shares of up to a maximum nominal amount of (i)
GBP22,574 (being one-third of the Company's issued ordinary share
capital as at 6 April 2023) to such persons and upon such
conditions as the Directors may determine; and (ii) a further
maximum aggregate nominal amount of GBP22,574 (being one-third of
the Company's issued ordinary share capital as at 6 April 2023) in
connection with a rights issue (as defined in resolution 12 of the
Notice), 6 April 2023, being the latest practicable date before the
publication of this notice.
This request for authority to allot shares up to a maximum of
two-thirds of the Company's issued ordinary share capital is in
line with the guidelines published by the Investment
Association.
The authorities sought under resolution 11 will expire on the
earlier of (i) the end of the next annual general meeting of the
Company and (ii) the date which is eighteen months after the date
on which this resolution is passed. The resolution replaces a
similar resolution passed at the Annual General Meeting of the
Company held on 28 June 2022. The Directors have no present
intention of exercising such authority. However, the Directors
consider it important to have the maximum ability and flexibility
commensurate with good corporate governance guidelines to raise
finance to enable the Company to respond to market developments and
conditions. No shares are currently held by the Company in
treasury.
Resolutions 12 and 13 - Disapplication of pre-emption rights
The Act requires that shares or other equity securities allotted
for cash are offered first to existing shareholders in proportion
to their existing holdings. The passing of resolutions 12 and 13
would allow the Directors to allot shares (or sell any shares which
the Company may hold in treasury following a purchase of its own
shares) without first offering the securities to existing
shareholders.
Accordingly, resolution 12 allows the Directors to allot shares
and sell treasury shares for cash (i) in connection with a
pre-emptive offer or pre-emptive rights issue and/or (ii) otherwise
up to a nominal value of GBP6,172, equivalent to 10 per cent. of
the total issued ordinary share capital of the Company (excluding
treasury shares) as at April 2023, being the latest practicable
date prior to the date of publication of this notice, without first
having to offer them to existing shareholders in proportion to
their holdings.
The Pre-Emption Group's Statement of Principles also supports
the annual disapplication of pre-emption rights in respect of
allotments of shares and sales of treasury shares for cash
representing no more than an additional 10 per cent. of issued
ordinary share capital (exclusive of treasury shares), to be used
only in connection with an acquisition or specified capital
investment. The Pre-Emption Group's Statement of Principles defines
"specified capital investment" as meaning one or more specific
capital investment related uses for the proceeds of an issue of
equity securities, in respect of which sufficient information
regarding the effect of the transaction on the Company, the assets
the subject of the transaction and (where appropriate) the profits
attributable to them is made available to shareholders to enable
them to reach an assessment of the potential return.
Accordingly, resolution 13 authorises the Directors to allot new
shares pursuant to the allotment authority given by resolution 11,
or sell treasury shares, for cash up to a further nominal amount of
GBP6,172, being an additional 10 per cent. of the entire issued
share capital of the Company as at 3 April 2023, only in connection
with an acquisition or specified capital investment which is
announced contemporaneously with the allotment, or which has taken
place in the preceding six-month period and is disclosed in the
announcement of the allotment. If the authority given in resolution
13 is used, the Company will publish details of the allotment in
its next annual report.
The authorities will expire on the earlier of: (i) the end of
the next annual general meeting of the Company; and (ii) the date
which is 18 months after the date on which this resolution is
passed. This resolution replaces a similar resolution passed at the
Annual General Meeting of the Company held on 28 June 2022.
Resolution 14 - Purchases of own shares by the Company
This resolution seeks authority from shareholders for the
Company to make market purchases of its own ordinary shares,
limited to the purchase of 14.99 per cent. of the ordinary shares
in issue as at 6 April 2023.
The maximum and minimum prices payable are also limited in the
resolution. The authority will only be exercised if the Directors
consider that there is likely to be a beneficial impact on earnings
per ordinary share and that it is in the best interests of the
Company at the time. The Company will be able to hold the ordinary
shares which have been repurchased as treasury shares and re-sell
them for cash, cancel them or use them for the purposes of any
employee share schemes. No options to subscribe for ordinary shares
have been granted and are outstanding as at 6 April 2023, although
shares issued in the Company's Management Incentive Schemes may be
exchanged for ordinary shares in certain circumstances.
