Zegona Communications plc
Annual Report
For the Year Ended 31 December 2023
ZEGONA COMMUNICATIONS PLC
CONTENTS
STRATEGIC REPORT |
Page
Chairman’s Statement 1
Strategy and Business Model 3
Business and Financial Review 5
Risks 6
Viability Statement 8
DIRECTORS’ REPORT |
Corporate Responsibility 9
Other Matters 12
Directors’ Responsibility Statements 15
GOVERNANCE |
Profiles of the Directors 17
Corporate Governance Statement 19
Audit and Risk Committee Report 23
Nomination and Remuneration Committee Report 27
Directors’ Remuneration Report 30
Independent Auditor’s Report to the members of Zegona Communications plc 37
FINANCIAL STATEMENTS |
Consolidated Statement of Comprehensive Income 44
Consolidated Statement of Financial Position 45
Company Statement of Financial Position 46
Consolidated Statement of Changes in Equity 47
Company Statement of Changes in Equity 49
Consolidated Statement of Cash Flows 51
Company Statement of Cash Flows 52
Notes to the Financial Statements 53
STRATEGIC REPORT | CHAIRMAN'S STATEMENT
1
ZEGONA COMMUNICATIONS PLC
I am pleased to present Zegona’s annual report for 2023.
Agreement to purchase Vodafone Spain
In the past year we continued to focus on finding the right opportunity within the European telecommunications
market where we can again successfully apply our proven strategy and capabilities to generate attractive returns
for our shareholders. On 31 October 2023 we announced the proposed acquisition of Vodafone Spain from
Vodafone Europe B.V. (“Vodafone Europe”). The acquisition is due to complete in the first half of 2024.
The headline purchase price payable by the Company is €5 billion which is subject to certain adjustments as set
out in the acquisition agreement. The purchase price is based on an enterprise value of €5 billion which represents
a multiple of 3.9x FY23 Business EBITDAaL
1
of approximately €1.3 billion. This valuation benchmarks attractively
to precedent European telecommunications transaction multiples such as the sale of Euskaltel to MásMóvil
Ibercom, S.A.U. in 2021, which valued Euskaltel at a multiple of 10.1x 2020 EBITDA, and the Orange/MásMóvil
merger announced on 23 July 2022. That announcement disclosed a valuation for Orange of 7.2x Orange’s 2022E
EBITDAaL and a valuation for MásMóvil of 8.7x MásMóvil’s 2022E EBITDAaL.
We are financing the acquisition of Vodafone Spain through a mixture of equity and debt. We have issued shares
and entered into an underwritten financing package, as follows:
• €300 million (£262 million) in gross proceeds through the Placing of 174,413,535 shares at a price per share
of 150 pence;
• €900 million (£785 million) in gross proceeds through the conditional subscription for 523,240,603 shares at
150 pence per share by EJLSHM Funding Limited;
• committed debt financing of €3,900 million which consists of a term loan of €500 million and a corporate
bridge facility of €3,400 million;
• €0.5 million (£0.5 million) through a separate offering of shares at 150 pence per share; and
• €500 million Revolving Credit Facility entered into on 31 October 2023 which is not expected to be drawn
upon at the closing of the proposed acquisition.
The Directors believe the financing package provides Zegona with an attractive cost of capital, in line with
the approach taken to Zegona’s prior investments in Telecable and Euskaltel. Zegona intend to refinance the
corporate bridge facility in the debt capital markets.
Macroeconomic / market update
The past year has been marked by continuing geo-political and macro-economic developments that have impacted
European economies. In particular, the ongoing war in Ukraine and events in the Middle East have created
uncertainty and have led to increased commodity prices, inflation and interest rates. More recently, there are
positive macroeconomic indications, with inflation rates starting to fall and bond interest rates reducing on the
market expectation of governments/the European Bank cutting interest rates during 2024. These developments
have created a more positive environment for raising finance and are expected to lead to lower finance costs
going forwards.
1 “Business EBITDAaL” is defined as Vodafone Group Spain segment's reported Adjusted EBITDAaL adjusted in line with Zegona's
accounting policy relating to subscriber acquisition costs. "Adjusted EBITDA" is defined as operating profit excluding net interest,
depreciation, amortisation (including amortisation of customer-related intangible assets), and gains/losses on disposal of owned and
leased assets, impairment losses, restructuring costs arising from discrete restructuring plans, other income and expense and significant
items that are not considered by Vodafone Spain's Management to be reflective of the underlying performance of Vodafone Spain.
STRATEGIC REPORT | CHAIRMAN'S STATEMENT
2
ZEGONA COMMUNICATIONS PLC
The telecommunications sector has continued to face challenges during 2023 as 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 continued to be affected. Overall, the level of European TMT mergers and acquisitions in 2023
has remained below the historic average, with a tendency for the major international players to focus on their
core operations and more difficult financing conditions impacting the ability of financial investors to acquire
assets. There have also been a number of in-market consolidations as operators have sought synergies and
increased scale, such as the announced $19 billion merger of Vodafone’s and Hutchison’s UK businesses and the
€18.6 billion MásMovíl and Orange Spain combination.
We believe Zegona’s proposed acquisition of Vodafone Spain is well positioned to benefit from these developments.
We are seeing improved financial market conditions leading to the potential to finance the business at lower
cost. Vodafone Spain has market-leading infrastructure with a high quality national mobile network and gigabit
capable fixed network. These assets create strong foundations for the business and its future development.
Vodafone Spain has already entered into value-creating relationships of this kind, in particular with its joint
roll-out with Orange of mobile coverage into less urban areas.
Eamonn O’Hare
Chairman and Chief Executive Officer
29 April 2024
STRATEGIC REPORT | STRATEGY AND BUSINESS MODEL
3
ZEGONA COMMUNICATIONS PLC
Vision
• Execute our 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 now a customer requirement in many markets but network rollouts 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
2
customers who are combining mobile and fixed services. This
has driven improvements in economics for converged players since mobile data delivery is heavily dependent
on high-capacity fixed networks and customers taking multiple products tend to be more loyal.
• Industry consolidation: The sector has seen M&A activity focussed on improving fundamental economics
through bringing businesses together and to realise the delivery of next generation networks. Industry
players are increasingly 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.
• 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
3
, and network infrastructure sectors. The proposed acquisition of Vodafone Spain reflects
this openness to identifying opportunities, with a detailed plan already in place to substantially improve the
operations, customer service and financial returns from the business.
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 strong
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. In 2023 we were able to gain the trust and support
necessary from Vodafone and the financial markets to negotiate and arrange funding for the acquisition of
Vodafone Spain. 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. Zegona has a long-term perspective and as a public company, its shareholders can readily realise
value at any stage through the improvement and transformation journey of the businesses we own. This
makes Zegona fundamentally different from private equity businesses, most of whom work within a short to
medium term timeframe. This also permits a focus on fundamental business improvements that are value
accretive rather than relying on high leverage and valuation multiple expansion. We are also able to act
quickly on acquisition opportunities while maintaining financial discipline. This is especially attractive to
potential sellers and a key differentiator.
2 Quad play: customers with four services (pay TV, fixed voice, broadband and mobile).
3 Business to Business.
STRATEGIC REPORT | STRATEGY AND BUSINESS MODEL
4
ZEGONA COMMUNICATIONS PLC
• Major global investors: Zegona benefits from having a number of global public equity asset managers with a
long-term outlook as shareholders. The strong support which we have from such shareholders was illustrated
by our successful placement of over €1.2 billion in 2023. 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, for the proposed
acquisition of Vodafone Spain, are set out below.
Zegona has significant relevant experience in the Spanish telecommunications market. When Zegona entered
the Spanish telecommunications market through its purchase of Telecable in August 2015, it identified an
opportunity for substantial value creation under new ownership. Zegona took this further through the sale of
Telecable to Euskaltel and the delivery of Zegona’s transformation programme at Euskaltel to create shareholder
value.
Vodafone Spain is one of the leading telecoms networks in Spain with a high quality mobile network and a gigabit
capable fixed network covering over 10 million households. The business also has access to the majority of the
remaining homes in Spain through partnerships and wholesale arrangements. However, business performance
has been disappointing in a changing market and the business now requires change. Zegona believes the future
of the business lies in right-sizing its cost base, operating the assets more efficiently and driving value for
money service propositions. At the same time, the business needs to focus its investments on next generation
technologies that customers will value and be willing to pay for. This is a strategy which the Directors believe
Zegona is well placed to execute, having made similar changes at Euskaltel resulting in an 87% return on Zegona’s
Net Invested Capital.
Zegona has identified key areas where specific cost saving actions can be taken to bring Vodafone Spain’s cost base
and Business Cash Flow Margin more in line with relevant peers. These actions include targeted cost reductions in
areas such as subscriber acquisition costs (driving distribution towards more efficient digital channels), bad debt
levels, TV content costs, IT capital expenditure, fixed wholesale access costs and other operational expenditures.
Zegona’s investment plan for Vodafone Spain rests on five key pillars which the Directors believe will enable the
business to continue to compete effectively, deliver its strategic objectives and drive shareholder value:
(1) An increasingly attractive, highly developed Spanish telecommunications market, underpinned by strong
fundamentals and supported by convergence and consolidation tailwinds;
(2) Leading integrated operator with strong market positions in consumer and B2B markets, a diversified product
offering and highly converged customer base across the value spectrum;
(3) High quality next generation mobile and fixed-line networks supported by strong spectrum positioning,
attractive active network sharing arrangements to drive efficiency and extensive nationwide reach through
wholesale agreements;
(4) Resilient cash flow, with significant upside driven by underlying market growth and bottom-up revenue, cost
and capex optimisation opportunities driving strong margin expansion; and
(5) Potential for Vodafone Spain to benefit from Zegona’s extensive experience driving growth and cost
optimisation in the Spanish market.
STRATEGIC REPORT | BUSINESS AND FINANCIAL REVIEW
5
ZEGONA COMMUNICATIONS PLC
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 of €15.6 million (2022: €3.3 million
net loss) which principally comprised:
Operating loss
Operating loss totalled €13.4 million (2022: €3.3 million) and included:
• €8.5 million (2022: €26 thousand) for significant project costs, principally professional fees paid in relation to
the proposed acquisition of Vodafone Spain;
• €4.7 million (2022: €3.3 million) for Zegona’s ongoing corporate operations. These costs included
strengthening the team in order to pursue the acquisition of Vodafone Spain.
Net finance income
Net finance income totalled €5.7 million (2022: €21 thousand of costs) and comprises interest earned on cash
deposits recognised within Finance Income net of bank charges, overdraft interest recognised within Finance
Costs, and imputed interest income on the €900 million promissory note from EJLSHM Funding Limited which
will be satisfied upon the completion of the proposed acquisition of Vodafone Spain.
Exchange differences
Exchange differences totalled a loss of €7.8 million (2022: loss of €3 thousand) reflecting translation of euro-
based transactions during the year into the functional currency of Sterling.
Other Comprehensive Income
Exchange differences on translation resulted in a gain of €8.1 million (2022: loss of €0.6 million). The variance
year on year arises as a result of movements in the closing €:£ exchange rates as the functional currency of
Sterling (“£”) is translated into the presentational currency of euro (“€”).
Financial Position
Zegona’s Net Assets as at 31 December 2023 were €1,181.7 million (2022: €10.5 million) which substantially
comprised the Other Receivables of €1,187.4 million and Income Tax Receivable of €5.1 million. The increase in
the period is due to receipt of funds and the receivable recognised from the issue of shares to fund the proposed
acquisition of Vodafone Spain.
STRATEGIC REPORT | RISKS
6
ZEGONA COMMUNICATIONS PLC
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”).
Principal and emerging risks
Risk title Risk rating
Change in risk assessment
since the last Annual Report
Ability to create value in acquired businesses Moderate ↔ No change
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 create value in acquired businesses
Zegona’s proposed acquisition of Vodafone Spain is based on a detailed assessment of the Vodafone Spain’s
business and where Zegona can create considerable value through its proven long term improvement strategy.
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.
