### MEGroup International plc ### Annual Report 2023 ## The next ## generation | Who we are | Our Vision | | --- | --- | | We are an international market leader in | To be the market leader and go-to instant-service | | automated instant-service equipment with | technology provider across all of our key markets, | | operations across 18countries. | andto contribute positively and responsibly to our | localities, communities and the environment. What we do We operate, sell and service a wide range of Our Mission instant-vending equipment primarily aimed To enhance our ability to service the needs of at theconsumermarket, with technological consumers’ everyday lives across multiple different innovation at its core. touch-points through innovative products and digital transformation. Our purpose Inventing eco-responsible local services that Our Values makeeveryday life easier. Supported by the strength of our people, a strong cohesion between teams, and social commitment, our aim is to meet end-consumer needs in terms of efficiency and reliability as well as to provide site owners with the services they need to make their sites attractive. ## Contents | Strategic report | FinancialStatements | | --- | --- | | Business at a Glance 4 | Independent auditor’s report to themembers of | | Our business model 6 | ME Group International plc 110 | | Growth strategy in action 8 | Group Statement of Comprehensive Income 118 | | Our business 10 | Group Statement of Financial Position 119 | | Chairman’s statement 18 | Company Statement of Financial Position 120 | | Chief Executive’s report 22 | Group Statement of Cash Flows 121 | | Innovation and diversification 30 | Company Statement of Cash Flows 122 | | Review of performance bygeography 32 | Group Statement of Changes in Equity 123 | | Section 172(1) statement 34 | Company Statement of Changes in Equity 124 | | Principal risks 38 | Notes to the Financial Statements 125 | | Sustainability at MEGroup 42 | Company Information & Advisers 188 | | Specific sustainability metricsand reporting 52 | Shareholder Information 189 | Viability statement 66 CorporateGovernance Board of Directors and Company Secretary 70 Report of Directors 72 Corporate governance 78 Statement of Directors’ Responsibilities 88 Directors’ RemunerationReport 90 Remuneration PolicyReport 94 Annual report on Remuneration 100 ## Navigation We use the various Contents page Refers to Photo.me iconsshown here to helpyounavigate Pages withinthis report Refers Print.me throughthedocument andits content Refers to Feed.me Refers to Wash.me ## Summary of 2023 ## Highlights A year of record financial Market leader in Japan, Continued expansion performance following photobooth oflaundry operations acquisition | Next-generation | | Return to the FTSE 250 | | --- | --- | --- | | photobooth rollout | Creation of further | Index on the London | | underway, modernising | shareholder value | Stock Exchange | | and digitalising | through dividends and | | | photobooth estate | share buyback | | programme ## Key financials for the 12 months ended 31 October 2023 REVENUE GROSS CASH 2023: £297.7m 2023: £111.1m 2022: £259.8m 2022: £136.2m 1 2 EBITDA NET CASH 2023: £106.6m 2023: £33.9m 2022: £92.2m 2022: £34.0m 5 | PROFIT BEFORE TAX | | CASH GENERATED FROM OPERATIONS | | | --- | --- | --- | --- | | | 2023: £67.1m | | 2023: £104.7m | | | 2022: £53.4m | | 2022: £91.7m | | | | 2 | | | 3/4 | | --- | --- | --- | --- | --- | --- | | EARNINGS PER SHARE | | | TOTAL DIVIDENDS PER ORDINARY SHARE | | | | | 2023: 13.31p | | | 2023: 7.39p | | 4 2022: 10.23p 2022 : 12.7p 1 EBITDA is profit before depreciation, amortisation, other net gains / (losses) and finance cost and income. 2 Net cash excludes investments in convertible bonds (£4.7m) and lease liabilities (£13.3 million). See note 20 for details of net cash. 3 Interim Dividend paid on 23 November 2023 (£11.2 million). Recommended Final Dividend will be paid on 23 May 2024, subject to approval at the AGM. 4 The total dividend per ordinary share of 12.70p in respect of FY 2022 included special dividends totalling 7.10p per share (£26.8 million). 5 2022 cash generated from operations has been restated by +£3.8m due to a reclassification from debtors to intangibles assets. See note 11 for details. MEGroup plc Annual Report 2023 1 ## Strategic ## report Business at a Glance 4 Our business model 6 Growth strategy in action 8 Our business 10 Chairman’s statement 18 Chief Executive’s report 22 Innovation and diversification 30 Review of performance bygeography 32 Section 172(1) statement 34 Principal risks 38 Sustainability at MEGroup 42 Specific sustainability metricsand reporting 52 Viability statement 66 MEGroup plc Annual Report 2023 2 ### We have been working to improve the user ### experience within our our apps and machines ### to simplify navigation, and boost overall ### efficiency for our customers. MEGroup plc Annual Report 2023 3 Strategic Report ## Business ## at a Glance ### UK & Republic of Ireland ## 6,297 MACHINES IN OPERATION ## 16.2% OF TOTAL GROUP REVENUE ### Continental Europe ## 26,232 MACHINES IN OPERATION ## 68.9 % OF TOTAL GROUP REVENUE ## Our business services Photobooths and High-quality digital integratedbiometric printing kiosks identification solutions Unattended laundry services Vending equipment for and launderettes thefood service market MEGroup plc Annual Report 2023 4 ## Feed Wash Print Photo ### Asia Pacific ## 15,037 MACHINES IN OPERATION ## 14.9 % OF TOTAL GROUP REVENUE ## 3 CORE GEOGRAPHIES Continental Europe, UK & Republic of Ireland and Asia Pacific OPERATIONS IN ## 18 countries Australia, Austria, Belgium, China, Finland, France, Germany, Ireland, Italy, Japan, Morocco, Netherlands, Portugal, Singapore, Spain, Switzerland, United Kingdom and Vietnam R&D CENTRES VENDING UNITS IN OPERATION ## 2 ## France and Vietnam, supported by 47,566 ateam of more than 50 engineers MEGroup plc Annual Report 2023 5 Strategic Report ## Our business model ### Technological innovation and We provide our partners and our end-consumers ### L L O U R S T A ### with an excellent customer experience focused A K E ### O R H O ### digital transformation sit at F L ### on people, service and customer satisfaction. E D ### U E ### L R ### A S ### thecore of our business Each day, millions of people see and use our V conveniently-positioned machines and technology ### strategy. This strategy is as we strive to make people’s lives easier every ### focused on diversifying our day around the world. ### product portfolio, expanding We have long-standing established partnerships ### the number of units in with site owners and our long-term contracts provide the Group with consistent, solid year- ### operation, and increasing the on-year recurring revenue streams and revenue ### yield per unit, while minimising visibility. We operate most of our vending equipment and pay the site owner a percentage ### production and operational of the machine turnover or a fixed fee, or a ### costs to the Group; this combination of these. ### enablesit to capitalise on The Group benefits from a dominant market ### itsoperating leverage. position, with limited or no competition, in many of the countries in which it operates. The size of our machine network enables us to leverage economies of scale to expand our operations and benefit from the trend towards increased