Resolution 15 - Reduction of notice period for general meetings
of the Company
This resolution seeks authority from shareholders for the
Company to call general meetings at 14 clear days' notice, as
opposed to 21 clear days' notice. While the Company's Articles
already provide that the Company can call any general meeting
(other than an annual general meeting) at 14 clear days' notice,
the Act requires that, in order to do so, the reduction from 21
days to 14 days must be approved by way of a special resolution of
the Company's shareholders. It is the Company's intention to
continue to call annual general meetings at 21 clear days'
notice.
Action to be taken
You are asked to either:
1. If you hold your shares in certificated form, unlike previous
years, and in order to reduce the Company's environmental impact,
you will not receive a hard copy form of proxy for the 2023 Annual
General Meeting in the post automatically. Instead, you will be
able to appoint a proxy electronically using the link
www.signalshares.com by no later than 10:30am on Friday 16 June
2023. Details of how to appoint a proxy in this way are set out on
page 84 of this document.
2. Link Group, the company's registrar, has launched a
shareholder app: LinkVote+. It's free to download and use and gives
shareholders the ability to access their shareholding record at any
time and allows users to submit a proxy appointment quickly and
easily online rather than through the post. The app is available to
download on both the Apple App Store and Google Play, or by
scanning the relevant QR code below.
Apple App Store GooglePlay
3. If you are an institutional investor you may also be able to
appoint a proxy electronically via the Proxymity platform, a
process which has been agreed by the Company and approved by the
Registrar. For further information regarding Proxymity, please go
to www.proxymity.io. Your proxy must be lodged by 10:30am on 16
June 2023 in order to be considered valid or, if the meeting is
adjourned, by the time which is 48 hours before the time of the
adjourned meeting. Before you can appoint a proxy via this process
you will need to have agreed to Proxymity's associated terms and
conditions. It is important that you read these carefully as you
will be bound by them and they will govern the electronic
appointment of your proxy. An electronic proxy appointment via the
Proxymity platform may be revoked completely by sending an
authenticated message via the platform instructing the removal of
your proxy vote.
4. if you hold your shares in uncertificated form, use the CREST
electronic proxy appointment service as described below.
Completion of the Form of Proxy or appointment of a proxy
through CREST does not prevent a member from attending and voting
in person.
Shares held in uncertificated form - electronic proxy
appointment through CREST
CREST members who wish to appoint a proxy or proxies by
utilising the CREST electronic proxy appointment service may do so
for the AGM and any adjournment(s) thereof by utilising the
procedures described in the CREST Manual. CREST personal members or
other CREST sponsored members, and those CREST members who have
appointed (a) voting service provider(s), should refer to their
CREST sponsor or voting service provider(s), who will be able to
take the appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be
valid, the appropriate CREST message (a "CREST Proxy Instruction")
must be properly authenticated in accordance with Euroclear UK
& International specifications and must contain the information
required for such instructions, as described in the CREST Manual
(www. euroclear.com). The message must be transmitted so as to be
received by the issuer's agent, Link Group (ID RA10), by 10:30 a.m.
on Friday 16 June 2023. For this purpose, the time of receipt will
be taken to be the time (as determined by the timestamp applied to
the message by the CREST Applications Host) from which the issuer's
agent is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST.
CREST members and, where applicable, their CREST sponsors or
voting service providers should note that Euroclear UK &
International does not make available special procedures in CREST
for any particular messages. Normal system timings and limitations
will therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal
member or sponsored member or has appointed (a) voting service
provider(s), to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where
applicable, their CREST sponsors or voting service providers are
referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and
timings.
The Company may treat as invalid a CREST Proxy Instruction in
the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001 (as amended).