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 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 operated in the Spanish telecommunications market since 2015 and have a good understanding of
the market and its key drivers. We are familiar with all the main operators, including Vodafone Spain, and have
analysed their market positions, strategies and operational performance over an extended time period. We have
been evaluating Vodafone Spain and its operations since 2022, identifying opportunities to improve the business
performance. We have developed a detailed improvement plan for the business which sets out specific actions
to be taken within each business area and the expected improvements to be delivered from each. We have also
evaluated the restructuring investment that is expected to be required and these costs are included in all our
financial projections for the business. As a result, we are confident we can materially improve the performance
and financial returns from the business over the business plan period.
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.
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. In line with the pending
completion of the Acquisition, Zegona will strengthen its team through the selective hiring of a small number of
highly qualified personnel to support Zegona in implementing its plans for Vodafone Spain.
STRATEGIC REPORT | RISKS
7
ZEGONA COMMUNICATIONS PLC
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. The Company raised equity in
GBP which was converted into Euros to manage the exposure to currency risk arising in relation to the proposed
use of these funds as part settlement of the proposed acquisition price. 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
8
ZEGONA COMMUNICATIONS PLC
Longer term viability statement
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.
The assessment period
We continue to believe that three years – in this case the three years to December 2026 – is the appropriate
period as it is the period focused on by the Board during its strategic planning process including an assessment
of its principal risks.
The assessment process and key assumptions
In making this assessment the Board undertook a comprehensive and robust analysis of the key risks to Zegona
including those resulting from the proposed acquisition of Vodafone Spain including those considered to threaten
its business model, performance, solvency and liquidity.
Zegona’s position changed fundamentally on 31 October 2023 with the proposed acquisition of Vodafone
Spain. The proposed acquisition will be part funded by an underwritten financing package of €3.9 billion, which
comprises a term loan facility of €0.5 billion (Term Loan A) and a corporate bridge facility of €3.4 billion (see
note 15). The bridge loan is for a term of 12 months, with two 6-month extension options being available at
the discretion of the Zegona Directors (Zegona intends to refinance the corporate bridge facility in the debt
capital markets). The equity funding and debt financing has been considered for the purposes of this viability
assessment. The Directors also considered covenants that upon the completion of the proposed Acquisition, will
be attached to the underwritten financing package and will be first measured in March 2025.
In assessing whether the viability assumptions are appropriate, the Zegona Board considered both Zegona’s and
the combined Zegona and Vodafone Spain Group’s (assuming completion of the acquisition) operations, strategy,
customer numbers and revenues, direct costs, acquisition and retention costs per customer and customer churn
rates together with operating and capital expenditure and Business EBITDaaL
4
measures and net debt assumptions.
This assessment also included detailed considerations of current and proposed strategic and business plans,
working capital requirements, operating and capital investment plans, debt and funding, available headroom
and covenant reporting.
This assessment was conducted considering both a base case and a ‘stressed’ reasonable worse case scenario,
identifying risks and mitigating factors and ensuring both Zegona and the Combined Group has sufficient
funding to meet its current, planned and contracted commitments as and when they fall due during the viability
assessment period.
Results of the going concern assessment
The assessment showed that, 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.
Statement of viability
Taking into account Zegona’s current position and its 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 to 31 December 2026.
The Strategic Report was approved by the Board on 29 April 2024 and is signed on its behalf by:
Eamonn O’Hare
Chairman and Chief Executive Officer
4 As defined on page 1.
DIRECTORS' REPORT | CORPORATE RESPONSIBILITY
9
ZEGONA COMMUNICATIONS PLC
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.
The business is committed to diversity and to meeting governance requirements in this important area. Historically
we met the 40% gender balance target, with Kjersti Wiklund and Suzi Williams (Chair of the Remunerations &
Nominations Committee). Following Kjersti’s resignation (2 October 2023), the board has been actively recruiting
her replacement, and plans are well advanced in that area. This does however mean that as at 31 December
2023, the board included one woman and no members from a minority ethnic background. The Committee is
committed to a diversity policy within its board and is actively incorporating this into its current recruitment
process in anticipation of the close of the proposed acquisition of Vodafone Spain.
Board Directors and senior managers have been appointed to bring required skills, knowledge and experience.
The Nomination and Remuneration Committee will continue to consider the diversity of the Board for new
appointments.
The table below shows the breakdown of our workforce at the end of 2023.
Male Female Total
Board Directors 4 1 5
Senior management 1 – 1
Other staff – 1 1
Total 5 2 7
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 oversee and have responsibility for Zegona’s sustainability initiatives,
disclosures, and reporting. These include, but are not limited to, climate risks and opportunities. In view of its
current activities 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.
DIRECTORS' REPORT | CORPORATE RESPONSIBILITY
10
ZEGONA COMMUNICATIONS PLC
We are committed to minimising Zegona’s impact on the environment. As it is presently constituted, Zegona’s
environmental impact is limited and climate-related risks and opportunities are accordingly limited until it
acquires another business. In the period under review, Zegona had no operating investments and only 4 full time
employees. These employees perform largely information-based roles and during 2023 they all worked from
home, save for a weekly meeting, as Zegona did not maintain business premises and embraced virtual working
practices.
Zegona’s approach seeks 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.
For 2023 it was 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, once the Vodafone Spain proposed acquisition completes this will profoundly change the scale and
climate-related risk profile of the business and the process for identifying and managing them. It is not possible to
reach any sensible conclusions today about which specific risks Zegona may be exposed to in the future following
the completion of the proposed acquisition of Vodafone Spain without completing a detailed risk assessment.
However, Zegona is conscious from preliminary assessments at the deal stage that such risks and opportunities
will exist in the acquisition and considers that the most important objective is to ensure these are properly
understood so appropriate decisions can be taken on risk mitigation tools.
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’s Scope 2 and Scope 3 emissions for the year to 31 December 2023 and
comparative previous period are shown below:
Global tonnes of CO
2
e
2023 2022
Scope 2 (electricity) – –
Per €m operating expenses – –
Scope 3 (water consumption, business travel) 17.8 4.5
Per €m operating expenses 1.25 1.35
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.
DIRECTORS' REPORT | CORPORATE RESPONSIBILITY
11
ZEGONA COMMUNICATIONS PLC
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 22.
DIRECTORS' REPORT | OTHER MATTERS
12
ZEGONA COMMUNICATIONS PLC
General
Details of the directors can be found on pages 17 to 18. 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 30.
Result
For the year ended 31 December 2023, Zegona’s loss before tax from continuing operations was €15.6 million
(2022: €3.3 million). Other comprehensive gain was €8.1 million (2022: loss of €0.6 million). Therefore, the total
comprehensive loss for 2023 was €7.4 million (2022: loss of €4 million). Reviews of performance and likely future
developments are set out in the Strategic Report on pages 1 to 8.
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 2023 (2022: €nil).
Contracts of significance
On 31 October 2023 we announced the proposed acquisition of Vodafone Spain from Vodafone Europe B.V.
(“Vodafone Europe”) by Zegona Communications plc, Zegona Limited and Zegona Bidco, S.L.U (the “Acquisition”).
The acquisition is due to complete in the first half of 2024. The details of this proposed acquisition and the
significant contracts and arrangements Zegona have entered into are noted on page 1.
There were no further significant contracts.
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 704,149,410 ordinary shares of £0.01 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. We note that, pursuant to the Conditional Subscription and Relationship Agreement dated 31 October
2023, a substantial shareholder, EJLSHM Funding Limited has irrevocably agreed with Zegona not to exercise its
voting rights (other than in connection with a takeover) and there are further restrictions around future sales by
EJLSHM Funding Limited of Zegona’s shares. Holders of Ordinary Shares have the right to participate in dividends
and any surplus capital on a winding up pari passu as amongst themselves.
Future Developments
On 31 October 2023 we announced the proposed acquisition of Vodafone Spain from Vodafone Europe. The
acquisition is expected to complete in the first half of 2024. Details of this proposed acquisition are noted in the
Chairman’s Statement on page 1.
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 2024 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 Director’s estimate of Zegona’s intrinsic value. Any shares repurchased by Zegona may
be held in treasury and subsequently resold for cash, cancelled or used for employee share scheme purposes.
DIRECTORS' REPORT | OTHER MATTERS
13
ZEGONA COMMUNICATIONS PLC
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 starting on page 23. 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 2023 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:
Asset manager
Shareholding at
28 March
2024
% of ordinary
share capital
as at 28 March
2024
Shareholding at
31 December
2023
% of ordinary
share capital
as at
31 December
2023
EJLSHM Funding Ltd 523,240,603 74.31% 523,240,603 74.31%
Thornburg Investment Management 35,994,107 5.11% 34,880,842 4.95%
Alken Asset Management 25,556,449 3.63% 26,897,259 3.82%
Fidelity Investments Limited 24,928,947 3.54% 24,533,347 3.48%
609,720,106 86.59% 609,552,051 86.56%
Independent auditor
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 2024 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.
DIRECTORS' REPORT | OTHER MATTERS
14
ZEGONA COMMUNICATIONS PLC
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 and, as discussed in note 2 to the
financial statements, has concluded the Company is able to continue in business and 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
29 April 2024
DIRECTORS' REPORT | DIRECTORS’ RESPONSIBILITY
15
ZEGONA COMMUNICATIONS PLC
STATEMENTS
15
STATEMENTS
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report 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.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with
that law and those regulations.
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 jurisdictions.
In accordance with Disclosure Guidance and Transparency Rule (“DTR”) 4.1.16R, the financial statements will
form part of the annual financial report prepared under DTR 4.1.17R and 4.1.18R. The auditor’s report on these
financial statements provides no assurance over whether the annual financial report has been prepared in
accordance with those requirements.
DIRECTORS' REPORT | DIRECTORS’ RESPONSIBILITY
16
ZEGONA COMMUNICATIONS PLC
STATEMENTS
16
HEAD_2nd_Line
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
29 April 2024
GOVERNANCE | PROFILES OF THE DIRECTORS
17
ZEGONA COMMUNICATIONS PLC
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.
Suzi Williams, independent Non-Executive Director (appointed 5 February 2020)
Suzi is a highly experienced FTSE 250 Non-Executive Director. She has spent over 25 years in telecommunications,
media and consumer businesses in the UK and internationally including 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.
GOVERNANCE | PROFILES OF THE DIRECTORS
18
ZEGONA COMMUNICATIONS PLC
PROFILES OF THE DIRECTORS
Suzi is currently a non-executive director and chair of remuneration committee 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.
Previously she was Senior Advisor to The Sustainable Infrastructure fund at Gresham House Private Equity (until
June 2023). She also held non-executive director and chair of remuneration committee 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
19
ZEGONA COMMUNICATIONS PLC
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 starting on page 9 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 three 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 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.
Upon on the closure of the proposed acquisition of Vodafone Spain, the Board would meet formally at least
six times a year but will frequently meet 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 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. A Schedule of Matters Reserved for the Board,
approved by the Board on 9 June 2020, can be found on Zegona’s website
6
.
6 https://www.zegona.com/investor-relations/shareholder-information.aspx.
GOVERNANCE | CORPORATE GOVERNANCE STATEMENT
20
ZEGONA COMMUNICATIONS PLC
CORPORATE GOVERNANCE STATEMENT
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 18. 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, and Suzi Williams together with
Kjersti Wiklund (until her resignation on 2 October 2023) were 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 2023 was:
Board
Nomination and
Remuneration
Committee
Audit and Risk
Committee
Eamonn O’Hare 5/5 – –
Robert Samuelson 5/5 – –
Richard Williams 5/5 2/2 2/2
Ashley Martin 5/5 2/2 2/2
Suzi Williams 5/5 2/2 –
Kjersti Wiklund* 3/5 – 1/2
* resigned 2 October 2023
Directors’ terms of service
Zegona’s Articles of Association require each Director to retire from office and offer himself or herself for
re-election or election, as the case may be, at each AGM. Accordingly, each of the Directors will retire from
office at the 2024 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 appointment letters 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.
GOVERNANCE | CORPORATE GOVERNANCE STATEMENT
21
ZEGONA COMMUNICATIONS PLC
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, which was renamed Gen II Corporate Services (Jersey) Limited on 16
April 2024 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 19 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, their tenure
should be limited to nine years and succession planning should be undertaken when appropriate. Zegona does
not comply with these requirements. 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. The Board consider that it is important that this should continue to be kept under active
review.
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. The Board fully recognises the value that can
be provided by a SID and is intending to consider such appointments during 2024 following the completion of the
proposed acquisition of Vodafone Spain.