automation while presenting significant barriers topotential competitors. ### Our key strengths The Group’s business model and market-leading position benefit from: Predictable and stable International footprint and Established network of cash flows diversity of services offered skilled field engineers Generated from existing network Providing resilience through location Supporting growth across business tofund growth through and service mix against geographic areas at limited additional cost productinnovation trends and demand patterns Industry-leading Competitively priced, Value for all our technological capabilities high-quality services with stakeholders and proven track record afocus on consumer Meeting the needs of customers experience and consumers and delivering In-house R&D developing proprietary solutions and shareholder value through growth Meeting the increasing demand for continuous product diversification, and dividends instant-vending service on the go offering best-in-class user through convenient easy-to-use experience and operations reliable, value-for-money services management, underpinned by instant-service vending know-how Long-term partnerships A market leader with more Sustainability and contracts with than 60 years of industry Focus on social commitment, high-footfall site owners experience environmental footprint and responsibility towards society | Machine portfolio positioned in | Providing leading brands and | | | | | | --- | --- | --- | --- | --- | --- | | accessible locations with c.90% | household names in key territories with | | | | | | tacit renewal, such as | expert know-how in autonomous | | | | | | | | V | | | S | | supermarkets,shopping centres | vending equipment | A | | R | | | | | | L | E | | ### U ### E L D ### and transport hubs F O ### O R H ### A K E ### L L O U R S T A MEGroup plc Annual Report 2023 6 ### L L O U R S T A ### A K E ### O R H O ### F L ### E D ### U E ### L R ### A S ### V ### P P O R T O U ### S U R ### S G ### T H R ### G O ### N W ### E T ### R H ### T S ### S T ### Y R ### E A ### K T ### E ### R G ### U Y ### O Y ### G G ### E R ### T O ### A ### W ### R ### T T ### S H ### H S ### T T ### R ### W ### A ### O T ### R E ### G G ### Y ## Innovation, ## Diversification, ## Digitalisation ### G ### R ### O ### Y ### W G ### T E ### H T ### A ### S R ### T T ### R S ### A ### T H ### E T ### G W ### Y O ### O R ### G Y ### U ### G ### R ### E ### K T ### E A ### Y R ### T ### S S ### T ### R H ### E T ### N W ### G O ### T H R ### S G ### S U U R ### P P O R T O ### V S ### A R ### L E ### U ### E L D ### F O O ### R E H ### A L L T A K ### O U R S MEGroup plc Annual Report 2023 7 ### Feed Photo Wash Print Strategic Report ## Growth strategy in action ## Our growth strategy is centred on five key pillars to ## support the development of the Group’s principal ## business areas: photobooths, laundry services, ## digital printing and food vending equipment. We are pleased to outline | progress in FY 2023 on | 1. | 2. | | --- | --- | --- | | delivery of our growth | Expansion into | Entering new | | strategy against each of the | new geographic | | ### market segments five key pillars aimed at ### territories supporting the development of the Group’s principal business areas. Continue to build the Through securing new Group’s international partnerships with businesses presence in recently such as supermarkets and enteredmarkets of Italy, smaller retailers. Finland and Australia. | Progress in FY 2023 | Progress in FY 2023 | | --- | --- | | The Group has continued | Our partners and site | | to drive expansion | owners remain a valuable | | of operations in new | route for us to grow our | | geographic territories. In | business by entering new | | Australia we have around | market segments. We | | 11 photobooths installed | launched new partnerships | | across Sydney and | with Central Co-op and | | Melbourne, our pilot cities. | Morrisons, two major | | Whilst expansion in Australia | supermarket chains in the | | remains at an early test | UK, enabling us to offer | | phase, we continue to look | conveniently accessible | | at how we can best grow our | laundry services to | | operations and believe there | consumers at those sites. | is a significant opportunity in the region MEGroup plc Annual Report 2023 8 ## We are pleased to have made solid ## progress against our five-year plan ## to2027, driving forward a number ## ofinitiatives as part of this ## mid-termroadmap. | 3. | 4. | 5. | | --- | --- | --- | | Ongoing new | Continued | Merger and | | product and | expansion and | acquisition | | technology | diversification | strategy | | innovation | ofservices | | To meet the vending needs Revenue growth through a Focused on enabling our of consumers through multi-service instant-service growth strategy through state-of-the-art user offering and integration bolt-on acquisitions, which experience, backed by the of centralised operating meet the Group’s return- best technology, and an systems. on-investment criteria, to omnichannel approach. extend our geographic footprint, consolidate our market position and increase the breadth of our services available through our machine network. | Progress in FY 2023 | Progress in FY 2023 | Progress in FY 2023 | | --- | --- | --- | | The Group is well underway | The Group has rolled out a | In October our Japanese | | with the deployment of | number of next generation | subsidiary, MEGroup | | modernisation software | photobooths, predominantly | Japan K.K., completed | | across its photobooth | across France, as part of | the acquisition of the | | estate. This new proprietary | our strategy to introduce a | automated-photobooth | | software provides us with | multi-service offering across | business from FUJIFILM | | the ability to deploy new | its operations. Machines are | Corporation. The acquired | | functionality and services, | being installed at a rate of | photobooths have been fully | | as well as update interfaces, | around 180 per month with | integrated into the Group’s | | remotely. Further details are | ambitions to increase to 250 | operations, benefitting from | | disclosed further down in | new installations per month | wider operational synergies, | | this report. | during 2024. | and consequently the Group | is positioned as a market leader for photobooths across Japan. MEGroup plc Annual Report 2023 9 Strategic Report # Our business Photo.ME GROUP Photobooths with integrated biometric photo identification solutions A global leader in the photobooth market for instant photo ID, portraits and fun photographs. Our services are primarily aimed at the consumer market, with machines typically located in convenient, high-footfall locations such as travel hubs, shopping centres and supermarkets. The business generates stable cash flow which supports the Group's diversification strategy and investment in new product development. GROUP TOTAL VENDING ESTATE 64.7% PHOTOBOOTH UNITS IN OPERATION 30,762 OPERATIONS IN 18 countries Australia, Austria, Belgium, China, Finland, France, Germany, Ireland, Italy, Japan, Morocco, Netherlands, Portugal, Singapore, Spain, Switzerland, United Kingdom, Vietnam VENDING REVENUE¹,² ▲ 11.8% 2023: £172.5m 2022: £154.3m EBITDA³ ▲ 14.0% 2023: £61.8m 2022: £54.2m ¹ For the 12 months ended 31 October 2023. ² Excludes revenue from the sales of machines, equipment and services. 