OOUT.L Regulatory News (OOUT)

3 May 2022

Ocean Outdoor Limited

("Ocean" or the "Company" or the "Group") 

Full Year 2021 Results

Ocean Outdoor Limited (LSE: OOUT), a leading operator of premium Digital Out-of-Home ("DOOH") advertising in the United Kingdom, the Netherlands, the Nordics and Germany, is pleased to announce its full year results for the twelve months ended 31 December 2021.

Key Highlights

Financial highlights

· Revenue generated by the business in the year totalled £124.4m (FY20: £86.2m)

· Group gross profit was £42.1m (FY20: £22.4m)

· Group loss before tax was £30.3m (FY20: £156.5m)

· Cash on balance sheet of £42.0m (FY20: £30.0m)

· Net assets balance of £193.4m (FY20: £223.8m)

· Cash generated from operations totalling £47.1m (FY20: £32.1m)

UK

· Appointed exclusive outdoor media partner for the Canary Wharf Group, with long-term contract value of £30 million

· £25 million outdoor media partner contract for Edinburgh's prestigious St James Quarter

· Delivered 'fan zone' experiential campaign and Tokyo 2020 highlights at Westfield London in partnership with Team GB

· Successful launch of 3-D product DeepScreen®

Netherlands

· Westfield Mall of the Netherlands officially launched in April

· Secured new retail and key roadside contracts

· Launched the Netherlands' first Digital Creative Competition

Nordics

· Appointed strategic media partner for Westfield Fisketorvet, Copenhagen

· Extended relationship with DEAS with contract covering 39 event areas across 18 malls in Denmark to launch experiential service

· Partnership with Point Properties, covering 14 malls in Sweden

· Oslo Central bus station launched with 28 new digital screens

· 131 new digital screens installed across a total of 41 malls in Norway, creating strong marketing position

Post period end highlights and current trading

· Retained advertising contract for the iconic BFI IMAX in London with lifetime value of £25 million

· Launch of The Arrival @ Terminal 5, new large format roadside screen

Commenting on the results, Tim Bleakley, CEO of Ocean Outdoor, said:

"We ended 2021 with all our territories open and capitalising on the surge in advertising spend, which culminated in a record Q4 performance for the Group. Over the past three years, the Group has transformed from a UK focused player into one of the most advanced DOOH operators in northern Europe, covering seven countries. Our decision to commit to our investment plans and grow our premium digital assets during the pandemic period has enabled Ocean to be at the forefront of the recovery. At the same time, the advancement in the capability of our network has supported brands in delivering some of the most impactful and memorable out of home campaigns we have seen."

There will be a conference call for analysts and investors which will begin at 16:00hrs BST / 11.00hrs ET today. A copy of the presentation can be accessed via the Reports & Documents section of the Ocean Outdoor investor relations website: https://investors.oceanoutdoor.com.

Details for the conference call are as follows:

UK Toll Free: 0808 109 0700USA Toll Free: 1 866 966 5335

Standard International Access: +44 (0) 33 0551 0200

Password: Ocean Outdoor

For further information please contact:

Ocean Outdoor 020 7292 6161

Tim Bleakley, CEO

Susann Jerry, Head of Communications

Yellow Jersey PR 07747 788 221

Charles Goodwin, Annabel Atkins

oceanoutdoor@yellowjerseypr.com 

It is with pleasure that we present to you, the shareholders, the Annual Report and audited consolidated financial statements of Ocean Outdoor Limited for the year ended 31 December 2021.

2021 has certainly been the year of the recovery for both Ocean and the wider out of home advertising sector, as evidenced by the significant rise in our revenues and profits, particularly during the second half. Having successfully shielded the business during the lockdown periods whilst investing in our network to be ready for the recovery, Ocean was primed to bounce back once restrictions were lifted. The business has certainly delivered, capitalising on both its focal position across prime retail and urban roadside and leveraging its cutting edge DOOH technology. Collectively this differentiates us from the competition, delivering the ultimate, high-impact brand advertising experiences across the most sought-after locations.

The recovery began to take off midway during the first half of the year, driven by the ramping up of vaccination programmes, which led to the easing of social restrictions. With the UK ahead with its vaccination roll out, the positive effects were certainly felt first in this market, with growing numbers of people returning to city centres and their favoured retail and leisure destinations. Hand in hand with this trend, advertising bookings began to grow week on week, with brands rushing to roll out their advertising campaigns and capitalise on the acceleration in business and consumer confidence.

With the Netherlands and Nordic regions being slightly slower with their vaccination programmes, these markets were running eight weeks behind the UK during the latter part of the first half, with Sweden experiencing less of a bounce due to fewer restrictions throughout the pandemic. However, moving into the second half, both regions had significantly improved and were experiencing very similar recovery patterns to the UK in terms of bookings and demand. Q4 was particularly pleasing, with all territories recording a strong quarter, with revenues 7.2% higher than Q4 2019, illustrating the strength of the ongoing recovery. This correlated with the consistent, high levels of footfall recorded across the major shopping malls where Ocean is present, whilst roadside traffic was close to pre-pandemic levels across all territories.

People

After three years with us, independent non-executive director Thomas Ebeling resigned from the Board. During this time, Thomas provided valuable strategic advice to help the Company capture growth opportunities as they arise. On behalf of the Board, I want to thank Thomas for his commitment and guidance during his tenure on the Board.

Whilst we are returning to more normal times, during the period Ocean's staff continued to contend with various restrictions and disruptions, particularly earlier in the year. Despite this they continued to demonstrate outstanding commitment and teamwork, which has been integral to the success of the business recovery in 2021. On behalf of the shareholders and the Board, I would like to pass on my sincere thanks.

Strategic Review

In November 2021, we announced the initiation of a strategic review to evaluate potential strategic and financial alternatives to maximise shareholder value. This decision was taken after the Board and management felt that the Company was undervalued, with the share price continuing to face technical trading challenges unrelated to Ocean's strong business fundamentals and intrinsic value. At this current time, the Board is evaluating a potential sale to its largest shareholder, Atairos, which may or may not lead to a transaction. Whilst there can be no certainty that a formal offer will be made, discussions continue and Atairos have presented a proposal to the Board which is being considered.