Employee engagement
Provisions 2, and 5 provide guidance for the implementation of procedures meant to ensure Zegona engages
with and monitors its workforce. Zegona had four employees during the period under review and therefore
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.
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.
GOVERNANCE | CORPORATE GOVERNANCE STATEMENT
22
ZEGONA COMMUNICATIONS PLC
The findings of the review were generally positive. 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 2024 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 is 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.
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.
GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT
23
ZEGONA COMMUNICATIONS PLC
I am pleased to present the 2023 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
7
.
Committee membership and meetings
The members of the A&RC during 2023 were Ashley Martin (Chairman), Richard Williams and Kjersti Wiklund
(up to her resignation on 2 October 2023), 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 2023,
reflecting that Zegona did not hold an operating asset, the A&RC met only in September and April 2023 and has
subsequently met in January and April 2024. 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.
7 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.
GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT
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ZEGONA COMMUNICATIONS PLC
• 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 both Zegona’s and Zegona
incorporating Vodafone Spain (the Combined Group’s) ability to continue as a going concern, which
involved reviewing the underlying assumptions around on-going cash flows, management’s stressing of
these assumptions and challenging Management’s judgments around Zegona’s and the Combined Group’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 and
the Combined Group’s strategic position. The A&RC also considered the impact of any potential delays to the
closing of the proposed acquisition of Vodafone Spain and also the event that the proposed acquisition does
not close. The A&RC also reviewed the appropriateness of Management’s conclusion that the going concern
basis is appropriate. The A&RC also reviewed the proposed disclosure around going concern in the annual
report.
Impact of the proposed acquisition of Vodafone Spain on the Zegona financial statements - The A&RC
reviewed and agreed with management’s accounting treatment of items relating to the proposed
Acquisition. Specifically, the following key judgements were reviewed: treatment of significant project costs,
the treatment of the promissory note due from EJLSHM Funding Limited, the foreign change losses arising as
a result of the revaluation of the €1,187.7 million of euro denominated assets (generated from the proceeds
of the Company’s financing activities) to the functional currency of Sterling.
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 £4.4 million (€5.1 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 and other factors which may impact
the external auditor’s re-appointment;
• Assessed 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 2023;
GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT
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ZEGONA COMMUNICATIONS PLC
• 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 eighth audit and the A&RC was involved in the
process to select the 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.
The A&RC maintains a policy that requires the prior approval of non-audit services by the AR&C and the Chief
Financial Officer to ensure that such services do not impair the external auditor’s independence or objectivity.
Additionally, the external auditor’s independence and objectivity is further safeguarded by the AR&C policy of
prohibiting the employment of any current or former employee of the external audit firm and those with any
immediate family members who are an employee of the external auditors. This policy is compliant with the
revised FRC Ethical Statement Standard.
During 2023, there were £162,000 non-audit fees paid to KPMG principally relating to the equity raise prospectus
and a review of the interim financial statements. These services and fees were approved by the A&RC.
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. Upon the closure of the proposed acquisition
of Vodafone Spain their existing internal audit function will form an integral and important part of the Zegona
control matrix.
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;
GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT
26
ZEGONA COMMUNICATIONS PLC
• Systems and procedures in place to identify, assess, control and monitor principal and emerging strategic,
commercial, financial and regulatory risks which 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
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ZEGONA COMMUNICATIONS PLC
COMMITTEE REPORT
27
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 2023.
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
Last year management continued to look for their next investment opportunity in the European
Telecommunications market where considerable value could be generated to the Zegona’s shareholders and on
31 October 2023 we announced the proposed acquisition of Vodafone Spain from Vodafone Europe B.V. (the
proposed “Acquisition”). The acquisition is expected to complete in the first half of 2024.
This success forms the backdrop of the key remuneration matters that we have dealt with in the year, as detailed
below:
Remuneration decisions for 2023 - Reviewing outcomes against company performance
2023 bonus and salaries
As noted in last year’s Remuneration Report, at the start of the year the Committee did not originally envisage
paying any bonuses for 2023 given Zegona did not own any material asset at that stage. However, the subsequent
identification and securing of the Vodafone Spain business during the year represents an exceptional deal in
scale and complexity and is considered to provide an outstanding opportunity to grow value for the shareholders
of Zegona. In this context, it was decided that it was wholly appropriate for the Committee to recognise the
substantial work of the senior management team in respect of this transformational acquisition, particularly in
the absence of any other incentive for the year. Accordingly, bonuses of 100% of salary were approved by the
Committee in respect of 2023 for the Executive Directors.
Despite the Committee recognising the contribution of the CEO in securing the Vodafone Spain deal,
Eamonn O'Hare made a personal decision to request not to be considered for a bonus for the year.
Application of remuneration policy for 2024
We will perform a detailed and full benchmarking review of the levels of Executive and Non-Executive Director
remuneration against relevant and comparable businesses immediately post the close of the acquisition of
Vodafone Spain to ensure European compensation equivalences for our Executive and Non-Executive Directors
based on delivering a mix between putting in place required governance structures, debt restructuring and
commercial targets.
We will report on any resulting changes to remuneration in next year’s Remuneration Report.
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.
With specific regard to remuneration, the role of the Committee continues to be ensuring that the Directors are
appropriately incentivised and rewarded, through making recommendations regarding remuneration policy and
frameworks. 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.
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ZEGONA COMMUNICATIONS PLC
COMMITTEE REPORT
28
HEAD_2nd_Line
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 2023, the Committee formally met once and has subsequently met in April 2024, supported by a number of
full board discussions, with the matters being discussed set out on page 29. 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 2024, and
concluded to undertake a full benchmarking exercise;
• Reviewed the recommendations arising from the 2023 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 PricewaterhouseCoopers LLP (“PwC”) as an adviser in 2021 and advice has been sought in
respect of 2023.
Conclusion
I would like to take the opportunity again to thank shareholders for their support this year and I look forward to
your support at the upcoming AGM.
Suzi Williams
Chair of the Nomination and Remuneration Committee
GOVERNANCE | NOMINATION AND REMUNERATION
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ZEGONA COMMUNICATIONS PLC
COMMITTEE REPORT
29
HEAD_2nd_Line
Executive pay at a glance
Base salary
Purpose Current policy 2023 Implementation 2024 Implementation
To reflect market value of
the role and individual’s
performance and
contribution and enable
Zegona to recruit and
retain Executive Directors
of sufficient calibre to
drive Zegona’s ambitions.
Reviewed every twelve months.
Base salary increases are applied in
line with the outcome of the review. In
respect of existing Executive Directors, it
is anticipated that no salary increases will
be considered before Zegona completes its
next investment.
No salary increases
for either Executive
Director
Will be considered
subject to
benchmarking following
the completion of the
proposed acquisition
Pension contributions
Purpose Current policy 2023 Implementation 2024 Implementation
To provide a market
competitive pension.
Pension contributions are made to the
individual’s private pension arrangements
or paid to them 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.
Contribution reduced
to 19%
No change
Other benefits
Purpose Current policy 2023 Implementation 2024 Implementation
To provide market
competitive benefits.
Benefits may include car allowances,
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.
No change No change
Annual cash bonus
Purpose
To incentivise delivery of
Zegona’s annual financial
and strategic goals.
Current policy
Performance is measured on an annual
basis for each Executive Director in respect
of each financial period.
The maximum annual bonus available is
100% of base salary per annum.
The Committee retains discretion to apply
malus or clawback provisions.
2023 Implementation
Bonuses were paid
to certain Executive
Directors and senior
management
2024 Implementation
Will be considered
subject to
benchmarking following
the completion of the
proposed acquisition
Management Incentive Scheme
Purpose Current policy 2023 Implementation 2024 Implementation
To drive performance,
aid retention and align
the interests of Executive
Directors and senior
management with
shareholders over the
long term.
The Committee may allocate Management
Shares in Zegona Limited to Executive
Directors or senior management.
Zegona’s management incentive scheme
entitles participants in aggregate to receive
up to 15% of the growth in value of Zegona
subject to a shareholders’ 5% per annum
preferred return.
The 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.
No change No change
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ZEGONA COMMUNICATIONS PLC
All disclosures in this section are unaudited unless otherwise stated. The annual report on remuneration gives
details on the amounts earned in the year ended 31 December 2023 and how the Directors’ remuneration policy
will be applied in 2024. This remuneration report will be subject to an advisory vote at the 2024 AGM.
2023 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).
Executive Directors (Sterling)
Eamonn O’Hare
(Chairman & CEO)
Robert Samuelson
(COO)
2023
£
2022
£
2023
£
2022
£
Base salary 563,000 563,000 419,000 419,000
Pension contributions 106,970 112,600 79,610 83,800
Taxable benefits 21,321 21,321 21,321 21,321
Company health insurance scheme
8,935 8,582 8,430 8,152
Total fixed pay
700,226 705,503 528,361 532,273
Annual cash bonus – – 419,000 –
Management Incentive Scheme redemptions
– – – –
Total variable pay
– – 419,000 –
Total fixed and variable pay 700,226 705,503 947,361 532,273
Executive Directors (Euros)
Eamonn O’Hare
(Chairman & CEO)
Robert Samuelson
(COO)
2023
€
2022
€
2023
€
2022
€
Base salary 653,080 658,811 486,040 490,305
Pension contributions 124,085 131,762 92,348 98,061
Taxable benefits 24,732 24,950 24,732 24,950
Company health insurance scheme
10,365 10,043 9,779 9,539
Total fixed pay
812,262 825,566 612,899 622,855
Annual cash bonus - - 486,040 -
Management Incentive Scheme redemptions
- - - -
Total variable pay
- - 486,040 -
Total fixed and variable pay 812,262 825,566 1,098,939 622,855
Components of remuneration: Base salary
In 2023 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 2023.
We will perform a detailed and full benchmarking review of the levels of Executive Director remuneration against
relevant and comparable businesses immediately post the close of the acquisition of Vodafone Spain to ensure
market alignment for our Executive Directors.
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ZEGONA COMMUNICATIONS PLC
Components of remuneration: Pension contributions
In 2023 both Executive Directors received a pension contribution of 19% of their base salary, which was the same
as the contribution available to the majority of the workforce. There will be no change to pension provision for
2024.
Components of remuneration: Taxable benefits and Company Health Insurance Scheme
In 2023 both Executive Directors received car allowances, personal tax advice, private medical insurance, and
death in service cover, which will continue in 2024.
Components of remuneration: Annual cash bonus
Implementation in 2023
As noted in last year’s Remuneration Report, at the start of the year the Committee did not originally envisage
paying any bonuses for 2023 given Zegona did not own any material asset at this stage. However, the identification
and securing of the Vodafone Spain business during the year, which represents an exceptional deal in scale
and complexity and is considered to provide an outstanding opportunity to grow value for the shareholders
of Zegona. In this context, it was subsequently decided that it was wholly appropriate for the Committee to
recognise the substantial work of the senior management team in respect of this transformational acquisition,
particularly in the absence of any other incentive for the year. Accordingly, bonuses of 100% of salary were
approved by the Committee in respect of 2023 for the Executive Directors.
Despite the Committee recognising the contribution of the CEO in securing the Vodafone Spain deal, Eamonn
O'Hare made a personal decision to request not to be considered for a bonus for the year.
Implementation in 2024
The bonus scheme will continue to operate for the Executive team during 2024/5. Targets are commercially
sensitive, especially ahead of completion of the Vodafone Spain acquisition. Targets and performance against
them will therefore be disclosed retrospectively in the 2024 Remuneration Report
Components of remuneration: Management Incentive Scheme
Although the Committee has determined that it is appropriate to remunerate and incentivise the Executive
Directors through their basic pay, benefits and annual bonus, it considers that for the Executive Directors’ a
significant portion of potential remuneration should be delivered via long-term incentives linked to the creation
and delivery of real returns to shareholders. Accordingly, a key element of Zegona’s remuneration policy for the
Executive Directors and senior management continues to be 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
8
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 of associations of Zegona
Limited. If the Preferred Return has not been achieved, no payment is made. It is currently anticipated that the
8 Return (a 5% per annum return on a compounded basis on shareholders' net investment).
GOVERNANCE | DIRECTORS’ REMUNERATION REPORT
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ZEGONA COMMUNICATIONS PLC
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.