10 # Our photobooths offer - Integrated proprietary software to conform to International Standards Organisation (ISO) and International Civil Aviation Organisation (ICAO) photo ID regulations - Secure digital photo ID technology to improve and digitalise security ID, working closely with national institutions to ensure compliance with Photo ID standard and security requirements, offering secure integrated solutions including biometric data capture, secure and direct transfer of data and 3D facial image capture - Portraits and fun photos provide fun user experiences such as beautifying, vintage, portrait editing features, video capture etc The Group pays the site owner a percentage of machine turnover or a fixed fee or a combination of these. # Growth drivers - Demand for photo ID required for official documentation - Government need for digitalised photo ID and security to combat fraud and criminal activity - Consumer demand for multi-functional instant services via a single machine # Growth strategy - Commercialisation of multi-service next generation photobooths to grow revenue contribution - Longer-term opportunities to expand presence in countries where self-taken ID photos are not permitted - Deployment of proven photo ID security technologies in existing and new territories - Targeting new strategic partners for entry at high-footfall locations including major supermarkets and smaller retail shops and parks # Growth targets - Continued roll out of next generation photobooths in 2024, with the aim of deploying approx. 3,000 - Planned investment in FY2024: £15-20 million for next generation photobooth rollout and machine upgrades - Target returns: 18 months - Plans to deploy a total of 8,000 next generation machines by the end of FY 2025 # Next generation photobooths Our next-generation photobooth marks the start of our journey to modernising and modulariang our photobooth estate. It offers consumers a multi-functional booth providing a range of services, alongside our core photo ID product offering. ![img-0.jpeg](img-0.jpeg) # Features include: - Photo ID for official documentation with secure upload technology - User personalisation services, using A1 and photo filter technology for fun images - 'Mobile to print' functionality for photograph # Powered by technological digitisation: - New, cloud-based proprietary software # Deployment strategy: - 547 installed in FY 2023 - Plans to install 3,000 in FY 2024 - Target of 8,000 installed by end of FY 2025 # Capex: - £8.9 million invested in FY 2023 - Planned investment in FY2024: £15-20 million - Target return on investment: 18 months PMI Group plc Annual Report 2023 11 Strategic Report Our business continued # Print.ME High-quality digital printing kiosks Convenient, affordable and easy-to-use instant-printing services for consumers, positioned in attractive high footfall locations across Europe. ![img-1.jpeg](img-1.jpeg) ![img-2.jpeg](img-2.jpeg) GROUP TOTAL VENDING ESTATE 10.0% UNITS IN OPERATION 4,734 OPERATIONS IN 8 countries Belgium, France, Germany, Japan, Netherlands, Portugal, Spain and Switzerland VENDING REVENUE¹,² ▲ 5.6% 2023: £11.3m 2022: £10.7m EBITDA¹ ▲ 16.7% 2023: £4.2m 2022: £3.6m ¹ For the 12 months ended 31 October 2023 ² Excludes revenue from the sales of machines, equipment and services © Copyright Amended 2023 12 Our digital printing offer Growth strategy ▪ Industry-leading technology offering a wide range of ▪ Opportunities to extend digital kiosk services offered printing formats and personalised products. Our kiosks through the Group’s instant-service machine network enable easy, competitively-priced, high-quality digital ▪ Product partnership and expansion opportunities printing from smartphones within existing territories ▪ State-of-the-art kiosks which are fully integrated with Growth targets major social media networks providing consumers with ▪ A second range of 500 new kiosks to be installed in convenient, easy-to-use, reliable and high-quality France to refresh portfolio in France in 2024 services for a seamless customer experience ▪ Target returns: 18-20 months The Group pays the site owner a percentage of machine turnover or a fixed fee or a combination of these. Growth drivers ▪ Increased use of smartphones and digital sharing across social media networks ▪ Growing demand for convenient, high-quality printingservices GROUP TOTAL VENDING ESTATE ## Other vending ## equipment ## 13.6% ther vending equipment typically situated UNITS IN OPERATION athigh-footfall sites where the Group has anexisting relationship with the site owner andcan benefit from operating synergies, ## 6,055 such asusing its field engineer and maintenance network. Our operations include: Self-service traditional amusement and interactive rides offering safe entertainment for children. Photocopiers which enable consumers to reproduce physical documents, safely and securely, using the latesttechnology. The Group pays the site owner a percentage of machine turnover or a fixed fee or a combination of these. MEGroup plc Annual Report 2023 13 Strategic Report Our business continued Wash.ME GROUP Unattended 24/7 laundry services and laundrettes Growing network of large- capacity unattended laundry services, offering a range of machine formats for partners and end consumers. ![img-3.jpeg](img-3.jpeg) GROUP TOTAL VENDING ESTATE 11.6% UNITS IN OPERATION 5,533 OPERATIONS IN 12 countries Austria, Belgium, China, France, Germany, Ireland, Japan, Netherlands, Portugal, Spain, Switzerland and United Kingdom REVOLUTION VENDING REVENUE¹,² ▲ 34.2% 2023: £76.1m 2022: £56.7m EBITDA¹ ▲ 35.7% 2023: £39.5m 2022: £29.1m ¹ For the 12 months ended 31 October 2023. ² Excludes revenue from the sales of machines, espigment, and services © Group Ltd Annual Report 2023 Our laundry operations Growth strategy ▪ Revolution unattended laundry services offer ▪ Expansion of Revolution laundry services in target 24/7outdoor self-service laundry machines, territories through new and existing partnerships with typicallylocated on high footfall sites, providing strategic site owners, increasing laundry revenue as a accessto large-capacity and energy-saving proportion of total Group revenue rapidlaundry services ▪ Continued innovation of laundry units, upgrading existing machines and commercialisation of new ▪ Self-service launderette shops offer convenient and formats for new market segments competitively-priced large-capacity, self-service laundry amenities, typically located near town centres ▪ Key focus on sustainability and cost savings of water and electricity The Group pays the site owner a percentage of machine turnover or a fixed fee or a combination of these. Growth targets ▪ Targeting an average installations of 80-90 units Growth drivers permonth in FY 2024 ▪ Demand for convenient, high-capacity laundry services ▪ Rollout of photovoltaic solar panels on Revolution at competitive prices unitsacross key territories, including France and ▪ Cost-effective and energy-efficient service compared UnitedKingdom with domestic alternatives ▪ Planned investment in FY2024: £26.0 million ▪ Compact machine formats present attractive option ▪ Target returns: Approx. 