Aryeh Bourkoff

Chairman

30 April 2022

Directors' Report for the year ended 31 December 2021

The Directors present their report and the financial statements for the year ended 31 December 2021.

Overview

· Strong bounce back in demand over the course of 2021

· Focus on prime retail and urban roadside locations has put us in a stronger position compared to some of our peers

· Immersive 3D proposition DeepScreen®, rolled out across all territories to great effect

· Ocean Labs expanded into Netherlands and Nordics

Ocean saw a strong bounce back in demand over the course of 2021, which led to a 44.3% increase in Group revenue to £124.4 million, and a significant increase in Unaudited Adjusted EBITDA Excl. IFRS16 to £18.3 million. Since emerging from lockdown restrictions early in the year, the Ocean Group has gone from strength to strength. With the UK first experiencing the accelerated recovery during Q2, the Netherlands and Nordics went on to experience similar recoveries from the summer onwards, as their vaccination programmes gathered pace and restrictions were eased. All territories went on to record a strong performance in Q4, the Group's key trading period, with revenues up by 67.5% compared to Q4 2020 and 7.2% compared to Q4 2019, illustrating the strength of the ongoing recovery.

Ocean has certainly been at the forefront in enabling brands to interact with consumers as they rapidly return to urban locations and retail hubs for work and leisure. The pattern of recovery from Q2 2021 has also underlined the importance of Digital Out-of-Home (DOOH®) within the wider advertising sector and confirmed its position as a structural, long-term winner. This has been evident by the growing confidence among high-spending advertising categories, which rose in line with the vaccine rollout and easing of restrictions, with both the 'power brands' and new advertisers committing increased budgets to DOOH due to its ability to target highly valuable audiences both efficiently and cost effectively.

Ocean's focus on prime retail and urban roadside locations has put us in a stronger position compared to some of our peers, with audience numbers returning more quickly to these environments. Footfall across prime retail destinations, such as Westfield shopping malls and major city centres, came back strongly during the summer and has remained consistent since, whilst roadside traffic across most of our territories was close to pre- pandemic levels by the year end.

Combined with favourable market dynamics, Ocean's commitment to strengthening the business and investing for growth back in 2020 meant that we were able to fully capitalise on the resurgence in demand to run DOOH campaigns, with brands seeking to capture the pent-up consumer demand which the restrictions had created. Our unique innovations, including the development of Deepscreen™, our immersive 3D proposition that has now been launched across multiple screens in all territories, have been a resounding success that have in many cases amplified brand campaigns through pick-up across online news and mobile platforms on a national and global scale.

An important strategic step made during the year was the expansion of Ocean Labs team into the Netherlands and Nordics. Ocean Labs has been integral in advancing the scale and impact of Ocean's UK network and has led the way in terms of innovation in our sector. The team is already making excellent early progress across our European territories and will be at the forefront in further developing our DOOH proposition, particularly as we win more prime locations and convert and upgrade existing sites.

Organic momentum continued throughout the year with a series of new contracts won across all territories which plays to our prime retail and roadside strategy. We were also delighted to report early in 2022 that Ocean had retained the contract for London's BFI IMAX, Europe's largest OOH canvas, for a further five years, carrying a lifetime value of £25 million. Extending our prime London presence, in recent weeks we have gone live with 'the Arrival' at Heathrow Terminal 5, a large format roadside screen which will receive almost 750,000 impacts every two weeks. The new screen also utilises the most efficient LEDs to reduce energy consumption, something we are consistently looking to improve across our entire network.

Extending our sustainability initiatives, Ocean has launched a new advertising fund to give a voice to charities and non-profits that are working to save the planet. The initiative will see Ocean donating 2% of the Group's reported revenue to environmental charities in the form of advertising value across the Company's premium digital screen network in seven countries - the UK, the Netherlands, Germany, Sweden, Finland, Denmark and Norway.

Unaudited appendix

The appendix provides financial information for entities owned by the Group as at 31 December 2021. This allows analysis and assessment of the underlying performance by operating segment.

FY21 and FY20 financials are provided for comparison. The financials are presented including IFRS16 accounting standard which came in to effect 1 January 2019. Also presented are the FY21 and FY20 financials under the previous accounting standard.

Revenue has increased in the year following a strong performance by the Group following the recovery of the DOOH® market, especially in the later half of the year. FY20 was severely impacted by the tough trading conditions following the impact of COVID-19 across the globe. Government decisions to restrict the movement of people in the markets which the Group operates reduced the appetite for brands to advertise on OOH assets resulting in the lower revenue. FY21 saw the return of OOH audiences, and advertisers appetite to use the medium, which has driven revenue in the year.

The 44% increase in revenue has resulted in a 87% increase in gross profit, with the gross profit margin improving in the year as a result of the split between the Group's fixed and variable cost base. Cost savings, and the mitigation of cost using Government schemes were necessary at the height of COVID-19, has helped reduce the Group's cost base in the year.

The loss for the year reduced significantly as a result of the improved trading performance, but also as a result of impairment losses totalling £113.8m recognised in FY20. No such costs were incurred in the current year.

The Group had a cash balance of £42.0m (FY20: £30.0m) at year end, with cash generated from operations FY21 of £47.1m (FY20: £32.1m) driven largely by the increase in sales. Of the total debt facility available to the Group, only £12.5m has been drawn down. The Group has net assets of £193.4m (FY20: £223.8m) with much of the year-on-year decrease arising from amortisation on intangible assets. The Group is now in a good position to capitalise on the opportunities that present themselves as advertisers' have returned to the OOH market.

Analysis using financial key performance indicators

Directors and managers assess performance using performance indicators at a Group level. The Group's key performance indicators (KPI) are Billings, Revenue and Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation excluding one off items (Adjusted EBITDA).

Note 1 - Billings represent the advertising spend by the advertiser, including fees directly payable by the advertiser to their advertising agency, exclusive of sales tax.