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
2023, even though the Management Shares were not exercisable at that date
9
. 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 £1,111 million was higher than both the Preferred Return target and the net
invested capital, the holders of the Management Shares would have received some payment.
Since November 2023 (£)
Net invested capital
10
1,056,160,071
At 31 December 2023 (£)
Number of shares 704,149,410
Average share price
11
1.577
Deemed market capitalisation
1,110,541,755
Surplus in value per the incentive scheme
54,381,684
Split between:
Management Shares 15%
8,157,253
Ordinary Shares 85%
46,224,431
9 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.
10 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.
11 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 2023.
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33
ZEGONA COMMUNICATIONS PLC
Shareholders’ net invested capital at 31 December 2023 was calculated as follows:
Net invested capital
(unadjusted)
£
5% pa
Preferred Return
at 31 Dec 2023
£
Preferred
Return hurdle
at 31 Dec 2023
£
Baseline Value – 14 October, 2021 6,700,452 764,291 7,464,743
Share Issue – October 2021 1,276,360 143,086 1,419,446
Share Issue – November 2022 1,217,780 69,932 1,287,712
Share Issue - November 2023 1,046,965,479 7,404,517 1,054,369,996
As at 31 December 2023 1,056,160,071 8,381,826 1,064,541,897
Shares outstanding 704,149,410 704,149,410 704,149,410
Per share (£) 1.500 0.012 1.512
2023 Non-Executive Directors remuneration summary (Audited)
The remuneration of the Non-Executive Directors during the year is detailed below. Non-Executive Directors
receive a basic fee of £50,000 with an additional fee of £10,000 if the Non-Executive Director is Chair of a sub-
committee of the Board. In the interest of clarity, since the Non-Executive Directors fees are set and paid in
Sterling, the table has been presented in both Sterling and euros (Zegona’s presentational currency).
Non-Executive Directors fees
12
2023
£
2022
£
2023
€
2022
€
Richard Williams 50,000 50,000 58,520 58,509
Ashley Martin 60,000 60,000 69,624 70,211
Kjersti Wiklund* 37,500 50,000 43,515 58,509
Suzi Williams 60,000 60,000 69,624 70,211
Total 207,500 220,000 241,283 257,440
* resigned 2 October 2023
Non-Executive Director remuneration is fixed and therefore not performance-linked. We will perform a
detailed and full benchmarking review of the levels of Non-Executive Director remuneration against relevant
and comparable businesses immediately post the close of the acquisition of Vodafone Spain to ensure market
alignment for our Non-Executive Directors.
Summary of total shareholder return and Chief Executive remuneration.
The total shareholder return graph below shows the value as at 31 December 2023 of £100 invested on IPO on
19 March 2015, compared with £100 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 £204.6 in December 2023 reflects the impact of equity issuance and proposed acquisition of Vodafone
Spain.
12 The Non-Executive Directors have not received any other form of remuneration during the current or prior year.
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ZEGONA COMMUNICATIONS PLC
20
40
60
80
100
120
140
160
180
200
220
Value of investment (£)
Zegona OMSCI Europe/ CommunicaƟon Services Sector Index
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
13
2016 2017 2018 2019 2020 2021 2022 2023
Total remuneration €m 0.67 0.77 1.29 0.71 1.25 1.27 18.48 0.83 0.81
Annual bonus
(% of maximum) 0% 0% 100% 0%
14
94% 75% 0%
15
0%
16
0%
17
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 2022
and 2023:
Base salary
change %
Taxable
benefits
change %
Annual cash
bonus
change %
Executive Directors
Eamonn O’Hare 0% 1.2% n/a
Robert Samuelson 0% 1.2% 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%
* resigned 2 October 2023
13 Period from incorporation on 19 January 2015 to 31 December 2015.
14 The Chief Executive did meet several indicators of achievement in relation to his 2018 bonus objectives, however the Chief Executive
waived his 2018 bonus in order to maximise the cash raised from the equity placing in February 2019.
15 The Chief Executive 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.
16 The Chief Executive 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.
17 Bonus was voted for but waived by the CEO
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ZEGONA COMMUNICATIONS PLC
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:
2023
€000
2022
€000
Employee pay 2,717 2,122
Returns to shareholders – –
Of which:
Dividends – –
Capital Return – –
Directors’ terms and conditions
Service contract duration and directors’ appointment letters durations
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
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 2024
AGM. All Board members have service contracts or appointment letters and details of the unexpired terms of
these service contracts or appointment letters 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 incentive shares pursuant to the long-term
incentive plan in force in respect of Zegona. No payments for loss of office were made in 2023.
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ZEGONA COMMUNICATIONS PLC
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 interests are significantly aligned with
shareholders through their existing shareholdings and their participation in the Management Incentive Scheme.
The shareholdings of the Directors at 31 December 2023 are set out below. There have been no changes in the
shareholdings of the Directors from 31 December 2023 to the date of this report.
Director
Number of
shares
% of issued
share capital
Eamonn O’Hare 1,067,462 0.15%
Robert Samuelson 525,561 0.07%
Richard Williams 27,742 0.00%
Ashley Martin 13,544 0.00%
Suzi Williams – –
In addition, the Directors owned the following Management Shares in Zegona Limited
Participation in
growth in
value
Number of
Management
Shares
Nominal value
of Management
Shares
Eamonn O’Hare 8.88% 305,000 £305
Robert Samuelson 4.44% 152,500 £153
Zegona senior management 1.68% 57,964 £58
515,464 £516
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 AGM
For the
resolution
Against the
resolution
Votes
withheld
Directors’ Remuneration Report
for the year ended 31 December 2022 20 June 2023 99.99% 0.01% –
(Votes cast) 4,411,747 1 152,250
Suzi Williams
Chair of the Nomination and Remuneration Committee
29 April 2024
1. Our opinion is unmodified
We have audited the financial statements of Zegona
Communications Plc (“the Company”) for the year
ended 31 December 2023 which comprise the
Consolidated Statement of Comprehensive Income,
Consolidated Statement of Financial Position, Company
Statement of Financial Position, Consolidated Statement
of Changes in Equity, Company Statement of Changes in
Equity, Consolidated Statement of Cash Flows, Company
Statement of Cash Flows, and the related notes,
including the accounting policies in note 2.
In our opinion:
— the financial statements give a true and fair view of
the state of the Group’s and of the parent
Company’s affairs as at 31 December 2023 and of
the Group’s loss for the year then ended;
— the Group financial statements have been properly
prepared in accordance with UK-adopted
international accounting standards;
— the parent Company financial statements have been
properly prepared in accordance with UK-adopted
international accounting standards and as applied in
accordance with the provisions of the Companies
Act 2006; and
— the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs (UK)”)
and applicable law. Our responsibilities are described
below. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our
opinion. Our audit opinion is consistent with our report
to the audit committee.
We were first appointed as auditor by the directors on 21
November 2016. The period of total uninterrupted
engagement is for the eight financial years ended 31
December 2023. We have fulfilled our ethical
responsibilities under, and we remain independent of the
Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed
public interest entities. No non-audit services prohibited by
that standard were provided.
Independent
auditor’s report
to the members of Zegona Communications plc
Overview
Materiality:
group financial
statements as a whole
€700,000 (2022: €172,000)
4.50% (2022: 5%) of loss before
tax
Coverage 100% (2022:100%) of Group loss
before tax
Key audit matters
(Group and Parent) vs 2022
Event driven Accounting treatment
and presentation of the
impact of the proposed
acquisition of Vodafone
Spain
New
37
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. We summarise below the key audit matters (changed from 2022), in arriving at our audit opinion above, together with
our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These
matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of
the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not
provide a separate opinion on these matters.
We continue to perform procedures over Going concern and Recoverability of Income Tax receivable. However, given the significance of
the transaction on acquisition of Vodafone Spain, the recoverability of income tax receivable was no longer a significant area of focus and
with financing available to the entity and the equity issue, going concern is no longer a heightened risk area for our audit in 2023.
Therefore, these are not separately identified in our report this year.
The risk Our response
Accounting treatment and presentation of
the impact of the proposed acquisition of
Vodafone Spain
Refer to page 24 (Audit and Risk Committee
Report), page 61 (accounting policy) and
page 76 (financial disclosures)
Low risk, High value
The Group has entered into an
agreement to acquire 100% of the
Vodafone Spain business which is in
the final stages of completion and
now only subject to Spanish
regulatory approval. The Group
completed an equity raise and
incurred costs in arranging financing
facilities, including consultant fees,
in anticipation of the completion of
this acquisition. The equity raise,
costs incurred and the related
presentation are not at a high risk of
significant misstatement or subject
to significant judgement. However,
due to its materiality in the context
of the Group and Parent Company
financial statements, we considered
this to be the area which was the key
focus of the overall Group and
Parent Company audit.
We performed the tests below rather than seeking
to rely on any of the group or parent company’s
controls because the nature of the transaction is
such that we would expect to obtain audit evidence
primarily through the detailed procedures
described.
Our procedures included:
— Assessing expert’s credentials: We assessed the
objectivity and experience of external experts
engaged by the Group to support them with
their accounting analysis and step plan for the
proposed acquisition.
— Tests of details: We tested the amounts for cost
incurred against agreements with third parties.
— Tests of details: We inspected the bank
statements and expense reports for the period
subsequent to year-end in order to support our
assessment as to whether all relevant costs had
been recorded correctly in the year.
— Accounting analysis: We critically challenged
the group’s judgement on the allocation of costs
to issuance of shares, the arrangement of debt
facilities, or other project costs, by comparing
the allocation considered by group with the
allocation confirmed by third parties and our
understanding of the nature of services
provided.
— Accounting analysis: We critically assessed the
group accounting analysis for each step
completed, including the amounts recorded for
the initial recognition and measurement of the
consideration received for the issue of equity
shares, by comparing it to our own analysis of
the relevant accounting standards.
Assessing transparency - We assessed the adequacy
of the Group and Company's disclosures about the
proposed acquisition of Vodafone Spain
Our results - We found the accounting treatment
and the disclosures of the proposed acquisition of
Vodafone Spain to be acceptable.
38
3. Our application of materiality and an overview of the
scope of our audit
Materiality for the Group financial statements as a whole
was set at €700,000 (2022: €172,000), determined with
reference to a benchmark of gro up loss before tax, of
which it represents 4.50% (2022: 5% of group loss before
tax).
Materiality for the parent company financial statements
as a whole was set at €630,000 (2022: €39,000),
determined with reference to a benchmark of total
assets, limited to be less than materiality for group
materiality as a whole. It represen ts 0.03% (2022: 1%) of
the stated benchmark.
In line with our audit methodology, our procedures on
individual account balances and disclosures were
performed to a lower threshold, performance
materiality, so as to reduc e to an acceptable level the ris k
that individually immaterial misstatements in individual
account balances add up to a material amount across the
financial statements as a whole.
Performance materiality for the financial statements as a
whole was set at 75% (2022: 75%) of materiality, which
equates to €525,000 (2022: €129,000) for the Group and
€470,000 (2022: €30,000) for the parent Company. We
applied this percentage in our determination of
performance materiality because we did not identify any
factors indicating an elevated level of risk.
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding €35,750 (2022: €8,600), in addition to other
identified misstatements that warranted reporting on
qualitative grounds.
In 2023 (same as 2022) the Group audit team performed
the audit of the Group as if it was a single aggregated set
of financial information which covered 100% of total
Group lo ss before tax and total Group assets. The audit
was performed using the materiality and performance
materiality levels set out above.
The scope of the audit work performed was fully
substantive as we did not rely upon the Group’s internal
control over financial reporting.
Loss before tax
€15.55m (2022: € 3.4m)
Group materiality
€ 700,000 (2022: € 172,000)
Loss before Tax
Group materiality
€700,000
Whole financial
statements
materiality (2022:
€172,000)
€525,000
Whole financial
statements performance
materiality (2022: €129,000)
€35,750
Misstatements
reported to the
audit committee (2022:
€8,600)
39
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. We summarise below the key audit matters (changed from 2022), in arriving at our audit opinion above, together with
our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These
matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of
the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not
provide a separate opinion on these matters.
We continue to perform procedures over Going concern and Recoverability of Income Tax receivable. However, given the significance of
the transaction on acquisition of Vodafone Spain, the recoverability of income tax receivable was no longer a significant area of focus and
with financing available to the entity and the equity issue, going concern is no longer a heightened risk area for our audit in 2023.