18 months for space-sensitive site owners and consumers MEGroup plc Annual Report 2023 15 Strategic Report Our business continued Feed.ME GROUP Vending equipment for the food and juice service market ![img-4.jpeg](img-4.jpeg) Primarily sells fruit juice and pizza machines, typically with a maintenance agreement. In addition, the Group operates a small number of fresh orange juice vending machines in Japan. ![img-5.jpeg](img-5.jpeg) GROUP TOTAL VENDING ESTATE 0.8% UNITS IN OPERATION 441 OPERATIONS IN 5 countries Belgium, France, Japan, Switzerland, Australia REVENUE¹ ▲ 8.0% 2023: £15.5m 2022: £12.5m EBITDA¹ ▲ 11.8% 2023: £3.8m 2022: £3.4m ¹ For the 12 months ended 31 October 2023 Our vending operations Growth strategy ▪ Specialist high-end professional fresh fruit machines ▪ Expand presence in the self-service fruit juice with proprietary technologies to produce high-quality equipment market and offer a wider variety of self- fruit juices service fresh juice options in all territories where the Group has an existing footprint ▪ Pizza vending equipment manufacturer offering consumers self-service pizza 24/7 ready in four minutes, ▪ Establish a larger presence in the pizza-vending as well as pizza machines aimed at the B2B hospitality equipment market across new and existing territories market (restaurants and takeaways) ▪ Developing partnerships with new and existing site ▪ Multiple vending machine formats providing range of owners to sell / deploy food vending equipment, applications and use of space benefitting from synergies where other units are already deployed Contracts typically include a maintenance agreement for the Group to service the equipment for the duration of Growth targets the contract. ▪ Aim to become the food-vending equipment market leader in the European market Growth drivers ▪ A new salesforce reinforced by MEGroup France team will drive significant growth in pizza-vending equipment sales to B2B market ▪ Technical issues were resolved in 2023. This should help the Group to accelerate the sales in 2024 ## The connected ## fridge A catering service for the hotel industry, givescustomers the chance to enjoy a full meal on the spot at any time, quickly and atalow price Features include: ▪ All-in-one fridge + reheating system on less than 1m² of floor space ▪ Electronic payment ▪ Intelligent detection system with quick and easy product registration Green technology: ▪ Clean SmartScale technology (without polluting RFID chips) and optimised stock management to limit deliveries and waste. MEGroup plc Annual Report 2023 17 Strategic Report ## Chairman’s statement ## The Group’s operations are highly ## cash-generative, with these cash flows ## used to fund growth through product ## innovation and expansion, and in turn ## driving value to our shareholders ## through growth and dividends REPORTED REVENUE ## £297.7m 12 months ended 31 October 2023 CASH GENERATED FROM OPERATIONS ## £104.7m As at 31 October 2023 MEGroup plc Annual Report 2023 18 ![img-6.jpeg](img-6.jpeg) Sir John Lewis OBE Non-executive Chairman ## 2023 Overview I am pleased to report that the Group delivered a record financial performance in FY 2023, with strong growth delivered against the prior year, particularly across the Group's core Photobooth and Laundry operations. This reflected the positive trading momentum achieved throughout the year with growth achieved across all of ME Group's key business areas and key territories, with activity supported by strong consumer demand for our automated services. For the 12 months ended 31 October 2023, the Group delivered robust revenue growth of 14.6%, EBITDA growth of 15.6% and a 25.7% increase in profit before tax. In FY 2023, Group EBITDA also surpassed £100 million for the first time, reaching £106.6 million, with profit before tax increasing by £13.7 million to £67.1 million, reflecting the Group's focus on delivering growth profitably across its global vending estate. Today, ME Group has a dominant market position in most of the markets in which it operates, with its long-term customer contracts supporting good predictability and visibility on its revenue streams. The Group's operations are highly cash-generative, with these cash flows used to fund growth through product innovation and expansion, and in turn driving value to our shareholders through growth and dividends. ## Strategic progress We have continued to make good progress against our growth strategy. Our technological innovation expertise is supporting the diversification of our product portfolio and the Group's digital transformation, as we modernise our vending estate and our organisation. This underpins our continued focus on expanding the number of units in operation and increasing the yield per unit, while reducing production and operational costs to the Group. This enables us to capitalise on the Group's operating leverage. Our growth strategy is focused on five core pillars: 1. Expansion into new geographic territories 2. Entering new market segments 3. Ongoing new product and technology innovation 4. Continued expansion and diversification of services and revenue growth 5. Merger & Acquisition Progress was achieved across these pillars, notably with the deployment of our next generation photobooth, integrated with our newly developed proprietary software. We also cemented our presence in the Japanese photobooth market, positioning the Group as market leader in the country, following our photobooth acquisition. Further details on our progress are set out in the Chief Executive's Report. We continue to explore a plethora of potential opportunities that will help us to meet our growth ambitions and we remain confident in the Group's ability to achieve these and drive attractive levels of returns for our shareholders. ## Entry into the FTSE 250 Index In June, we were delighted to be informed that the Group had been included as a constituent of the FTSE 250 Index, following a review by global index provider FTSE Russell. Our return to the FTSE 250 marked an important corporate milestone demonstrating the journey that the Group has been on to expand and diversify its operations through technological innovation. ME Group plc Annual Report 2023 Strategic Report ### Chairman’s statement continued The Board & Executive Team Shareholder returns and dividend Post period-end, on 2 November 2023, we Share buyback announced that Jean-Marc Janailhac who had As a Group, we are committed to creating been an Executive Director of the Company shareholder value wherever we can and as a since July 2020, would be stepping down from Board we look to explore opportunities that his executive role. We are delighted, however, reward our shareholders. In August, we announced that Jean-Marc continues to sit on the Board this the launch of a Share Buyback Programme to run time in his original capacity as a Non-executive until the Company’s next Annual General Meeting. Director. I would like to take this opportunity to As at 31 October 2023 the Company held 1,260,534 thank him for his valuable contribution to the shares, with an average value of 156p per share, Company as an Executive Director and I am at a cost of £1,969,000. It is the aim that the pleased he will continue to work closely with me Buyback Programme will reduce the Company’s and the Board in his previous role. share capital and in turn drive an increase in the earnings per share and consequently the yield for The Board of Directors continues to believe that it all shareholders. has a strong team