Note 2 - Unaudited Adjusted EBITDA Excl. IFRS16 in FY21 represents the unaudited loss from operations of £26,152k plus depreciation on tangible fixed assets of £9,717k, amortisation charge on intangibles of £24,418k. Also added back are deal fees, FX, restructuring and redundancy costs, profit/loss on disposal and other one- off costs totalling £10,279k. These other costs are added back by virtue of their size and nature in order to better reflect management's view of the underlying trends, performance and position of the Group. Management exercises judgement in determining the adjustments to apply to IFRS measurements, and this assessment covers the nature of the item, cause of occurrence and the scale of impact of that item on reported performance. See the appendix for further details and a breakdown of the items added back.

Non-GAAP performance measures

Billings is the standard metric used by the out of home advertising industry body "Outsmart" to measure the market size and industry trends. Management consider Billings to be an important metric to assess the performance of the underlying business against industry trends and therefore presents Billings as a Non-GAAP performance measure.

The Directors feel that the use of Unaudited Adjusted EBITDA Excl. IFRS16 is the most appropriate profit measure for the Group because it most closely approximates on-going cash flows from underlying operations, which is not possible once IFRS16 has been applied.

Non-GAAP performance measures are presented for the benefit for users of the accounts but are not a substitute for other standard GAAP measures presented.

Billings and revenue have increased, as described above, following a significant upturn in the market after a COVID-19 impacted FY20. Unaudited Adjusted EBITDA Excl. IFRS16 has increased in the year following the rise in gross profits generated in the year. In order to fully understand the reasons behind the movements in these metrics, narrative has been provided below for each market in which the Group operates, detailing key items that influenced the performance of that market in the year. For the split of Unaudited Adjusted EBITDA Excl. IFRS16 by market, in addition to revenue and billings, please refer to the unaudited appendix.

Ocean UK

· Exclusive UK digital content deal with BT Sport to broadcast UEFA Champions League match clips across 7 UK cities

· £25 million outdoor media partner contract for Edinburgh's prestigious St James Quarter

· Delivered 'fan zone' experiential campaign and Tokyo 2020 highlights at Westfield London in partnership with Team GB

· Appointed exclusive outdoor media partner for the Canary Wharf Group, with long-term contract value of £30 million

· Successful launch of 3-D product DeepScreen®, which has been rolled out across Ocean's large format full motion portfolio in all territories

· Hosted annual Digital Creative Competition at the National Gallery to champion innovative out-of-home concepts

Ocean signed a series of significant contracts and partnerships throughout 2021 as restrictions were lifted and advertisers sought to tap into consumer euphoria and pent-up demand. In early February, Ocean signed its first exclusive digital content deal with BT Sport, broadcasting next day match clips from UEFA's Champions League last 16 fixtures through to the Final in May across screens in seven major UK cities.

Keeping the momentum, the Group was appointed outdoor media partner for the prestigious St James Quarter £1 billion regeneration project in Edinburgh, a 1.7 million square foot urban location and global tourist destination. The 10-year DOOH advertising contract, with a lifetime value of £25 million, represents Ocean's first contract with global asset management company Nuveen, which part owns and developed the St James Quarter.

In line with the return to work, Ocean was subsequently appointed the exclusive outdoor media partner for the Canary Wharf Group, one of Europe's most prestigious DOOH locations, to enhance the audience experience as footfall bounced back. Awarded a long-term DOOH advertising contract with a lifetime value of £30 million, Ocean retains exclusive rights to sell 40 full motion digital screens and one large format full motion screen.

Ocean continued to use its network of high impact screens as a critical communications platform during the much-anticipated COP26 in Glasgow that took place in October and November. The Group commenced a sealed bid auction in February for the brands that wanted to be on the frontline of the climate emergency and speak directly to decision makers on an international scale. Brands including EDF Energy, Unilever and Volvo appeared on the 55 screens that make up Ocean's large format digital roadside estate across Scotland, delivering more than 42 million impacts.

During the period the Group continued to push the boundaries of DOOH advertising with innovative developments to allow communities to come together and celebrate key events around its screens. Ocean carried the highlights of the Tokyo 2020 Olympics across its UK portfolio as part of its partnership with Team GB, with Ocean Labs building its biggest experiential campaign to date with an official Team GB fanzone in Westfield Square. The Company also celebrated the launch of DeepScreen®, a 3D screen experience that has now been rolled out across Ocean's large format full motion portfolio in all territories. Bold illusions by brands such as Vodafone, IWC Schaffhausen and Netflix have been used as centrepieces for integrated campaigns, delivering some of our most memorable images to appear across our network.

Towards the end of the year, Ocean stepped into the realm of the metaverse through a partnership with the UK firm Admix, which will see a blending of the physical with the virtual world. A series of activities that couple DOOH with virtual worlds are planned for 2022 and beyond, aimed at maximising eyeballs for advertisers in the DOOH market. The initiative has already seen the launch of three DOOH ad spots into the metaverse as NFT billboards, including digital replicas of three bespoke DOOH locations which are similar in design and scale to some of Ocean's premium city centre UK assets.

Ocean UK was also delighted to resume in person its annual Digital Creative Competition to champion innovation and celebrate bold out-of-home concepts. Land Rover, Pets at Home, Toolstation and Rays of Sunshine were among the winners at this year's event at the National Gallery, chosen by a panel of 19 expert judges drawn from the outdoor and advertising industry.

Ocean Netherlands

· H2 recovery with particularly strong Q4 performance generating almost 45% of total NL revenue

· Secured new retail and key roadside contracts

· Westfield Mall of the Netherlands officially launched in April

· Launched the Netherlands' first Digital Creative Competition

As previously cited at the half year, the recovery in the Netherlands lagged the UK by eight to ten weeks due to its vaccination programme being at an earlier stage. With restrictions easing at the start of H2, the Netherlands experienced a similar pattern to the UK, with advertisers carrying over media budgets from the first half. Q4 was particularly strong with almost 45% of total revenue for the Netherlands coming in this period, with the most active users of DOOH being retail, e-commerce, automotive and the major streaming services. With Ocean's footprint even more digitalised, the Netherland's had a record year in terms of the proportion of revenue derived from DOOH at 78%, up from 73% in 2019.