Therefore, these are not separately identified in our report this year.
The risk Our response
Accounting treatment and presentation of
the impact of the proposed acquisition of
Vodafone Spain
Refer to page 24 (Audit and Risk Committee
Report), page 61 (accounting policy) and
page 76 (financial disclosures)
Low risk, High value
The Group has entered into an
agreement to acquire 100% of the
Vodafone Spain business which is in
the final stages of completion and
now only subject to Spanish
regulatory approval. The Group
completed an equity raise and
incurred costs in arranging financing
facilities, including consultant fees,
in anticipation of the completion of
this acquisition. The equity raise,
costs incurred and the related
presentation are not at a high risk of
significant misstatement or subject
to significant judgement. However,
due to its materiality in the context
of the Group and Parent Company
financial statements, we considered
this to be the area which was the key
focus of the overall Group and
Parent Company audit.
We performed the tests below rather than seeking
to rely on any of the group or parent company’s
controls because the nature of the transaction is
such that we would expect to obtain audit evidence
primarily through the detailed procedures
described.
Our procedures included:
— Assessing expert’s credentials: We assessed the
objectivity and experience of external experts
engaged by the Group to support them with
their accounting analysis and step plan for the
proposed acquisition.
— Tests of details: We tested the amounts for cost
incurred against agreements with third parties.
— Tests of details: We inspected the bank
statements and expense reports for the period
subsequent to year-end in order to support our
assessment as to whether all relevant costs had
been recorded correctly in the year.
— Accounting analysis: We critically challenged
the group’s judgement on the allocation of costs
to issuance of shares, the arrangement of debt
facilities, or other project costs, by comparing
the allocation considered by group with the
allocation confirmed by third parties and our
understanding of the nature of services
provided.
— Accounting analysis: We critically assessed the
group accounting analysis for each step
completed, including the amounts recorded for
the initial recognition and measurement of the
consideration received for the issue of equity
shares, by comparing it to our own analysis of
the relevant accounting standards.
Assessing transparency - We assessed the adequacy
of the Group and Company's disclosures about the
proposed acquisition of Vodafone Spain
Our results - We found the accounting treatment
and the disclosures of the proposed acquisition of
Vodafone Spain to be acceptable.
4. Going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have
concluded that the Group and the Company’s financial po sition
means that this is realistic. They ha ve also concluded that there
are n o material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for at least
a year from the date of app roval of the financial statements (“the
going concern period”).
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent risks to
its business model and analysed how those risks might affect the
Group and Company’s financial resources or ability to co ntinue
operations over the going concern period. The risks that we
considered most likely to adversely affect the Group and
Company’s available financial resources over this perio d were:
• In the scenario where the proposed acquisitio n of Vodafone
Spain closes during the first half of 2024 or is delayed past
this date – a failure to achieve the revenue and EBITDA
targets in the Zegona Business Plan as a result of increased
competition within the Spanish telecommunicatio ns sector or
a challenges in controlling customer churn rates, or a failure
to achieve the cost control measures in the timelines set out
in the plan.
We considered whether this risk could plausibly affect the
liquidity in the going concern period by assessing the directors’
sensitivities over the level of available financi al resources
indica t ed by the Group’s financial forecasts taking account of
severe, but plausible adverse effects that could arise from these
risks individually and collect i vely.
Our procedures also included:
• Evaluating management’s risk assessment process for
identifying business risk s relating to events and conditions
that may cast significant doubt on the ability to continue as a
going concern;
• Assessing the reasonableness of management’s
budgets/forecasts and evaluating whether the assumptions
are within a reasonable range, and assessing the severe but
plausible downside scenarios, in particular challenging
whether those downside scenarios reflect plausible impacts
of contingen cies in business improvement plans;
• Evaluating whether there is adequate support for the
assumptions underpinning management’s assessment and
whether they are realistic, achievable and consistent with the
external and /or internal environment and other matters
identified
in the audit;
• Challenging management’s plans for future actions, and
assessing the relia bility and relevance of data used; and
• Evaluating whether sufficient and appropriate audit evidence
has been obtained to conclude on the appropriateness of
management’s use of the going concern basis of accounting,
and the appropriateness of the basis of preparation
disclosure in no te 2.
We considered whether the going concern disclosure i n note 2 to
the financial statements gives a full and accurate description of
the directors’ assessment of going concern, includ ing the
identified risks and dependencies.
Our conclusions based on this work:
— we consider that the directors’ use of the go ing concern basis
of accounting in the preparation of the financial statements is
appropriate;
— we hav e not identified, and concur with the directors’
assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may
cast significant doubt on the Group’s or Company's ability to
continue as a going concern for th e going concern period; and
— we have nothing material to add or draw attention to in
relation to the directors’ statement in note 2 to the financial
statements on the use of the g oing concern basis of
accounting with no material uncertainties that may cast
significant doubt over the Group and Company’s use of that
basis for the going concern period, and we found the going
concern disclo sure in note 2 to be acceptable.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcome s that are
inconsistent with judgements that were reasonable at the time
they were made, the above conclusions are not a guarantee that
the Group or the Company will continue in operation.
5. Fra ud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could in dicate an
incentive or pressure to commit fraud or provide an opportunity
to commit fraud. Our risk assessment procedures included:
• Enquiring of directors, the audit committee and inspection of
policy documentation as to the Group’s high-level policies
and procedures to prevent and detect fraud, and the Group’s
channel for “whistleblowing”, as well as whether they
have
knowledge of any actual, suspected or alleged fraud.
• Reading board, audit committee, remuneration and
nomination committee minutes.
• Considering remuneration incentive schemes and
performance targets for directors/senior management.
• Using analytical procedures to i de n tify any unusual or
unexpected transactions.
• We communicated identified fraud risks throughout the audit
team and remained alert to any indications of fraud
throughout the audit.
As required by auditing standards, we perform procedures to
address the risk of management override of controls, in
particular the risk that Group and Company management may be
in a position to make inappropriate accounting entries. On this
audit we do not believe there is a fraud risk related to revenue
recognition because the company does not have any trading
operations.
We did n o t id entify any additional fraud risks.
We performed procedures including identifyin g journal entries to
test based on risk criteria and comparing the identified entries to
supporting documentation. These included th ose posted to
unusual pairings with cash entries, unusual credits to inco me
statement and post year end journals.
40
Identifying and responding to risks of material misstatement due to
non-compliance with laws and regulations
We identified areas of laws an d regulations that could reasonably be
expected to have a material effect on the financial statements from
our general commercial and sector experience, through discussion
with the directors and other management (as required by auditing
standards), and discussed with the directors and other management
the policies and procedures regarding compliance with laws and
regulations.
As the Gro up is regulated, our assessment of risks involved gaining
an u nd e rstanding of the contro l environment including the entity’s
procedures for complying with reg ulatory requirements.
We communicated identifi ed laws and regulations throughout our
team and remained alert to any indications of non-comp liance
throughout the audit.
The potential effects of these laws and regulations on the financial
statements varies considerably.
Firstly, the Gro up is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation), distributable
profits legi slation , and taxation legislation and we assessed the
extent of compliance with these laws and regulations as part of our
procedures on the related financial statement items.
Secondly, the Group is subject to many other law s and regulations
where the consequences of non - compliance could have a material
effect on amounts of disclos ures in the financial statements, for
instance through the imposition of fines or litig ation. We identified
the following areas as the most likely to have such an effect:
antibribery, employment law and certain aspects of company
legislation recognising the nature of the Group’s activ i ties and its
legal form. Aud iting standards limit the required audit procedures to
identify non-compliance with these laws and regulations to enquiry
of the directors and other management and inspectio n of regulatory
and legal correspondence, if any. Therefore if a breach of
operational regu l ations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of
law or regulat i on
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statemen ts, even though we have
properly planned an d performed our audit in accordance with
auditing standards. For example, the further removed
noncompliance wit h laws and regulations
is from the events and
transactions reflected in the financia l statements, th e less likely
the inherently limited procedures required by auditing standards
would iden t i fy it .
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collus i on, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We a re not responsible for preventing
non-compliance or fraud and cannot be expected to detect
noncompliance with all laws and regulations.
41
4. Going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have
concluded that the Group and the Company’s financial po sition
means that this is realistic. They ha ve also concluded that there
are n o material uncertainties that could have cast significant
doubt over their ability to continu e as a going concern f o r at least
a year from the date of app roval of the financial statements (“the
going concern period”).
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent risks to
its business model and analysed how those risks might affect the
Group and Company’s financial resources or ability to co ntinue
operations over the going concern period. The risks that we
considered most likely to adversely affect the Group and
Company’s available financial resources over this perio d were:
• In the scenario where the proposed acquisitio n of Vodafone
Spain closes during the first half of 2024 or is delayed past
this date – a failure to achieve the revenue and EBITDA
targets in the Zegona Business Plan as a result of increased
competition within the Spanish telecommunicatio ns sector or
a challenges in controlling customer churn rates, or a failure
to achieve the cost control measures in the timelines set out
in the plan.
We considered whether this risk could plausibly affect the
liquidity in the going concern period by assessing the directors’
sensitivities over the level of available financi al resources
indica t ed by the Group’s financial forecasts taking account of
severe, but plausible adverse effects that could arise from these
risks individually and collect i vely.
Our procedures also included:
• Evaluating management’s risk assessment process for
identifying business risk s relating to events and conditions
that may cast signifi cant doubt on the ability to continue as a
going concern;
• Assessing the reasonableness of management’s
budgets/forecasts and evaluating whether the assumptions
are withi n a reasonable range, and assessing the severe but
plausible downside scenarios, in particular challenging
whether those downside scenarios reflect plausible impacts
of contingen cies in business improvement plans;
• Evaluating whether there is adequate support for the
assumptions underpinning management’s assessment and
whether they are realistic, achievable and consistent with the
external and /or internal environment and other matters
identified
in the audit;
• Challenging management’s plans for future actions, and
assessing the relia bility and relevance of data used; and
• Evaluating whether sufficient and appropriate audit evidence
has been obtained to conclude on the appropriateness of
management’s use of the going concern basis of accounting,
and the appropriateness of the basis of preparation
disclosure in no te 2.
We considered whether the going concern disclosure i n note 2 to
the financial statements gives a full and accurate description of
the directors’ assessment of going concern, includ ing the
identified risks and dependencies.
Our conclusions based on this work:
— we consider that the directors’ use of the go ing concern basis
of accounting in the preparation of the financial statements is
appropriate;
— we hav e not identified, and concur with the directors’
assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may
cast significant doubt on the Group’s or Company's ability to
continue as a going concern for th e going concern period; and
— we have nothing material to add or draw attention to in
relation to the directors’ statement in note 2 to the financial
statements on the use of the g oing concern basis of
accounting with no material uncertainties that may cast
significant doubt over the Group and Company’s use of that
basis for the going concern period, and we found the going
concern disclo sure in note 2 to be acceptable.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcome s that are
inconsistent with judgements that were reasonable at the time
they were made, the above conclusions are not a guarantee that
the Group or the Company will continue in operation.
5. Fra ud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could in dicate an
incentive or pressure to commit fraud or provide an opportunity
to commit fraud. Our risk assessment procedures included:
• Enquiring of directors, the audit committee and inspection of
policy documentation as to the Group’s high-level policies
and procedures to prevent and detect fraud, and the Group’s
channel for “whistleblowing”, as well as whether they
have
knowledge of any actual, suspected or alleged fraud.
• Reading board, audit committee, remuneration and
nomination committee minutes.
• Considering remuneration incentive schemes and
performance targets for directors/senior management.
• Using analytical procedures to i de n tify any unusual or
unexpected transactions.
• We communicated identified fraud risks throughout the audit
team and remained alert to any indications of fraud
throughout the audit.
As required by auditing standards, we perform procedures to
address the risk of management override of controls, in
particular the risk that Group and Company management may be
in a position to make inappropriate accounting entries. On this
audit we do not believe there is a fraud risk related to revenue
recognition because the company does not have any trading
operations.
We did n o t id entify any additional fraud risks.
We performed procedures including identifyin g journal entries to
test based on risk criteria and comparing the identified entries to
supporting documentation. These included th ose posted to
unusual pairings with cash entries, unusual credits to inco me
statement and post year end journals.