in place to continue supporting the leadership team in delivering on the Group’s Dividends long-term growth strategy. Under the Company’s current distribution policy, it will look to pay annual dividends in excess of 55% I would like to thank my Board colleagues, the of its annual profits after tax, subject to market and | executive team, and every employee across | capital requirements. This total will be split between | | --- | --- | | the Group for their continued dedication, | interim dividends (1/3) (generally to be paid in the | | commitment, and hard work. | month of November) and final dividends (2/3) | (generally to be paid in the monthof May). MEGroup plc Annual Report 2023 20 ## Engagement is crucial to ensuring that Directors fully understand stakeholder needs and can make well-informed decisions. The Board declared an interim dividend for the six months ended 30 April 2023 of 2.97 pence per Ordinary share (the "Interim Dividend"), which amounted to £11.2 million, paid to shareholders on 23 November 2023 to shareholders on the register on 3 November 2023. The Board has recommended a final dividend for the year ended 31 October 2023 of 4.42 pence per Ordinary share ("Final Dividend") amounting to £16.6 million. Combined with the Interim Dividend, this brings the total dividend for the year ended 31 October 2023 to 7.39 pence per Ordinary share (£27.9 million). Subject to approval at the Company's annual general meeting on 26 April 2024, the Final Dividend will be paid on 23 May 2024 to shareholders listed on the register at the close of business on 26 April 2024. The ex-dividend date will be 25 April 2024. ### Sustainability We remain committed to strengthening our sustainability activity to deliver our goals through inventing eco-responsible local services to support growth by integrating social, environmental, and economic expectations into our strategy and operations. Details of our Sustainability approach and KPIs are available on the Group's website at me-group.com. ### Looking ahead Laundry is a key part of our growth strategy and we continue to invest to expand our portfolio and build on new and existing partnerships, to further extend our convenient laundry services in high footfall destinations. We are also improving the user experience, through the launch of our consumer App for our laundry services, which delivers better marketing insight. In the year ahead, we plan to install an average of 80-90 Revolution laundry machine per month, with a particular focus on expansion in France and the United Kingdom. The photobooth market remains robust, and even though it is a mature market, turnover and the number of transactions has stayed stable from year-to-year. Within the Group, 70% of the photobooth market is based on the requirement for official photos (driving licences, passports, ID photos, etc.), unofficial photos (universities, schools, sports clubs etc) and, to a lesser extent, fun products. The Group does not foresee a drop in demand for official photos in the short- or medium-term. The Group is securing this market as much as possible by developing agreements with administrations and regulatory bodies (ANTS in France, HMPO in the UK and MY NUMBER in Japan) and by trying to replicate this same model in other countries and by extending it to all official needs (passports, identity cards and driving licences). The demand for official photos is helped by the continual introduction of new legislation (for example, the compulsory renewal of 'old pink driving licences' in France and the My Number campaign in Japan). At the same time, the Group is working on a range of additional, more entertaining offers in photobooths that could attract other consumers. The Group has proven to be resilient, despite the ongoing macroeconomic headwinds. It remains highly cash generative, and our financial position remains strong, driven by good trading momentum across the business. This supports the Board's confidence in the Company's ability to make further strategic progress in FY 2024 and beyond. The Board expects the Group to achieve continued revenue and earnings growth in the financial year ahead, building on the success of FY 2023, subject to any major changes to the macroeconomic environment. Sir John Lewis OBE Non-executive Chairman 27 February 2024 31 ME Group plc Annual Report 2023 Strategic Report ## Chief Executive’s report ## We are pleased to report a year of ## record financial performance during ## which we continued to make good ## strides in delivering on our long-term ## growth strategy. We have reported ## strong revenue and profit growth ## acrossall of our business areas and ## geographic regions. EBITDA ## £106.6m 12 months ended 31 October 2023 PROFIT BEFORE TAX ## £67.1m 12 months ended 31 October 2023 MEGroup plc Annual Report 2023 22 Serge Crasnianski Chief Executive Officer & Deputy Chairman Business review The Group’s corporation tax charge for the year Our continued focus on technological innovation was £16.4 million, resulting in an effective tax and diversification, underpinned by our in-house rate of 24.5%. Tax charge for the prior year was R&D capabilities, enables us to meet the needs £14.6 million, an effective tax rate of 27.3%. of end-users internationally. This, alongside the global footprint of our operations, well positions us Capital expenditure was £53.5 million, primarily on the international stage as a leading operator in related to laundry (£24.7 million), photobooths instant service vending. (£8.9 million), kiosks (£3.1 million), plant, machinery and vehicles (£6.3 million) and the acquisition of a Financial performance photobooth business in Japan (£4.8 million). Total revenue increased by 14.6% to £297.7 million (2022: £259.8 million), with strong growth delivered The Group remains well capitalised and in a strong in each of our geographic regions. financial position, with net cash of approximately £33.9 million. By geography, our largest region, Continental | Europe, reported revenue growth of 15.4%, due | During the year ended 31 October 2023, the Group | | --- | --- | | toa continued strong performance in France. | repurchased 1,260,534 of its ordinary shares | | In the UK & Republic of Ireland, revenue was up | and also paid dividends totaling £23.4 million | | 14.8%, and in Asia Pacific operating revenue | (comprising the interim dividend for 2022 of | | wasup 11.0%. | £9.8 million, the final dividend for 2022 of | £11.3 million and a special dividend for 2022 of | Each of our principal business areas delivered | £2.3 million). In November 2023, the Company | | --- | --- | | operating revenue growth year-on-year | paid its announced interim dividend for 2023, | | compared with the same period in FY 2022. | totaling £11.2 million. | Our laundry operations performed particularly | strongly, up 32.0%, photobooth operations grew | Further details of the Group’s performance by | | --- | --- | | by 11.8%, digital printing by 5.6% and Other | business area and geographic region are set | | Vending Equipment and Feed.ME operating | outoverleaf. | revenue was up 30.8% on FY 2022. As a result of the above, EBITDA (excluding associates) was £106.6 million, an increase of 15.6%, which delivered an EBITDA margin of 35.8%. Reported profit before tax was up 25.7% to £67.1 million (2022: £53.4 million), with all regions reporting