In April, Westfield Mall of the Netherlands officially launched with great success by exceeding expectations in terms of audience figures and media revenue in its early months. Two contracts for two new large digital screens at shopping malls in Haarlem and Hilversum were also won, whilst a series of key roadside contracts were renewed as well as a new contract won in Almere, with the installation of two new digital screens.

In June, Ocean Netherlands staged its first edition of the Digital Creative Competition, mirroring the event which has run for the past 10 years in the UK. Staged as both a live and augmented reality event in Amsterdam's museum district, there were 74 entries for the inaugural competition from clients, brands and agencies. As well as the fantastic creative on show, the event helped to raise Ocean's profile across the Dutch advertising market and support the business' commercial activity.

As part of its data and research strategy, Ocean Netherlands signed a strategic partnership with the data insights provider, Precisely, delivering a new solution incorporating mobile trace data to measure reach and determine the profile of audiences. After going live in October, the solution is helping to significantly increase insights for advertisers in segmented reach per screen and is also providing near real time audience data.

Ocean Nordics and Germany

· Appointed strategic media partner for Westfield Fisketorvet, Copenhagen

· Extended relationship with DEAS with contract covering 39 event areas across 18 malls in Denmark to launch experiential service

· Oslo Central bus station launched with 28 new digital screens

· 131 new digital screens installed across a total of 41 malls in Norway, creating strong marketing position

With Sweden remaining open throughout the pandemic period, with limited restrictions, the country did not experience the same recovery trends as those emerging from strict lockdowns. As for the rest of the Nordic region, most restrictions began to be lifted towards the end of the first half. Whilst Q2 and Q3 were very similar in performance for the region, Q4 saw a major uptick in sales and campaign activity, with most of the year's advertising budgets being deployed during this period. As such, Ocean Nordics delivered a record Q4 for sales. The Nordics team has continued to make further efficiency gains, including bringing the whole region under one operating allowing it to sell campaigns that can be run across the entire Nordics. Another success was the first 'Nordic Digital Creative' competition, which surpassed all expectations in attracting over one hundred entrants. This has helped to both drive greater awareness of Ocean and its product offering, and, in turn, supported the region's sales pipeline.

In Sweden, Ocean has extended its partnership with Point Properties, adding five new malls to its network. This comes on the back of the nine-mall agreement signed in the first half, which collectively attract 7 million visitors each year. A contract with Skandia Fastigheter to install a 300 square metres banner at its Mörby Centrum mall, which is situated north of Stockholm, and a contract with Centrumkanalen for screens in 23 supermarkets, which complements Ocean's existing mall and grocery channels in Sweden. Ocean has also won the media contract for Helsingborg Central Station, one of the largest stations in southern Sweden, which also connects bus and ferry routes. A large screen has already been installed at the station entrance, whilst the internal screens are being upgraded.

In Denmark, Ocean was appointed strategic media partner for Westfield Fisketorvet, Copenhagen's premium shopping, dining, and leisure destination, with a seven-year contract carrying a lifetime value of £7 million. Since being awarded the new contract Ocean is already investing in the site and has added a new large format icon screen. Earlier in the year Ocean also extended its association with shopping centre owner DEAS, with the award of a contract covering 39 event areas across 18 malls, for exclusive experiential rights, proceeding the contract to install 381 new screens across Danske's portfolio of malls, won back in 2020.

In Finland, Ocean won the media contracts for two malls in Helsinki and Lund and developed a multi country sales strategy to maximise its market position with Unibail-Rodamco-Westfield and the inclusion of the 15 shopping malls Ocean operates across Germany. The introduction of Deepscreen in Finland has had a particularly strong impact in terms of differentiating its product offering from other DOOH provider, which has helped to drive stronger sales in the country since it was launched.

The focus in Norway during the period has been the ongoing major inventory upgrade project spanning 41 shopping malls, which includes the Group's significant contract with Alti that covers 23 malls. 133 new digital screens have been installed, which has increased the Group's digital footprint in Norway from 5% to 24%. Norway has also gone live with its Oslo Central bus station contract with the launch of 28 state of the art digital screens.

Outlook

Despite commencing the year with Omicron and restrictions to leisure and hospitality across some of our countries, trading has started very strongly. We currently expect revenue and adjusted EBITDA for FY2022 to be ahead of FY2019 reflecting the return of audiences and brands to OOH environments.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2021

The prior period expense recognised an impairment of intangible assets within administrative expenses. This has been restated following the identification of a calculation error. Please see note 27 for further details.

STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021

The financial statements on pages 32 to 93 were approved and authorised for issue by the board of Directors and were signed on its behalf by:

Stephen Joseph

Director

Date: 30 April 2022

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2021

The prior period loss for the year has been restated following the identification of a calculation error of the expense recognised for the impairment of intangible assets, impacting the opening balance of retained earnings. Please see note 27 for further details.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2020

The prior period loss for the year has been restated following the identification of a calculation error of the expense recognised for the impairment of intangible assets. Please see note 27 for further details.

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2021

The prior period loss for the year and prior period adjustment for impairment loss on intangible assets has been restated following the identification of a calculation error of the expense recognised for the impairment of intangible assets. Please see note 27 for further details.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021

1. Reporting entity

Ocean Outdoor Limited (the 'Company') is a limited company incorporated in British Virgin Islands. The Company's registered office is at Kingston Chambers, PO Box 173, Tortola. These consolidated financial statements comprise the Company and its subsidiaries (collectively the 'Group' and individually 'Group companies'). The Group is primarily involved in the provision of out of home advertising media services.

2. Basis of preparation

The Group's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and Interpretations as adopted by the EU (collectively IFRSs) and those parts of the BVI Business Companies Act applicable under IFRS. They were authorised for issue by the board of directors on 29 April 2022.

Details of the Group's accounting policies, including changes during the year, are included in note 2.1.