6. We have nothing to report on the other information in the
Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or our
audit knowledge. Based solely on that work we have not
identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the
strategic report and the directors’ report;
— in our opinion the information given in those reports for
the financial year is consistent with the financial
statements; and
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Disclosures of emerging and principal risks and longer-term
viability
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
disclosures in respect of emerging and principal risks and the
viability statement, and the financial statements and our
audit knowledge.
Based on those procedures, we have nothing further material
to add or draw attention to in relation to:
— the directors’ confirmation within the viability statement
page 8 that they have carried out a robust assessment of
the emerging and principal risks facing the Group,
including those that would threaten its business model,
future performance, solvency and liquidity;
— the longer term viability statement disclosures describing
these risks and how emerging risks are identified, and
explaining how they are being managed and mitigated;
and
— the directors’ explanation in the viability statement of
how they have assessed the prospects of the Group, over
what period they have done so and why they considered
that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their
assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
In addition to our audit of the financial statements, the directors
have engaged us to review their Viability Statement as if the
Company were required to comply with the Listing Rules of the
Financial
Conduct Authority in relation to this matter. Based on
the above procedures, we have concluded that the above
disclosures are materially consistent with the financial
statements and our audit knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were
made, the absence of anything to report on these statements is
not a guarantee as to the Group’s and Company’s longer-term
viability.
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
corporate governance disclosures and the financial statements
and our audit knowledge. Based on those procedures, we have
concluded that each of the following is materially consistent with
the financial statements and our audit knowledge:
— the directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy;
— the section of the annual report describing the work of the
Audit Committee, including the significant issues that the
audit committee considered in relation to the financial
statements, and how these issues were addressed; and
— the section of the annual report that describes the review of
the effectiveness of the Group’s risk management and
internal control systems.
In addition to our audit of the financial statements, the directors
have engaged us to review their Corporate Governance
Statement as if the Company were required to comply with the
Listing Rules of the Financial Conduct Authority in relation to this
matter. Under the terms of our engagement we are required to
review the part of the Corporate Governance Statement relating
to the Company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review. We have
nothing to report in this respect.
Based solely on our work on the other information described
above:
— with respect to the Corporate Governance Statement
disclosures about internal control and risk management
systems in relation to financial reporting processes and about
share capital structures:
– we have
not i
dentified material misstatements therein;
and
– the information therein is consistent with the financial
statements; and
— in our opinion, the Corporate Governance Statement has
been prepared in accordance with relevant rules of the
Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority.
We are also required to report to you if a corporate governance
statement has not been prepared by the company.
We have nothing to report in these respects.
42
7. We have nothing to report on the other matters on which we
are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
— adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
— the parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
— certain disclosures of directors’ remuneration specified by
law are not made; or
— we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 15,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent Company
or to cease operations, or have no realistic alternative but to do
so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in
an annual financial report prepared under Disclosure Guidance
and Transparency Rule 4.1.17R and 4.1.18R. This auditor’s report
provides no assurance over whether the annual financial report
has been prepared in accordance with those requirements.
9. The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006 and the terms of our engagement by the Company. Our
audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditor’s report, and the further matters we are
required to state to them in accordance with the terms agreed
with the Company,
and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this
report, or for th
e opinions we have formed.
Simon Richardson (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
29 April 2024
43
6. We have nothing to report on the other information in the
Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or our
audit knowledge. Based solely on that work we have not
identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the
strategic report and the directors’ report;
— in our opinion the information given in those reports for
the financial year is consistent with the financial
statements; and
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Disclosures of emerging and principal risks and longer-term
viability
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
disclosures in respect of emerging and principal risks and the
viability statement, and the financial statements and our
audit knowledge.
Based on those procedures, we have nothing further material
to add or draw attention to in relation to:
— the directors’ confirmation within the viability statement
page 8 that they have carried out a robust assessment of
the emerging and principal risks facing the Group,
including those that would threaten its business model,
future performance, solvency and liquidity;
— the longer term viability statement disclosures describing
these risks and how emerging risks are identified, and
explaining how they are being managed and mitigated;
and
— the directors’ explanation in the viability statement of
how they have assessed the prospects of the Group, over
what period they have done so and why they considered
that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their
assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
In addition to our audit of the financial statements, the directors
have engaged us to review their Viability Statement as if the
Company were required to comply with the Listing Rules of the
Financial
Conduct Authority in relation to this matter. Based on
the above procedures, we have concluded that the above
disclosures are materially consistent with the financial
statements and our audit knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were
made, the absence of anything to report on these statements is
not a guarantee as to the Group’s and Company’s longer-term
viability.
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
corporate governance disclosures and the financial statements
and our audit knowledge. Based on those procedures, we have
concluded that each of the following is materially consistent with
the financial statements and our audit knowledge:
— the directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy;
— the section of the annual report describing the work of the
Audit Committee, including the significant issues that the
audit committee considered in relation to the financial
statements, and how these issues were addressed; and
— the section of the annual report that describes the review of
the effectiveness of the Group’s risk management and
internal control systems.
In addition to our audit of the financial statements, the directors
have engaged us to review their Corporate Governance
Statement as if the Company were required to comply with the
Listing Rules of the Financial Conduct Authority in relation to this
matter. Under the terms of our engagement we are required to
review the part of the Corporate Governance Statement relating
to the Company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review. We have
nothing to report in this respect.
Based solely on our work on the other information described
above:
— with respect to the Corporate Governance Statement
disclosures about internal control and risk management
systems in relation to financial reporting processes and about
share capital structures:
– we have
not identified mat
erial misstatements therein;
and
– the information therein is consistent with the financial
statements; and
— in our opinion, the Corporate Governance Statement has
been prepared in accordance with relevant rules of the
Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority.
We are also required to report to you if a corporate governance
statement has not been prepared by the company.
We have nothing to report in these respects.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
44
ZEGONA COMMUNICATIONS PLC
| 2023 | 2022 | ||
| Notes | €’000 | €’000 | |
| Administrative and other operating expenses: | |||
Corporate costs | 5 | ( | ( |
Incentive scheme costs | 16 | ( | ( |
Significant project costs | 6 | ( | ( |
Operating loss | ( | ( | |
Finance income | 7 | ||
Finance costs | 7 | ( | ( |
Exchange differences | 7 | ( | ( |
Loss for the period before income tax | ( | ( | |
Income tax expense | 8 | ||
| Loss for the period | ( | ( | |
Loss for the period attributable to equity of the parent | ( | ( | |
| Other Comprehensive Gain / (Loss) | |||
Exchange differences on translation of foreign continuing operations | ( | ||
Other Comprehensive Loss | ( | ||
Total Comprehensive Loss | ( | ( | |
€ | € | ||
| Earnings per share | |||
| Basic and diluted earnings per share attributable to equity | |||
holders of the parent | 20 | ( | ( |
The notes on pages 53 to 77 form an integral part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
45
ZEGONA COMMUNICATIONS PLC
| As at | As at | ||
| 31 December | 31 December | ||
| 2023 | 2022 | ||
Notes | €’000 | €’000 | |
| Assets | |||
| Non–current assets | |||
Property, plant and equipment | |||
Income tax receivable | 13 | ||
| Current assets | |||
Prepayments and other receivables | 12 | ||
Cash and cash equivalents | 11 | ||
| Total assets | |||
| Equity and Liabilities | |||
| Equity | |||
Share capital | 17 | ||
Share based payment reserve | 18 | ||
Capital redemption reserve | 18 | ||
Share premium reserve | 18 | ||
Other Reserves | 18 | ( | |
Retained earnings | 18 | ( | |
Foreign currency translation reserve | 18 | ( | |
| Current liabilities | |||
Accruals and other payables | 14 | ||
| Total liabilities | |||
| Total equity and liabilities |
The notes on pages 53 to 77 form an integral part of these Consolidated Financial Statements.
COMPANY STATEMENT OF FINANCIAL POSITION
46
ZEGONA COMMUNICATIONS PLC
As at As at
31 December
2023
31 December
2022
Notes €’000 €’000
Assets
Non–current assets
Property, plant and equipment 1 13
Investment in subsidiary 9 1,201,714 3,655
1,201,715 3,668
Current assets
Prepayments and other receivables 12 899,338 1,805
Cash and cash equivalents 2,875 337
902,213 2,142
Total assets
2,103,928 5,810
Equity and Liabilities
Equity
Share capital 17 8,312 311
Share based payment reserve 18 156 65
Capital redemption reserve 18 2,565 2,565
Share premium reserve 18 1,182,375 3,049
Other Reserves 18 (3,722) –
Retained earnings 18 (13,216) (415)
Foreign currency translation reserve 18 9,941 –
1,186,411 5,575
Current liabilities
Accruals and other payables 14 917,517 235
917,517 235
Total liabilities
917,517 235
Total equity and liabilities
2,103,928 5,810
The notes on pages 53 to 77 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 €7.7 million (2022: €4.0 million loss)
The Financial Statements of Zegona Communications plc (registered number 09395163) were approved by the
Board of Directors on 29 April 2024 and were signed on its behalf by:
Eamonn O’Hare
Director
Robert Samuelson
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
47
ZEGONA COMMUNICATIONS PLC
| Foreign | |||||||||
| Share–based | currency | Capital | Share | ||||||
| Share | payment | translation | Retained | redemption | premium | Other | Total | ||
| capital | reserve | reserve | earnings | reserve | reserve | reserves | equity | ||
| Note | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
Balance at 1 January 2023 | ( | ||||||||
Loss for the year | ( | ( | |||||||
Other comprehensive loss | |||||||||
| Share–based payment | |||||||||
expense | 16 | ||||||||
Issuance of shares | 17 | ( | |||||||
| Transaction costs arising | |||||||||
on share issues | ( | ( | |||||||
Reclassification of interest income related to promissory note | ( | ||||||||
| Balance at 31 December | |||||||||
| 2023 | ( | ( |
The notes on pages 53 to 77 form an integral part of these Consolidated Financial Statements.
CONSOLIDATED CHANGES IN EQUITY
48
ZEGONA COMMUNICATIONS PLC
| Foreign | |||||||||
| Share–based | currency | Capital | Share | ||||||
| Share | payment | translation | Retained | redemption | premium | Other | Total | ||
| capital | reserve | reserve | earnings | reserve | reserve | reserves | equity | ||
| Note | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
Balance at 1 January 2022 | ( | ||||||||
Loss for the year | ( | ( | |||||||
Other comprehensive loss | ( | ( | |||||||
| Share–based payment | |||||||||
expense | 16 | ||||||||
Issuance of shares | 17 | ( | |||||||
| Balance at 31 December | |||||||||
| 2022 | ( |
The notes on pages 53 to 77 form an integral part of these Consolidated Financial Statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
49
ZEGONA COMMUNICATIONS PLC
Note
Share
capital
€000
Share–based
payment
reserve
€000
Foreign
currency
translation
reserve
€000
Retained
earnings
€000
Capital
redemption
reserve
€000
Share
premium
reserve
€000
Other
reserves
€000
Total
equity
Balance at 1 January 2023 311 65 – (415) 2,565 3,049 – 5,575
Loss for the year – – – (7,664) – – – (7,664)
Other comprehensive loss – – 9,941 – – – – 9,941
Share–based payment
expense 16 – 91 – – – – – 91
Issuance of shares 17 8,001 – – – – 1,184,282 (8,859) 1,183,424
Transaction costs arising
on share issues – – – – – (4,956) – (4,956)
Reclassification of
interest income related to
promissory note
– – – (5,137) – – 5,137 –
Balance at 31 December
2023
8,312 156 9,941 (13,216) 2,565 1,182,375 (3,722) 1,186,411
The notes on pages 53 to 77 form an integral part of these Consolidated Financial Statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
50
ZEGONA COMMUNICATIONS PLC
Note
Share
capital
€000
Share–based
payment
reserve
€000
Foreign
currency
translation
reserve
€000
Retained
earnings
€000
Capital
redemption
reserve
€000
Share
premium
reserve
€000
Other
reserves
€000
Total
equity
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 16 – 34 – – – – – 34
Issaunce of shares 17 10 – – – – 1,433 (1,443) –
Reserves transfer 18 – – 61,855 (61,855) – – – –
Balance at 31 December
2022 311 65 – (415) 2,565 3,049 – 5,575
The notes on pages 53 to 77 form an integral part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
51
ZEGONA COMMUNICATIONS PLC
| Year ended | Year ended | ||
| 31 December | 31 December | ||
| 2023 | 2022 | ||
| Note | €000 | €000 | |
| Operating activities | |||
Loss before income tax | ( | ( | |
Adjustments to reconcile profit before income tax to operating cash flows: | |||
Depreciation of property, plant and equipment | |||
Net foreign exchange differences | |||
Finance income | 7 | ( | ( |
Finance costs | 7 | ||
| Share based payment expense | |||
| Working capital adjustments: | |||
| (Increase)/decrease in trade and other receivables | |||
and prepayments | ( | ||
| Increase/(decrease) in trade and other payables | ( | ||
| Net cash flows (used in) operating activities | ( | ( | |
| Investing activities | |||
Transfer of cash to escrow account, restricted for the proposed acquisition of Vodafone Spain | 24 | ( | |
| Interest received | |||
| Net cash flows from investing activities | ( | ||
| Financing activities | |||
Cash received from the issuance of shares | 17 | ||
| Repayment of bank borrowings | ( | ||
| 15 | |||
| Net cash flows used in financing activities | ( | ||
Net decrease in cash and cash equivalents | ( | ( | |
Net foreign exchange difference | ( | ||
| Cash and cash equivalents at beginning of the year | |||
| Cash and cash equivalents at the end of the year |
The notes on pages 53 to 77 form an integral part of these Consolidated Financial Statements.