growth. MEGroup plc Annual Report 2023 23 Strategic Report ### Chief Executive’s report continued ### Overview of principal generation photobooths, with 547 installed in France and Germany in FY 2023. While ### businessareas deployment of the machines was slower than initially expected, due to supplier delays, these Below is an overview of the Group’s four principal short-term challenges have been resolved. At the business areas: photobooth (Photo.ME), digital year-end we were installing approximately 180 printing (Print.ME), laundry (Wash.ME) and food next-generation units per month. In addition, a (Feed.ME). In addition, the Group operates Other programme to upgrade our existing photobooth Vending Equipment. estate with new proprietary software and functionalities is underway. At 31 October 2023, the number of photobooths in operation was 30,762, an 11.4% increase on the Photobooths and secure integrated prior year (2022: 27,625), reflecting the ongoing biometric photo ID solutions expansion programme as we continue to rollout units in existing and new territories. This represents 12 months to 12 months to 64.7% of the Group’s total vending units. 31Oct 2023 31Oct 2022 Number of units 30,762 27,625 Growth strategy and progress inoperation We believe that there are a number of long- Percentage of total group 64.7% 62.9% term growth drivers in place which underpin our vending estate (number continued expansion. Demand for photo ID for ofunits) the use in official documentation, including driving Revenue £172.5m £154.3m licences and passports, Government requirements for digitalised photo ID and security to combat Capex £8.9m £3.0m fraud, and consumers increasingly requesting EBITDA £61.8m £54.2m multi-functional instant services are all factors underpinning the continued growth of Photo. | Our photobooth operations, our largest business | ME. There continues to be a compelling case for | | --- | --- | | area by number of units, revenue and EBITDA | the Group to grow its photobooth business and | | contribution, continued to perform strongly | benefit from industry trends and widespread | | throughout the financial year. | consumer demand. | | Revenue increased by 11.8% to £172.5 million | Our next-generation photobooth was developed | | (2022: £154.3 million). This performance was | by the Group’s in-house R&D team and | | supported by continued demand of official | offers range of new functionalities, focused | | photo ID, the continued expansion of the estate | around enhancing the user experience. These | | both organically and through acquisition, and | new features include ‘Mobile to Print’, user | | annualised benefits of FY 2022 price increases | personalisation services using AI and photo | | implemented in certain locations, particularly | filters. The Group expects other new functions | | France, Germany and Austria. The average | will be added over time. The Group aims to | | revenue per machine (excluding VAT) increased | install 3,000 next-generation machines in FY | | to £5,908 per year (2022: £5,586 per year). | 2024, and approximately 8,000 next-generation | photobooths by the end of FY 2025. Subsequently, EBITDA was up 14.0% at £61.8 million and represented 58.0% of total At the same time, the Group is modernising the Group EBITDA. EBITDA was 35.8% of photobooth hardware of its existing photobooth estate and revenue during the Period. intends to install its new proprietary software at a rate of around 200 machines per month. Capex increased from £3 million to £8.9 million, This proprietary software enables the Group’s reflecting investment in the rollout of next engineers to quickly and cost-effectively upgrade MEGroup plc Annual Report 2023 24 ## Photo ![img-7.jpeg](img-7.jpeg) each machine, remotely rather than needing to physically visit the machines. In October 2023, the Company's Japanese subsidiary, ME Group Japan K.K., acquired the automated-photobooth business owned and operated by two subsidiaries of FUJIFILM Corporation (formerly FUJIFILM Co., Ltd) in Japan for an initial consideration of £4.8 million (Japanese Yen 873 million), funded by a local loan facility. This added 3,548 traditional photobooths, located in high-footfall locations such as travel hubs and shopping centres throughout Japan, delivering official photo ID for consumers, including for the government's social security and taxation photo ID card scheme. The acquired photobooths were fully integrated into the Group's operations in Japan in October 2023 and will benefit from operational synergies under the Group's ownership. Further details of the Japan acquisition are detailed in the Review of Performance by Geography section. Following the Group's entry into the Australian market through a small acquisition in 2021, the Group is trialling 11 photobooths in across Sydney and Melbourne, as part of our ongoing diversification strategy as we build our presence in both new and existing markets. Whilst this is at an early stage in terms of building out the market, the Group is exploring how best to drive forward expansion and remains excited by the prospects for the Australian market. The Board continues to believe that there are longer-term opportunities in the photo ID market across both existing and new geographic markets. Planned photobooth investment in FY 2024 is between £15 million and £20 million, with a target return on investment in approximately 18 months. ## Wash.ME Unattended Revolution laundry services and laundrettes | | 12 months to 31 Oct 2023 | 12 months to 31 Oct 2022 | | --- | --- | --- | | Total Laundry units deployed (owned, sold and acquisitions) | 6,870 | 5,924 | | Total revenue from Laundry operations | £81.6m | £61.8m | | Total Laundry EBITDA | £39.5m | £29.1m | | Revolution | | | | - Number of Revolutions in operation | 5,533 | 4,754 | | - Percentage of total group vending estate (number of units) | 11.6% | 10.8% | | - Total revenue from Revolutions | £76.1m | £56.7m | | - Revolution capex | £24.7m | £20.2m | Total revenue from our laundry operations grew by 32.0% to £81.6 million as we continued to expand our estate of Revolution laundry units, generating a higher level of turnover from this business. At 31 October 2023, the total number of laundry units deployed (owned, sold) was up 16.0% to 6,870. Total laundry EBITDA increase by 35.7% to £39.5 million. ### Growth of Revolution laundry operations The total number of Revolution units in operation grew 16.4% to 5,533, as the Group continued to roll out new machines at a rate of 65 per month, with more than 780 machines installed during the year. Revolution laundry machines accounted for 11.6% of the Group's total estate by number of machines (2022: 10.8%). 