In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the Group accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

The areas where judgements and estimates have been made in preparing the consolidated financial statements and their effects are disclosed in note 5.

The financial statements have been prepared on the historical cost basis except for the certain financial instruments which are stated at fair value.

2.1 Changes in accounting policies

i. New standards, interpretations and amendments effective from 1 January 2021

New standards impacting the Group that were adopted in the annual financial statements for the year ended 31 December 2021, and which have given rise to changes in the Group's accounting policies are:

- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform These amendments do not have a significant impact on the financial statements.

ii. New standards, interpretations and amendments not yet effective

The following new standards, interpretations and amendments, which are not yet effective and have not been adopted early in these financial statements, will or may have an effect on the Company's future financial statements:

- COVID-19 related rent concessions extension of the practical expedient (Amendments to IFRS16)

- References to Conceptual Framework (Amendments to IFRS 3)

- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS16)

- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

- Annual Improvements to IFRS Standards (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41)

- Presentation of financial statements', on classification of liabilities (Amendments to IAS1)

- Deferred tax related to assets and liabilities of a single transaction (Amendment to IAS12)

The Directors anticipate that the adoption of these Standards in future periods may have an impact on the results and net assets of the Company and are assessing the impact they will have, but do not expect them to be material.

3. Accounting policies

3.1 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including:

• the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

• potential voting rights held by the Company, other vote holders or other parties;

• rights arising from other contractual arrangements; and

• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at this time that decisions need to be made, including voting patterns at previous shareholders' meetings.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

3.2 Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.

The Directors have considered the Group's current financial position, its budgets and forecasts, the principal risks and uncertainties including the impact of COVID-19 and loan facilities available to the Group, with it having credit facilities available providing financing of up to £35m, subject to customary covenants related to minimum quarterly adjusted EBITDA and cash balances. £12.5m of this facility has been drawn down at year end. No breaches of the debt covenants are expected and there are no indicators that the current loan facilities available could not be extended. With a cash balance at 31 December 2021 of £42.0m, the Group would be in a position to repay its current debt of £12.5m without impacting its working capital requirements.

The Audit Committee continuously review forecasts and outlook, and as part of that consider the going concern basis of preparation of the accounts. These forecasts are modelled until 30 June 2023. A base case was prepared, as well as an extreme downside scenario modelled, including a further lockdown. The committee reviews the various models and applies its judgement in assessing the relevant assumptions used by management and challenges the inputs where necessary.

The key assumptions that were stress tested for the going concern scenarios were quarterly revenue declines, assuming another lockdown as experienced in FY20, with revenue then returning gradually to normality by the end of FY22. The expected variable cost impact was considered, however no cost mitigation was factored in to this model that would be available. This was applied to the most recent forecast for FY22. Further reductions to revenue were modelled to assess the headroom before a covenant breach would occur. In such a scenario it has been modelled that the £12.5m loan could be repaid. Whilst this scenario is plausible, it is not considered probable based on current expectations and trading outlook. The gap between the forecast and the covenant breach level was deemed more than sufficient to conclude that the going concern basis is appropriate with additional cost savings potentially available to further increase the headroom.

On 13 April 2022 the Group announced it was in discussions with Atairos, its largest shareholder, regarding a possible offer for the Group. Whilst there can be no certainty that a formal offer will be made, discussions continue and Atairos have presented a proposal to the Board which is being considered. At this time the Group continues to operate autonomously under the oversight of the Board and Management. It is assumed, therefore, that trading will continue as modelled without any adjustments to reflect any possible incremental costs or savings should a transaction occur. Atairos have not yet published their future intentions for the Group and there may be uncertainty over the nature of the continuing operations of the Group should the acquisition proceed successfully. This gives rise to a material uncertainty, as defined in auditing and accounting standards, related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern.

Despite the material uncertainty, whilst acknowledging the Group is exposed to economic risks, the Group remains well placed to manage its business risks successfully. In the event a transaction with Atairos does proceed, the Directors are satisfied, based on the expected intentions of Atairos, that the Group will remain a going concern. Therefore, they have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of 12 months from the date of approval of the financial statements. Accordingly, the financial statements continue to be prepared on a going concern basis.

3.3 Revenue

Revenue comprises the transaction price, being the amount of consideration the Group expects to receive, in exchange for transferring promised services to a customer in the ordinary course of the Group's activities.

Revenue is shown net of value-added tax, agency and other commissions, rebates payable and discounts and after eliminating sales within the Group.

IFRS15 defines 'transaction price' as the amount of consideration to which the entity is expected to be entitled to in exchange for transferring the promised goods or services to a customer.

For all services provided by the Group, it is considered to be the principal in the transaction since it is primarily responsible for fulfilling the promise to provide the service, it has inventory risk before the specified good or service has been transferred to the customer, it establishes the price that the customer pays for its services and it can direct the use of its service to obtain substantially all the remaining benefits and that no other entity can assume the performance obligations.

Commissions are paid by the Group to advertising agencies and specialists when they act as intermediaries between the Group and the ultimate advertiser. The agencies and specialists are considered to be the customer in the transaction, with the agencies and specialist then responsible for selling to the ultimate advertiser. Agreements are held with the agencies and specialist and commissions only arise following the performance obligations and would not otherwise be incurred. These commissions, in line with IFRS15, are therefore deducted from revenue, as they do not form part of the revenue to which the Group is entitled.

The Group has agreements with customers whereby volume-related allowances are provided based on billings with the customer in the period representing a reduction in the consideration. The rebates are at a fixed percentage with each customer calculated as a percentage of applicable billings. As a result revenue is recorded on a net basis after deduction of commercial rebates. The commercial rebates are recognised in the income statement when the performance obligations associated with the media sales have been met, with an associate accrual recognised for volume rebates due to customers.

Payment terms extended to customers depend on the country of operation, the size of the booking and the credit risk posed by the customer. Credit terms vary from up-front payment to 60 days.