COMPANY STATEMENT OF CASH FLOWS
52
ZEGONA COMMUNICATIONS PLC
Notes
Year ended
31 December
2023
€000
Year ended
31December
2022
€000
Operating activities
Loss before income tax (7,664) (4,046)
Adjustments to reconcile profit before income tax
to operting cash flows:
Depreciation of property, plant and equipment 14 16
Net foreign exchange differences 1,809 3
Finance income (5,356) –
Finance costs 7 4 –
Share based payment expense 91 –
Impairment of investment – 2,951
Working capital adjustments:
Decrease in trade and other receivables and prepayments 1,243 2,016
Increase/(decrease) in trade and other payables
9,828 (385)
Net cash flows from operating activities
(31) 555
Investing activities
Capital contribution in Zegona Limited (290,000) –
Interest received
219 –
Net cash flows from/used in investing activities
(289,781) –
Financing activities
Cash received from the issuance of shares 17 292,294 –
Repayment of bank borrowings 15 – (106)
Net cash flows from/used in financing activities
292,294 (106)
Net increase in cash and cash equivalents 2,482 449
Net foreign exchange difference 56 (128)
Cash and cash equivalents at beginning of the year
337 16
Cash and cash equivalents at the end of the year
2,875 337
The notes on pages 53 to 77 form an integral part of these Consolidated Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
53
ZEGONA COMMUNICATIONS PLC
1. GENERAL INFORMATION
The Consolidated Financial Statements of Zegona Communications plc
(collectively, “Zegona”) for the year ended 31 December 2023 (the “Consolidated Financial Statements” )
were authorised for issue in accordance with a resolution of the Directors on 29 April 2024. The Company
was incorporated and is domiciled in England and Wales 8 Sackville St, Mayfair,
2. SIGNIFICANT ACCOUNTING POLICIES
NOTES TO THE FINANCIAL STATEMENTS
54
ZEGONA COMMUNICATIONS PLC
NOTES TO THE FINANCIAL STATEMENTS
55
ZEGONA COMMUNICATIONS PLC
Standard | Effective date |
IFRS 17 Insurance Contracts | 1 January 2023 |
Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 | 1 January 2023 |
Definition of Accounting Estimates – amendments to IAS 8 | 1 January 2023 |
| Deferred Tax related to Assets and Liabilities arising from a Single Transaction – amendments | |
to IAS 12 | 1 January 2023 |
International Tax Reform – Pillar Two model Rules – amendments to IAS 12 | 1 January 2023 |
19 As defined on page 1.
NOTES TO THE FINANCIAL STATEMENTS
56
ZEGONA COMMUNICATIONS PLC
NOTES TO THE FINANCIAL STATEMENTS
57
ZEGONA COMMUNICATIONS PLC
NOTES TO THE FINANCIAL STATEMENTS
58
ZEGONA COMMUNICATIONS PLC
NOTES TO THE FINANCIAL STATEMENTS
59
ZEGONA COMMUNICATIONS PLC
NOTES TO THE FINANCIAL STATEMENTS
60
ZEGONA COMMUNICATIONS PLC
NOTES TO THE FINANCIAL STATEMENTS
61
ZEGONA COMMUNICATIONS PLC
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
• 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 the consideration around the proposed acquisition of the
Vodafone Spain Group by Zegona and the ability of Zegona to continue to operate as a going concern should
the proposed acquisition not complete. An explanation of the key judgements made in determining that the
Zegona continues to be a going concern is provided in note 2.
• Significant project costs related to the acquisition of Vodafone Spain. Significant project costs of €8.5 million
(2022: €26 thousand) were incurred during the year. A methodology based on the allocation of time spent
has been applied to determine whether costs are related to the issuance of shares, the arrangement of debt
facilities or the proposed acquisition of Vodafone Spain, which require different accounting treatments. This
methodology is considered to be judgemental. See note 24 for details around the proposed acquisition of
Vodafone Spain.
• The recoverability of the income tax receivable. During 2021, Zegona was required to pay two charging
notices totalling £4.4 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 13.
Accounting estimates
• Fair value and imputed interest on the €900m promissory note receivable. As the €900 million promissory
note receivable from EJLSHM Funding Limited is interest free, Zegona has calculated the fair value of this
receivable on the date of issuance which resulted in a of €8.9 million discount to its recorded value and
imputed interest over the expected life of the receivable which resulted in interest income recognised in the
2023 year of €5.1 million. In calculating these amounts Zegona has estimated a 5% as the rate of imputed
interest and a maturity date of 31 January 2024 at the date of recognition of the receivable. This rate is in
line with the 5% rate the redeemable preference shares issued by EJLSHM Funding Limited accrue at as part
of the proposed acquisition of Vodafone Spain (see note 24) .
NOTES TO THE FINANCIAL STATEMENTS
62
ZEGONA COMMUNICATIONS PLC
4. SEGMENTAL ANALYSIS
Zegona and its subsidiaries are organised as 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, which only receives consolidated information which 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.
| Consolidated | Consolidated | |
| 2023 | 2022 | |
| €000 | €000 | |
Salaries, bonuses and staff benefits | 2,717 | 2,212 |
Employment related tax | 377 | 333 |
Pension costs | 270 | 239 |
Other operating costs | 1,381 | 487 |
Corporate costs | 4,745 | 3,271 |
| Consolidated | Consolidated | |
| 2023 | 2022 | |
Operations | 3 | 6 |
Administration | 1 | 1 |
4 | 7 |
NOTES TO THE FINANCIAL STATEMENTS
63
ZEGONA COMMUNICATIONS PLC
| Consolidated | Consolidated | ||
| 2023 | 2022 | ||
| Note | €000 | €000 | |
Bank interest | 546 | 25 | |
| Interest income on promissory note | 5,137 | – | |
| 12 | |||
| Finance income | 5,683 | 25 | |
| Interest on bank borrowings and bank charges | (4) | (4) | |
Finance costs | (4) | (4) | |
| Exchange differences | (7,847) | (3) | |
Foreign exchange losses | (7,847) | (3) |
8. TAXATION
| Consolidated | Consolidated | |
| 2023 | 2022 | |
| €000 | €000 | |
| 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.
Reconciliation of effective tax rate
| Consolidated | Consolidated | |
| 2023 | 2022 | |
| €’000 | €’000 | |
(Loss) before tax from continuing operations | (15,551) | (3,312) |
At UK statutory income tax rate (23.5% (2022: 19%) ) | (3,655) | (629) |
Expenses not deductible for tax purposes* | 2,023 | 26 |
| Consolidated foreign exchange losses not recognised in the Company’s | ||
Income Statement* | 1,419 | – |
Unrecognised tax losses* | 213 | 602 |
Income tax expense | – | – |
* At UK statutory income tax rate (23.5% blended rate (2022: 19%) )
The majority of significant project costs are not deductible for tax purposes as the projects relate to acquisitions
or disposals and are therefore capital in nature.
NOTES TO THE FINANCIAL STATEMENTS
64
ZEGONA COMMUNICATIONS PLC
| Shares held | Shares held | |||
| directly | indirectly | |||
| Country of | by the | by the | ||
Subsidiary | Nature of business | incorporation | Company | Company |
Zegona Limited | Incentive company | Jersey (1) | 100% | – |
Zegona Spanish Holdco Limited | Dormant | England and Wales (2) | 100% | |
Zegona Borrower Limited | Dormant | England and Wales (2) | 100% | |
Zegona Holdco Limited | Dormant | England and Wales (2) | – | 100% |
Zegona Topco Limited | Financing company | England and Wales (2) | – | 100% |
Zegona Midco Limited | Financing company | England and Wales (2) | – | 100% |
Zegona Hedge Co Limited | Financing company | England and Wales (2) | 100% | – |
Zegona Hedge Co II Limited | Financing company | England and Wales (2) | 100% | |
Zegona BidCo S.L.U | Acquisition vehicle | Spain (3) | – | 100% |
NOTES TO THE FINANCIAL STATEMENTS
65
ZEGONA COMMUNICATIONS PLC
10. FINANCIAL RISK MANAGEMENT
Zegona’s activities expose it to market risk, principally interest rate risk and currency risk, as described below.
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 limited as its facilities are currently
undrawn.
During the year Zegona entered into a Corporate Bridge Facility, a Term Loan A Facility and a Revolving Credit
Facility to finance the acquisition of Vodafone Spain. These facilities were not drawn down during the year, and
as such do not present any interest rate risks. Further details are presented in note 15. When drawn down, the
three borrowing facilities will be subject to floating rates of interest linked to EURIBOR. The overdraft facility that
was available to the group for the year ended 31 December 2022 expired during the year and was not renewed.
Interest expense is presented in note 7.
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 two types of exchange risk: transaction and translation 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.
The table below show the impact of a 10% movement in Sterling against the Euro on the translation of Zegona’s
monetary net assets that are denominated in Euro as at 31 December 2023.
| +/- 10% | |
| movement | |
| Currency impact | £’000 |
Euro-denominated monetary net assets | -/+ 93,575 |
Credit risk
Credit risk arises from cash and cash equivalents, prepayments and other financial instruments. 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 2023, and there is no collateral or other credit enhancement feature on
Zegona’s financial assets.
NOTES TO THE FINANCIAL STATEMENTS
66
ZEGONA COMMUNICATIONS PLC
The material exposures to credit risk by credit quality classification and external rating at 31 December 2023 are
shown in the table below:
| Cash and cash | Other | |||
| External credit | equivalents | receivables | Total | |
| Quality classification | rating | €000 | €000 | €000 |
Strong | A- and above | 4,648 | 290,302 | 294,950 |
| Strong | – | 896,278 | 896,278 | |
| N/A | ||||
4,648 | 1,186,580 | 1,191,228 |
1
2
1 Other receivables of €290.3 million consists of €290 million cash held in Escrow and accrued interest of €302 thousands.
2 The €896 million other receivable relates to the promissory note from EJLSHM Funding Limited and is receivable upon completion of
the proposed acquisition of Vodafone Spain (see note 12 and note 24) . A conditional agreement is in place for the Vodafone Group to
fund EJLSHM Funding Limited upon the completion of the Acquisition. In the event that the Acquisition does not complete, there are
agreed mechanisms to buyback the ordinary shares held by EJLSHM Funding Limited in consideration for the set-off of the promissory
note which would unwind this receivable and would not present Zegona with a credit loss.
Furthermore, the maturity of this financial asset is not yet due and it is expected to be settled within less than a year. The Directors
have therefore considered this to be of a ‘strong’ credit quality classification.
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.
In accordance with IFRS 9, an expected credit loss assessment on the above financial assets has been performed.
Based on the investment ratings of the counterparties and their corresponding default rates, the credit risks are
assessed to be low and the estimated expected losses calculated are immaterial. Accordingly, no provision for
adjustments for such credit loss have been made as at the reporting date of 31 December 2023.