25 ME Group plc Annual Report 2023 Strategic Report ### Chief Executive’s report continued | Revenue increased by 34.2% to £76.1 million, | and existing partners in target territories, as a | | --- | --- | | which represented 25.6% of Group revenue, driven | means of meeting consumer demand by offering | | by a combination of higher demand and more | convenient, competitively priced and high- | | machines in operation. The average revenue per | capacity laundry services. We announced a new | | machine (excluding VAT) was £14,793 per year | strategic partnership with leading supermarket | | (2022: £12,816 per year). | chain Co-op, in the UK, to position Revolution | units at sites in selected parts of the country. EBITDA was £39.5 million and contributed 37.1% The partnership will allow us to position laundry of Group EBITDA. EBITDA from Revolution was services at an increasing number of high footfall 48.4% of revenue. locations across the UK, offering convenient laundry services to consumers at those sites. We Wash.ME remains our fastest growing and see this as a mutually beneficial relationship where highest margin business area and we continued we build a destination for consumers looking for to invest to deliver our expansion plans. As a high-capacity laundry facilities while shopping. result, Revolution capex increased to £24.7 million (2022:£20.2 million) reflecting the continued rollout As well as entering new market segments through | of units across our core territories. Furthermore, | strategic partnerships, the Group continues to | | --- | --- | | the Group has entered a period of machine | deliver innovative solutions to drive forward | | refurbishment and maintenance, the first since | the service offering available under Wash.ME. | | laundry operations were launched in 2012. | Alternative machine formats continue to prove | popular with different types of users. We see good Growth strategy and progress potential for our ‘Flex’ units, a compact format A key part of our growth strategy for the laundry that can fit into smaller spaces, and believe there business is expanding operations through new to be a long-term opportunity to address the MEGroup plc Annual Report 2023 26 domestic market and at-home laundry needs. Whilst this is at an early stage, we will continue to monitor the opportunity and update in due course. In June, the Group began rolling out a new consumer App aimed at laundry services as a means of improving the user experience as well as providing better marketing insights on the Group's end-consumers. It remains a focus for us to improve the App and work towards rolling this out more widely across our operations. The Group plans to install an average of 80-90 laundry machines per month in FY 2024. In addition, photovoltaic solar panels on being installed on Revolution laundry machines rollout across key territories, including France and the United Kingdom. Planned laundry investment in FY 2024 will be £22.0 million to £30.0 million, with a target return on investment in approximately 18 months. ![img-8.jpeg](img-8.jpeg) # Print.ME # High-quality digital printing services | | 12 months to 31 Oct 2023 | 12 months to 31 Oct 2022 | | --- | --- | --- | | Number of units in operation | 4,734 | 4,785 | | Percentage of total group vending estate (number of units) | 10.0% | 10.9% | | Revenue | £11.3m | £10.7m | | Capex | £3.1m | £1.3m | | EBITDA | £4.2m | £3.6m | Our estate of digital printing kiosks offers a wide range of competitively priced print formats and personalised products. Our key markets are France, where most machines are situated, the UK and Switzerland. At 31 October 2023 the Group had 4,734 kiosks in operation, a reduction of 1.1% compared with the prior year. These accounted for 10.0% of the total number of vending units in operation. Revenue increased to £11.3 million from £10.7 million in the prior year, reflecting increased demand from new digital kiosks, replacing 413 old machines. Revenue represented 4.1% of Group revenue. The average revenue per machine (excluding VAT) was £2,374 per year (2022: £2,279). EBITDA was £4.2 million which represented 3.9% of Group EBITDA. EBITDA was 37.2% of Print.ME revenue in the period. Capex was £3.1 million, a significant increase on the prior year reflecting an investment programme to replace some existing machines, and deployment of 500 new kiosks. # Growth strategy and progress In recent years, we have focused more investment towards the Print.ME business as demand for high-quality digital printing services remains robust. This, paired with the increasing use of smartphones and demand for social media 22 ME Group plc Annual Report 2023 Strategic Report ### Chief Executive’s report continued sharing, presents a long-term opportunity for our vending equipment back to the Group at a later digital printing services. The Group is forecasting date. The equipment is then refurbished and re- c.£3.0 million of capex in FY 2024. As part of the sold, generating repeat revenue for the Group. growth strategy for this business area, the Group continues to explore opportunities to extend The Group also sells maintenance agreements, the services offered through its wider vending under which it services vending equipment for an estate including digital printing services. Our agreed period of time. next-generation photobooths, currently being deployed, offers this functionality as part of the Technical adjustments to our pizza vending multi-service offering. machine led the Group to move manufacture of this machine in-house during the commercialisation phase. This enabled us to increase production to 30 machines per month and ensures that our R&D team are on hand to Vending equipment for the support and have oversight of quality control and foodservicemarket cost efficiencies. Feed.ME activities are focused on two areas, | self-service fresh fruit juice equipment market | On a smaller scale, the Group operates fruit | | --- | --- | | andpizza vending machines aimed at the | juice machines in Japan. During the year we | | B2B retail and hospitality markets. The Group | reinstated our B2B vending operations aimed | | currentlyhas operations in Belgium, France, | at end markets such as the hospitality sector. | | Japanand Switzerland. | At 31 October 2023, the Group had 441 freshly | squeezed-orange-juice vending machines The Feed.ME business model is primarily based in operation, which includes fulfilment of the on the sale of vending equipment. Customers oranges for the machines. frequently, but under no obligation, sell the MEGroup plc Annual Report 2023 28 ## Feed ![img-9.jpeg](img-9.jpeg) Revenue from the sale of equipment, consumables and services was £8.9 million. Combined with other revenue (£4.6 million), the total revenue of Feed.ME was £13.5 million (2022: £12.5 million). This business area contributed 4.5% of total Group revenue. A review following the technical issues experienced with the pizza machines, which have slowed progress in this business area, has resulted in an impairment of goodwill and intangibles of £2.6 million related to the acquisition of the pizza vending machine manufacturer (Resto'Clock) in 2021. The group will continue to sell pizza vending equipment, with the target of relaunching this division and improving profitability. EBITDA was £3.8 million and contributed 3.6% of Group EBITDA. ### Growth strategy and progress The food service sector remains an attractive proposition for the Group. We remain focused on growing our fruit juice vending machine operations in Japan and we plan to increase the production of our pizza vending machines, with the aim of selling more than 15 per month. The Group's aim is to become the food vending equipment market leader in Europe. ### Amuse.ME Copy.ME ### Other vending equipment At 31 October 2023, the Group operated 6,055 (2022: 6,483) other vending units in addition to its four principal business areas. These included 2,356 children's rides (Amuse.ME), 3,374 photocopiers (Copy.ME) and 325 other