Media sales

The Group derives revenue from contracts with customers containing a single performance obligation, being the provision of advertising space, and are subject to fixed prices. This is distinct from other revenue as the customer can benefit from the provision of media sales on its own and is separable from other performance obligations.

The fixed prices can be subject to fixed agency commissions, fixed specialist commissions and additional volume rebates. Volume rebates are calculated on actual year to date billings in line with volume rebate agreements held with its customers. Revenue is recognised straight on an over time basis as the media sale is delivered. This is because the customer simultaneously receives and consumes the economic benefits provided under the contract by the Group's performance.

Amounts invoiced in advance of the performance of the advertising services are recognised in deferred income as performance obligations and released to revenue as the Group performs the advertising service under the contract on an output basis.

Revenue is derived from the provision of advertising space to customers during the 52-week period ended 2 January 2022 (2020: 52-week period ended 27 December 2020). Revenue is recognised during the 52- week period to reflect the period of customer bookings, normally in 2-week blocks. The difference on this basis to recognition of revenue for a full year is immaterial.

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

There are not considered to be any significant judgements in respect of determining the timing of satisfaction of performance obligations.

Other revenue

The Group also derives revenue from the provision of production, studio and labs services, which relates to design services and experiential products offered to customers. These services are a single performance obligation relating to creative and design services offered by the Group to its customers and are subject to fixed prices. Revenue is recognised at a point in time for these services is allocated once the project has been completed and provided to the customer. Other revenue is considered distinct from media sales with the service separately identifiable with the service not tied to the provision of media sales. It is recognised in full at point in time following the satisfaction of the relevant performance obligation.

3.4 Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Directors. The Executive Directors are of the opinion the company operates in three distinct markets: The United Kingdom, The Netherlands and The Nordics. Segment results are prepared for the Executive Directors by segment managers on a regional basis, not distinguished by entity or product type. Board reporting packs are prepared with separate primary statements for the UK, the Netherlands, and Nordics, as well as an aggregation (i.e., results of The Group). The nature of the products offered across each region is similar with asset offerings to customers not distinguished by entity. The Group's strategy is to utilise its knowledge and success across whole regions. Accordingly, the Group has been treated as three operational segments and the results of the Group presented in the financial statements are disaggregated accordingly. Each operational segment provides digital out of home ("DOOH") services to their local market.

3.5 Government grants

Government grants received for expenditure incurred are netted against the cost incurred by the Group in the consolidated statement of profit or loss following the satisfaction of the required criteria. This relates to assistance provided by the Government in relation to the impact of COVID-19 on the business. Employee support grants "The coronavirus job retention scheme, (CJRS)" and equivalent schemes in the Nordics and Netherlands, were introduced in the pandemic to support companies in retaining employees, in the form of grants to cover a proportion of the wages and salaries of furloughed staff. These are accounted for as a credit to wages and salaries within employee costs. Local government support grants were also provided to support businesses, which were netted off against expensed incurred operating expenses.

3.6 Foreign currency

Transactions and balances

Transactions entered into by Group entities in a currency other than the functional currency are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss. Exchange differences arising on the retranslation of the foreign operation are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

On consolidation, the results of overseas operations are translated into GBP at the average exchange rate for the year. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

3.7 Taxation

The charge for current tax is based on the results for the year as adjusted for items which are nonassessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred Tax

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

- The initial recognition of goodwill

- The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit, and

- Investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the near future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

When there is uncertainty concerning the Group's filing position regarding the tax bases of assets or liabilities, the taxability of certain transactions or other tax-related assumptions, then the Group:

- Considers whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution;

- Determines if it is probable that the tax authorities will accept the uncertain tax treatment; and

- If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. This measurement is required to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations.

3.8 Property, plant, equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.

Depreciation is provided on all other items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives in accordance with local regulations and economic conditions. Assets under the course of construction are only depreciated once ready for use. Depreciation is provided at the following rates:

Site assets

Site build cost - Over the length of the lease

Digital signage - 3-10 years

Light boxes - 10 years

Equipment

Fixtures and fittings - 4 years straight line 

Computer equipment - 2 years straight line 

Motor vehicles - 4 years straight line

3.9 Borrowing costs

All borrowing costs are recognised in profit or loss in the period in which they are incurred.

3.10 Goodwill

Goodwill arising on consolidation represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired.

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses.

A cash generating unit ("CGU") is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Because the CGU definition is based on cash inflows, the division process should focus on an entity's sources of revenue and how assets are utilised in generating those revenues.

Management makes decisions around revenues on a regional basis as set out above and management make decisions on this basis. The portfolio's inseparability means it becomes the "smallest identifiable group of assets.

The Group generates cash inflows from this consolidated regional portfolio of assets. This consolidation of assets into a portfolio enhances the primary business activity. Advertising buyers can formulate and imagine a campaign's reach and impact with a greater degree of certainty compared with the market before these acquisitions occurred. The aim is to negotiate deals on a regional basis with invoices sold across each country and therefore the cash inflows are interdependent on each other. Each countries systems are largely entangled in each region. The three CGUs recognised by the Group are the UK, the Netherlands and the Nordics.

For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

The Group's policy for goodwill arising on the acquisition of an associate and a joint venture is described at note 3.11.

3.11 Investments in associates

An associate is an entity over which the Company 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.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Company's share of the profit or loss and other comprehensive income of the associate.

In line with IAS 28, the Group monitors for objective evidence of an impairment to its investment in associates following a "loss event" after the initial recognition. When necessary, the entire carrying amount of the investment is tested for impairment by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

3.12 Intangible assets

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

The Group has recognised intangible assets, acquired rights over advertising sites, that are recognised on business combinations where the Group obtains control over the assets as part of the transaction. Economic benefits are expected to flow to the Group as the contracts acquired as part of the business combination are expected to generate income and profit. They represent the incremental benefit and bundle of resources over and above the value of the lease from acquiring the entities, including the network of advertising sites, exclusivity in some cases, and other intangible benefits attached to the advertising rights. These intangible assets are amortised over the contractual life of the advertising sites on a straight-line basis, which are typically 5 to 15 years. The amortisation charge is included within administrative expenses in the consolidated statement of profit and loss.