OTHER INFORMATION |ADVISERS
Joint Corporate Brokers
J.P. Morgan Cazenove
25 Bank Street
London
E14 5JP
Telephone: +44 (0)22 7134 4000
Barclays Bank plc
5 The North Colonnade
Canary Wharf
London
E14 4BB
Telephone: +44 (0)22 3134 9801
Canaccord Genuity Limited
88 Wood Street
London, UK
EC2V 7QR
Telephone: +44 (0)22 7523 8000
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
Telephone: +44 (0)22 7311 1000
Registrar
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
Telephone: +44 (0)371 664 0391
Company Secretary
Crestbridge Corporate Services Ltd
47 Esplanade
St Helier
Jersey
JE1 0BD
Telephone: +44 (0)1534 835 600
Solicitors to the Company
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Telephone: +44 (0)22 7295 3000
Milbank, Tweed, Hadley & McCloy LLP
10 Gresham Street
London
EC2V 7JD
Telephone: +44 (0)22 7615 3000
[1] Zegona has also issued, posted, or made available to
shareholders, the Notice of Annual General Meeting and Form of
Proxy for the Annual General Meeting. These documents are also
available on the Zegona's website at www.zegona.com
[2] The financial information set out in this release does not
constitute the company's statutory accounts for the years ended 31
December 2022 or 2021. Statutory accounts for 2021 have been
delivered to the registrar of companies, and those for 2022 will be
delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) for the year end
2022 included reference to a matter to which the auditor drew
attention by way of emphasis without qualifying their report in
respect of a material uncertainty in respect of going concern
(2022), and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.
[3] Quad play: customers with four services (pay TV, fixed
voice, broadband and mobile).
[4] Business to Business.
[5] Those with holdings in 3% or more of the issued ordinary
shares of the Company are listed on page.
[6] O perating profit excluding depreciation of property, plant
and equipment and amortisation of intangible assets.
[7] Including Zegona management, directors and related
holdings.
[8]
https://www.zegona.com/investor-relations/shareholder-information.aspx.
[9] The A&RC's role and responsibilities are set out in its
terms of reference, which are available on Zegona's website and
from the Company Secretary.
[10] Return (a 5% per annum return on a compounded basis on
shareholders' net investment).
[11] The scheme will actually become exercisable either on 14
October 2024, or at the date that certain specific conditions such
as a takeover or a Board change of control occur as explained in
note 17 to the Consolidated Financial Statements. At the date of
this report, none of these conditions have occurred and the rights
under the incentive schemes are not exercisable.
[12] Calculated in accordance with Zegona Limited's Articles of
Association as the sum of Zegona Communications plc's subscription
proceeds minus dividends and capital returns.
[13] Calculated in accordance with Zegona Limited's Articles of
Association as the volume weighted average mid-market price of
Zegona Communications plc's ordinary shares for the previous 30
trading days to 31 December 2022.
[14] The Non-Executive Directors have not received any other
form of remuneration during the current or prior year.
[15] Period from incorporation on 19 January 2015 to 31 December
2015.
[16] Eamonn did meet several indicators of achievement in
relation to his 2018 bonus objectives, however Eamonn waived his
2018 bonus in order to maximise the cash raised from the equity
placing in February 2019.
[17] Eamonn met a significant majority of the indicators of
achievement in relation to the 2021 bonus scheme, however in
connection with the Return of Capital he agreed to waive any
amounts due.
[18] No bonuses will be paid until Zegona owns an operating
asset
[19] This meant that the instrument was allocated to level 3 of
the fair value hierarchy. The value assigned to the instrument at 1
January 2021 was EUR7,499 and the change in the fair value included
EUR3 thousand of foreign exchange losses.
[20] The movement in the year is entirely due to changes in
foreign exchange rates
[21] The preferred Return is a 5% per annum return on a
compounded basis on shareholders' net investment.
[22] Settlement of the Second Calculation Period in cash does
not create a precedent in respect of the Third Calculation Period
as ash settlement was required under those circumstances by the
terms of the scheme.
[23] Being the maximum number of shares that could be Admitted
on that date.
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END
FR NKDBKCBKKNQD
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April 11, 2023 07:50 ET (11:50 GMT)
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