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 2023, Zegona had cash balances held with banks amounting to €4.6 million (2022: €5.8 million) ,
compared to Zegona’s total liabilities amounting to €18.4 million (2022: €0.4 million) .
In addition, as at 31 December 2023 Zegona had undrawn facilities of €4,700 million (2022: undrawn overdraft
facilities of £1.5 million, equivalent to €1.7 million repayable on demand) comprising the Corporate Bridge Loan
of €3,700 million, Term Loan A Facility of €500 million and Revolving Credit Facility of €500 million.
NOTES TO THE FINANCIAL STATEMENTS
67
ZEGONA COMMUNICATIONS PLC
Maturities of financial liabilities
The tables below analyse the group’s financial liabilities into relevant maturity groupings based on their
contractual maturities for non-derivative financial liabilities.
The amounts disclosed in the tables are the contractual undiscounted cash flows. Balances due within 12 months
equal their carrying balances as the impact of discounting is not significant.
| Total contractual | Carrying | ||
| Contractual maturities of | 0-12 months | cash flows | amount |
| financial liabilities | €000 | €000 | €000 |
| At 31 December 2023 | |||
Trade payables | 1,168 | 1,168 | 1,168 |
Other accruals | 16,432 | 16,432 | 16,432 |
Total non-derivatives | 17,600 | 17,600 | 17,600 |
| At 31 December 2022 | |||
Trade payables | 208 | 208 | 208 |
Other accruals | 194 | 194 | 194 |
Total non-derivatives | 402 | 402 | 402 |
| Fair Value | Amortised cost | Fair Value | Amortised cost | ||
| 2023 | 2023 | 2022 | 2022 | ||
| Note | €000 | €000 | €000 | €000 | |
Other receivables | 12 | – | 1,186,580 | – | 75 |
| Cash and cash equivalents | – | 4,648 | – | 5,890 | |
Total current financial assets | – | 1,191,228 | – | 5,965 | |
Accruals and other payables | 14 | – | 17,600 | – | 402 |
| Total current financial | |||||
| liabilities | – | 17,600 | – | 402 |
NOTES TO THE FINANCIAL STATEMENTS
68
ZEGONA COMMUNICATIONS PLC
| Fair Value | Amortised cost | Fair Value | Amortised cost | ||
| 2023 | 2023 | 2022 | 2022 | ||
| Note | €000 | €000 | €000 | €000 | |
Other receivables | 12 | – | 896,372 | – | 1,805 |
| Cash and cash equivalents | – | 2,875 | – | 337 | |
| Total current financial assets | – | 899,247 | – | 2,142 | |
Accruals and other payables | 14 | – | 917,517 | – | 235 |
| Total current financial | |||||
| liabilities | – | 917,517 | – | 235 |
| Consolidated | Consolidated | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| €000 | €000 | |
Prepayments | 2,831 | 19 |
Accrued interest on loans | – | 24 |
VAT recoverable | 137 | 32 |
Other receivables | 1,186,580 | – |
Total | 1,189,548 | 75 |
| Company | Company | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| €000 | €000 | |
Prepayments | 2,829 | 19 |
Amounts due from subsidiary undertakings | 94 | 1,754 |
VAT recoverable | 137 | 32 |
Other receivables | 896,278 | – |
Total | 899,338 | 1,805 |
NOTES TO THE FINANCIAL STATEMENTS
69
ZEGONA COMMUNICATIONS PLC
| Consolidated | Consolidated | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| €000 | €000 | |
Trade payables | 1,168 | 208 |
Other accruals | 16,432 | 194 |
Total | 17,600 | 402 |
20 The movement in the year is entirely due to changes in foreign exchange rates
NOTES TO THE FINANCIAL STATEMENTS
70
ZEGONA COMMUNICATIONS PLC
| Company | Company | |
| 31 December | 31 December | |
| 2023 | 2022 | |
| €000 | €000 | |
Trade payables | 1,144 | 41 |
Amounts due to subsidiary undertakings | 899,913 | – |
Accruals | 16,460 | 194 |
Total | 917,517 | 235 |
NOTES TO THE FINANCIAL STATEMENTS
71
ZEGONA COMMUNICATIONS PLC
16. 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.
21 The preferred Return is a 5% per annum return on a compounded basis on shareholders' net investment.
NOTES TO THE FINANCIAL STATEMENTS
72
ZEGONA COMMUNICATIONS PLC
At 31 December 2023, 515,464 Management Shares in Zegona Limited remain allotted, issued and fully paid as
shown in the table below:
| Participation in | Number of | Nominal value | |
| growth in | Management | of Management | |
| value | Shares | Shares | |
Eamonn O’Hare | 8.88% | 305,000 | £305 |
Robert Samuelson | 4.44% | 152,500 | £153 |
Zegona senior management | 1.68% | 57,964 | £58 |
515,464 | £516 |
The First Calculation Period
The First Calculation Period began on 14 August 2015 and ended on 25 June 2020.
The Second Calculation Period
The Second Calculation Period automatically began on 25 June 2020 with the renewal subsequently approved by
Zegona’s shareholders on 30 June 2021.
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 £1.51 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 £0.28 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 £0.5 billion - £1.5 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 £1 in aggregate. €1.7 thousand of expense that had been recognised
in respect of the period between 14 October 2021 and 1 April 2022 was reversed.
NOTES TO THE FINANCIAL STATEMENTS
73
ZEGONA COMMUNICATIONS PLC
On 13 June 2022, 28,981 shares were issued to a second member of the management team in return for
consideration of £10 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 2023 a total expense of €91 thousand was recognised (2022: €34 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, and therefore
has concluded that the Management Shares are equity settled instruments
22
.
| 2023 | 2023 | 2022 | 2022 | |
| Allotted, called up and fully paid | Number | €’000 | Number | €’000 |
At 1 January | 6,172,424 | 311 | 5,325,567 | 301 |
Shares issued | 697,976,986 | 8,001 | 846,857 | 10 |
At 31 December | 704,149,410 | 8,312 | 6,172,424 | 311 |
NOTES TO THE FINANCIAL STATEMENTS
74
ZEGONA COMMUNICATIONS PLC
NOTES TO THE FINANCIAL STATEMENTS
75
ZEGONA COMMUNICATIONS PLC
20. 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 16, Management Shares
in the share capital of Zegona Limited were issued in prior years 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, they were anti-dilutive for the years ended
31 December 2023 and 2022.
2023 | 2022 | |
Loss for the year attributable to equity holders of the parent (€000) | (15,551) | (3,313) |
Weighted average number of ordinary shares | 105,606,703 | 5,446,215 |
Basic and diluted EPS (€) | (0.15) | (0.61) |
21. DIVIDENDS PAID
No dividends were declared or paid in 2023 or 2022.
NOTES TO THE FINANCIAL STATEMENTS
76
ZEGONA COMMUNICATIONS PLC
| 2023 | 2022 | |
| €’000 | €’000 | |
Fees for the audit of the Company’s annual accounts | 393 | 129 |
Total audit fees | 393 | 129 |
Fees for the review of interim financial statements | 43 | – |
Other fees relating to the equity raise prospectus | 144 | – |
Total non-audit fees | 187 | – |
24. ACQUISITION OF VODAFONE SPAIN AND RELATED FINANCING
(i) Background
Zegona Communications plc (via Zegona Holdco Limited) has agreed to acquire 100% of the issued share capital
of Vodafone Holdings Europe, S.L.U. (“Vodafone Spain”) , a provider of fixed-line, mobile, TV and digital market
services delivering voice, data and value–added services for €5,000 million (the “Acquisition”) .
Vodafone Group plc will provide a brand licence agreement which permits Zegona to use the Vodafone brand in
Spain for up to 10 years post completion. Vodafone and Zegona will enter into other transitional and long-term
arrangements for services including access to procurement, IoT, mobile roaming and carrier services.
The Acquisition is classified as a reverse takeover under the UK Listing Rules. An application has been made to
the FCA and the London Stock Exchange, respectively, for Zegona shares to be re-admitted to the standard listing
segment of the Official List and to trading on the Main Market with effect from the completion of the proposed
Acquisition. It is noted that the Acquisition is not a reverse takeover for the purpose of IFRS 3R.
The financial effects of this proposed acquisition have not been recognised as of 31 December 2023. The
operating results and assets and liabilities of the acquired company will be consolidated with effect from the
completion of the proposed Acquisition.
(ii) Financing
Zegona funded the Acquisition through a combination of debt and equity as follows:
• On 31 October 2023, Zegona entered into committed debt financing of €3,900 million which consists of a
term loan of €500 million and a corporate bridge facility of €3,400 million, as described in note 15.
• On 17 November 2023, Zegona raised €300 million (£262 million) in gross proceeds through the Placing of
174,413,535 shares at a price per share of 150 pence. Zegona incurred commissions and other estimated
fees and expenses of €13 million (£11 million) , resulting in total net proceeds for the Company from the
Placing of €288 million (£251 million) . See note 17.
NOTES TO THE FINANCIAL STATEMENTS
77
ZEGONA COMMUNICATIONS PLC
• On 17 November 2023, Zegona raised €900 million (£785 million) in gross proceeds through the Conditional
Subscription of 523,240,603 shares at 150 pence per share by EJLSHM Funding Limited. See note 17.
• The Company raised gross proceeds of €0.5 million (£0.5 million) through a separate offering of shares at
150 pence per share, as described in note 17.
• The Company entered into a €500 million Revolving Credit Facility on 31 October 2023 (note 15) .
The net proceeds will be used to partially fund the Acquisition, fees and expenses incurred in connection with
the Acquisition, related financing and for general corporate purposes. Zegona intends to refinance the corporate
bridge facility in the debt capital markets if the market conditions are favourable and circumstances are beneficial
for Zegona.
(iii) Acquisition related costs
Acquisition-related costs are expected to be approximately €14 million and will be included in administrative
expenses in the statement of profit or loss. €9.3 million of such costs were incurred prior to 31 December 2023
and are included in administrative expenses in that period. The remainder will be included in administrative
expenses in the year ended 31 December 2024.
(iv) Impact on the financial statements for the year ended 31 December 2024
The equity issued through the Placing to fund the acquisition occurred during the year ended 31 December 2023.
€290 million of cash was subsequently transferred into an escrow account held for the purpose of the Acquisition,
and interest has been accrued on this balance during the year. This account is held by a third party to fund the
proposed Acquisition and the release of the funds from escrow is conditional upon its completion and requires a
jointly issued instruction from both Zegona and Vodafone Europe B.V. In the event that the Acquisition does not
complete, the cash held in escrow would be reverted back to Zegona along with interest accrued on the balance.
The consideration for the subscription for ordinary shares by EJLSHM Funding Limited was satisfied by the issue
of a €900 million promissory note. It does not bear interest, and was initially recognised at fair value which was
determined to be €891 million using an interest rate of 5%. This has resulted in deemed interest income of
€5.1 million during the year.
The promissory note will be satisfied upon completion of the proposed acquisition of Vodafone Spain. A
conditional agreement is in place for the Vodafone Group to fund EJLSHM Funding Limited upon the completion
of the Acquisition. In the event that the acquisition does not complete, there are agreed mechanisms to buyback
the ordinary shares held by EJLSHM Funding Limited in consideration for the set-off of the promissory note which
would unwind this receivable and would not present Zegona with a credit loss. Pursuant to the Conditional
Subscription and Relationship Agreement dated 31 October 2023, EJLSHM Funding Limited has irrevocably
agreed with Zegona not to exercise its voting rights (other than in connection with a takeover) and there are
further restrictions around future sales by EJLSHM Funding Limited of Zegona’s shares.
Foreign exchange losses were incurred in the year driven by the revaluation in €1,187.7 million of euro
denominated monetary assets, generated from the proceeds of the Company’s financing activities to the
Company’s functional currency of Sterling at the reporting date.
Project costs incurred during the year of €8.5 million are reflected in the income statement. Accrued costs of
€17.2 million are reflected in the financial statements, together with prepayments of €2.5 million.
Going concern disclosures are also impacted by the Acquisition.
25. POST BALANCE SHEET EVENTS
There have been no material post balance sheet events that would require disclosure or adjustment to these
financial statements.
Black&Callow – c121350