The Group has recognised intangible asset in relation to the Ocean brand acquired as part of the business combination. This is amortised over 10 years on a straight-line basis. The amortisation charge is included within administrative expenses in the consolidated statement of profit and loss.

3.13 Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

3.14 IFRS16 Leases

The Group makes use of leasing arrangements, principally for site assets used to generate income. The rental term of contracts vary from short term to those in excess of 15 years. Contracts are modelled to the full length of the term and re-assessed with respect to break options if applicable. The Group does not enter in to sale and lease back arrangements.

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.

Significant judgement in determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease when determining the lease liability and corresponding right of use asset. Extension and termination options are included in a number of the site leases and the extension option term may be included in the lease term where there the lease is reasonably certain to be extended. Extension options are used to maximise operational flexibility in terms of managing the assets used in the Group's operations. After the lease commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).

Significant judgement in determining dismantling costs

The Group determines the costs that would be incurred at the end of a lease to dismantle or make new the site are not material on the basis that there is value to the landlord in the assets, and therefore no provisions are recognised, nor contingent liabilities recognised given the possibility of an outflow of resources embodying economic benefits in respect of the dismantling costs is considered remote.

Lease remeasurements

The Group has minimum guarantee leases, which represent fixed payments, which can be remeasured in subsequent periods based on contractual performance of a site. These are accounted for in the accounting period as a lease remeasurement at the original incremental borrowing rate. Payments in excess of fixed payments are not included in the initial measurement and are included in cost of sales in the period in which they occur.

Lease modifications

When the group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of the modification:

- If the renegotiation results in one or more additional assets being leased for an amount commensurate with the standalone price for the additional rights-of-use obtained, the modification is accounted for as a separate lease in accordance with the above policy.

- In all other cases where the renegotiated terms increase the scope of the lease (whether that is an extension to the lease term, or one or more additional assets being leased), the lease liability is remeasured using the discount rate applicable on the modification date, with the right-of use asset being adjusted by the same amount.

- If the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and right-of-use asset are reduced by the same proportion to reflect the partial or full termination of the lease with any difference recognised in profit or loss. The lease liability is then further adjusted to ensure its carrying amount reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments discounted at the rate applicable on the modification date. The right-of- use asset is adjusted by the same amount.

COVID-19-Related Rent Concessions (Amendments to IFRS 16)

Effective 1 April 2021, IFRS 16 was amended to provide a practical expedient for lessees accounting for rent concessions that arise as a direct consequence of the COVID-19 pandemic and satisfy the following criteria:

a) The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

b) The reduction in lease payments affects only payments originally due on or before 30 June 2022; and

c) There is no substantive change to other terms and conditions of the lease. Rent concessions that satisfy these criteria may be accounted for in accordance with the practical expedient, being recognised in the profit and loss within cost of sales, which means the lessee does not assess whether the rent concession meets the definition of a lease modification. Lessees apply other requirements in IFRS 16 in accounting for the concession.

The Company has elected to utilise the practical expedient for all rent concessions that meet the criteria.

Accounting for the rent concessions as lease modifications would have resulted in the Company remeasuring the lease liability to reflect the revised consideration using a revised discount rate, with the effect of the change in the lease liability recorded against the right-of-use asset. By applying the practical expedient, the Company is not required to determine a revised discount rate and the effect of the change in the lease liability is reflected in profit or loss in the period in which the event or condition that triggers the rent concession occurs.

Accounting for turnover rents and minimum guaranteed rents

Some contracts with landlords contain payable elements that vary based on the performance of the advertising location. These relate to costs in relation to site assets that are fully variable or amounts in excess of the minimum guaranteed rent. These variable lease payments are not included in the measurement of the lease liability and are recognised as a cost of sale in the profit or loss.

3.15 Share-based payments

Share-based payment transactions of the Company

The Founder Preferred Shares (and attached warrants) and director options represent equity settled share-based arrangements under which the Company receives services as a consideration for the additional rights attached to these equity shares, over and above their nominal price. In addition, the Company has granted options to the non-executive directors. The management team have been incentivised via the issue of hurdle shares which aligns the long-term interest of the company to deliver shareholder wealth. The hurdle shares represent equity-settled share-based arrangements under which the Group receives services as a consideration for equity shares, over and above their nominal price. The fair value of the grant of Founder Preferred Shares (and attached warrants), and hurdle shares in excess of any purchase price received is recognised as an expense. In addition, the Company has granted options to the non-executive directors. The management team have been incentivised via the issue of hurdle shares which aligns the long-term interest of the company to deliver shareholder wealth. The fair value of the Founder Preferred Shares (and attached warrants), the options and the hurdle shares is determined using a valuation model. See note 26 for further details.

3.16 Financial instruments

Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

3.17 Financial assets

The Group classifies its financial assets into one of the categories discussed below, depending on the business model and cash flow type under which the assets are held. The Group has not classified any of its financial assets as fair value through other comprehensive income. The Group's accounting policy for each category is as follows:

Amortised cost

These assets are non-derivative financial assets held under the 'hold to collect' business model and attracting cash flows that are solely payments of principal and interest. They comprise trade and other receivables and cash and cash equivalents. They are initially recognised at at their transaction price, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions for trade and other receivables are calculated using an expected credit loss model. The Group have adopted the 'simplified approach' to determine the expected credit loss associated with trade and other receivables. Under this model, impairment provisions are recognised to reflect expected credit losses based on a combination of historic and forward-looking information, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net; such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly liquid investments with maturities of three months or less.

3.18 Financial liabilities and equity instruments

i. Classification as debt or equity

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

ii. Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company's own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

iii. Financial liabilities

The Company classifies its financial liabilities as other financial liabilities. Other financial liabilities are measured at fair value on initial recognition and subsequently measured at amortised cost, using the effective-interest method.

Trade and other payables

Trade and other payables are measured at their transaction price unless the arrangement constitutes a financing transaction in which case the transaction is measured at present value of future payments discounted at prevailing market rate of interest. Other financial liabilities are initially measured at fair value net of their transaction costs. They are subsequently measured at amortised cost using the effective interest method.

Other interest bearing loans and loan notes

Borrowings other than bank overdrafts are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in the income statement over the period of the borrowings, using the effective interest method.

Financial liabilities at FVTPL

The Group classify financial liabilities as at FVTPL for contingent consideration, a financial liability arising following a business combination in accordance with IFRS 3. The Group does not hold financial liabilities at FVTPL for trading purposes, nor has it designated any financial liabilities as FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss.

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

3.19 Defined contribution pension scheme

Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the year to which they relate.

3.20 Share capital

Founder Preferred Shares, Ordinary Shares, and Warrants are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.

4. Functional and presentation currency

The Company is listed on the main market of the London Stock Exchange. These consolidated financial statements are presented in pound sterling, which is the Company's presentational currency.

Items included within the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates. Subsidiaries within the Group trade in Euros, Swedish Krona, Danish Krona and Norwegian Krone.

All amounts have been rounded to the nearest thousand, unless otherwise indicated.

5. Accounting judgements, estimates and assumptions

5.1 Judgements

The preparation of financial statements requires management to exercise judgement in applying the Group's accounting policies. The areas involving material judgement or complexity are set out below. Additional detail on the judgements applied by management are set out in the accounting policies section of the relevant notes.

Going concern

In order to satisfy itself the Group has adequate resources to continue in operation for the foreseeable future, and that there are no material uncertainties in respect of the Group's ability to continue as a going concern, the Directors have exercised their judgement when considering the Group's cash forecasts, including sensitivities to risks that could reasonably impact the future operating results, and available borrowing facilities. See note 3.2 for further details.

5.2 Estimates and assumptions

The Company makes certain assumptions regarding the future. Estimates and assumptions are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

Impairment of goodwill and other intangible assets

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which the goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the CGUs and a suitable discount rate in order to calculate present value.

The Group judge there to be three CGUs - the UK, the Netherlands and the Nordics, the basis of which is disclosed in note 3.10. This is reviewed annually to ensure compliance with accounting standards.

The discount rate applied in the value in use calculation is an approximation of the weighted average cost of capital for the CGU. This has been derived taking into account both company information and market data provided by a 3rd party specialist.

The estimated cash flows expected to arise include assumptions on lease renewals rates and associated costs. If the lease renewal rates are below expectations, this could have a significant impact on the cash flows generated in future periods. The renewal rates adopted are based on previous renewal rates across the business.

Growth rates are also inherent in the calculation and used when deriving a terminal value. Should the growth rate be overstated, future cash flows to the business may be inflated, resulting in a higher value in use. Growth rates applied are based on the historic growth rates of the CGU, independent market data and other industry insight publications.

Credit loss provisions

The application of IFRS 9, when measuring expected credit losses and the assessment of provisions required for accounts receivable balances applied, a number of estimates are required since the expected credit loss provision requires a forward looking assessment. Data points when making this assessment included reference to future expected unemployment rates, GDP growth rates as well as industry projected growth rates. Sensitivity analysis was undertaken and if the credit loss provisions percentages applied were 10% higher than those applied, an additional £393k credit loss provision would be required. The Group are however of the opinion that the rates used in note 18 remain appropriate.

6. Revenue

The following is an analysis of the Group's revenue for the year from continuing operations:

In 2022, the Group expects to recognise £6.6m of revenue currently held in deferred income.

Major customer revenue

The Group generates revenues from advertisers who may be represented by a media agency or specialist. These media agencies and specialists may be under common control of a holding agency group. Three of these holding agency groups each comprise more than 10% of the Group's revenue as follows:

7. Segmental reporting

Operating segments are reported in a manner consistent with the information provided to the Chief Operating Decision Maker ("CODM"). The CODM, who monitors the performance of the operating segments, as well as allocating resources to them, have been identified as the executive directors, in line with the accounting policy.

Included in the UK assets and UK loss for the period above is £5.0m (2020: £5.2m) asset and £0.05m (2020: £0.1m) loss relating to investment in associate. Further details of the investment in associate can be found in note 17.

8. Expenses by nature

9. Auditor's remuneration

10. Employee benefit expenses

Key management personnel compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the Directors of the Company listed on page 9.

11. Finance income and expense

12. Tax expense

12.1 Income tax recognised in profit or loss

The standard rate of corporation tax in the UK is 19.0%. The company's profits for the accounting period are taxed at a rate of 19.0% (2020: 19.0%).

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to losses for the year are as follows:

Changes in tax rates and factors affecting the future tax charges

Deferred tax assets and liabilities at 31 December 2021 have been calculated taking into consideration the applicable rates when the temporary differences are expected to reverse. On 3 March 2021 it was announced the UK corporation tax rate is to increase to 25% from 1 April 2023 and it was substantively enacted in May 2021. Deferred tax balances have been remeasured to reflect the applicable tax rate in which the timing difference is expected to reverse. Future changes in tax rates may have a material effect on deferred tax.

12.2 Deferred tax balances

The following is the analysis of deferred tax assets/(liabilities) presented in the consolidated statement of financial position:

13. Property, plant and equipment

Group

Included within site assets is £0.3m (2020: £0.5m) related to assets under course of construction.

The right of use asset arises from the Group entering into leases to secure advertising site, office space and equipment and other leases. At the year end, the net book value of the right of use asset that related to site leases was £158.3m (2020: £174.4m), to office leases was £4.4m (2020: £5.3m) and to equipment and other leases was £2.2m (2020: £2.8m). Details of the IFRS16 lease liability recognised in relation to the right of use asset can be found in note 20.

The depreciation methods and periods used by the group are disclosed in note 3.9. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the consolidated statement of profit or loss.

A subsidiary of the Group has a debenture including a fixed Charge over all present freehold and leasehold property; a first fixed charge over book and other debts, chattels, goodwill and uncalled capital, both present and future; and a first floating charge over all assets and undertaking both present and future dated 28 May 2020.

14. Intangible assets

Group