miscellaneous machines These machines are typically located in high-footfall locations alongside the Group's principal activities, thereby benefiting from existing site owner relationships and operating synergies. Amuse.ME units are mostly situated in the United Kingdom and the Netherlands. Copy.ME units are mostly situated in France. The Group will continue to operate other vending units where profitable. Other vending equipment accounted for 13.6% of the Group's total vending estate by number of units, down 1.7% compared with the previous year and represented 4.0% of the total Group revenue. ME Group plc Annual Report 2023 Strategic Report ## Innovation and diversification ## Continuous technological innovation ## and diversification of operations are ## central to the Group’s growth strategy, ## driven by our dedicated 50-strong ## R&Dteam, most of whom work at our ## primary R&D facility in France. We are continually looking at ways to create This digital transformation through the or evolve service offerings through our vending modernisation and modularisation of our vending estate that meet the changing needs of estate will enable the Group to be more agile consumers both across our existing and new and operationally efficient. It will support the markets. Our in-house team develops and tests swift deployment of software upgrades and new new technologies, products, and functionality services across our machine estate, whilst also before these enter the commercialisation phase enabling us to enhance consumer engagement and are deployed within our vending estate. through targeted marketing campaigns. In recent years, innovation has been primarily focused on key initiatives to digitally transform the Group, improve operational efficiencies and enhance the end-user experience. | 1. A state-of-the-art user experience, | 2. An omnichannel approach, | | --- | --- | | backed by the besttechnology | leveraging digital functionalities | | ▪ Design of new, intuitive, and modern user | toenhance user experience of | | interfaces across product categories | ourbrands and explore | newbusinessmodels ▪ Integration of digital payment systems ▪ Use of a powerful CRM which offers a ▪ Up-to-date functionalities, through an customised experience to end users aggregate of the best of external ▪ Launch of applications that connect to our technologyproviders machines to offer mobile-to- machinefeatures ▪ Remote management of our self-service vending equipment through acloud-based infrastructure ▪ Multi-service functionality for the next- generation machines. Centralised operating system offering operational efficiencies and aseamless, connected user experience for theconsumer MEGroup plc Annual Report 2023 30 ## Innovation in action New proprietary software Our new proprietary software developed by the in-house R&D team is at the centre of the Group’s digital transformation, which is initially being rolled out for photobooths. This software is fitted as standard on all next-generation photobooths beinginstalled and, over the coming years, the Group aims to retrofit this software across its existing photobooth estate. At the touch of a button, the Group will be able to remotely run a software upgrade for each photobooth, giving it the ability to deploy new functionality and services quickly and cost-effectively.. It will allow the Group to remotely update the consumer interface and enhance the end-user experience. Previously, software updates were implemented manually by an engineer on site. Enhanced user experience Our next-generation photobooth offers a redesigned user experience (UI and UX) to support greater digital functionality. This includes visual enhancements to the user interface as well as a more efficient consumer interaction, such as a reduction in the number of clicks required during user interaction. Additionally, users will be able to provide feedback on their experience via a QR code on each machine. Ongoing digitalisation driving operationalefficiencies We are currently working to develop several new initiatives to centralise back-office processes aimed at driving operational efficiencies. These include: ▪ A new application for field engineers offering centralised route planning ▪ Real-time telematics to monitor the operationalperformance of each machine andreduce downtime ▪ A new CRM tools to support the Group’s sales team function, due to go live by the end of 2024 ▪ Applications to enhance engagement with end user and support marketing campaigns, with new store locator launched in June 2024 ▪ Launch of end-user App in the first half of 2024 MEGroup plc Annual Report 2023 31 Strategic Report ## Review of performance ## bygeography Commentary on the Group’s financial performance is set out below, in line with the segments as operated by the Board and the management of the Group. These segmental breakdowns are consistent with the information prepared to support the Board’s decision-making. Some commentary below relates to the performance of specific products in the relevant geographies. Vending units in operations At October 2023 At October 2022 | | Number | % of total | | Number | % of total | | | --- | --- | --- | --- | --- | --- | --- | | | of units | | estate | of units | | estate | | Continental Europe | 26,232 55.1% 25,331 57.7% | | | | | | UK & Republic of Ireland 6,297 13.2% 6,858 15.6% Asia Pacific 15,037 31.6% 11,721 26.7% Total 47,566 100% 43,910 100% The total number of vending units in operation at 31 October 2023 increased by 8.3% to 47,566 (2022: 43,910), mainly due to the acquisition of a photobooth business in Japan, which was completed in September 2023. Key financials The Group reports its financial performance based on three geographic regions of operation: (i)Continental Europe; (ii) the UK & Republic of Ireland; and (iii) Asia Pacific. Revenue by geographic region | | 12 months ended | | 12 months ended | | --- | --- | --- | --- | | | 31 October 2023 | | 31 October 2022 | | Continental Europe | | £205.2m £177.8m | | UK & Republic of Ireland £48.2m £42.0m Asia Pacific £44.3m £39.9m Total £297.7m £259.7m Operating profit by geographic region | | 12 months ended | | 12 months ended | | --- | --- | --- | --- | | | 31 October 2023 | | 31 October 2022 | | Continental Europe | | £62.6m £51.3m | | UK & Republic of Ireland £12.4m £11.6m Asia Pacific £4.3m £2.0m Corporate costs £(11.8)m £(8.1)m Total £67. 5m £56.8m Total revenue increased by 14.6% to £297.7 million, reflecting the strong year-on-year performance in all three geographic areas from higher consumer demand for the Group’s instant-service machines and, to a lesser extent, the year-on-year benefit of end consumer pricing rises implemented during 2022. MEGroup plc Annual Report 2023 32 Continental Europe As at 31 October 2023, there were 6,297 units Continental Europe is the Group’s largest region in operation in the UK & Republic of Ireland, by both number of machines and contribution to a decrease of 8.2%, due to the loss of two key Grouprevenue. accounts in 2023. This segment represented 13.2% of the Group’s total vending estate. Revenue increased 15.4% to £205.2 million | (2022: £177.8 million), reflecting a strong | Asia Pacific | | --- | --- | | performance and revenue growth across | Revenue increased by 11.0% to £44.3 million, | | all business areas, notably laundry and | driven by a 5.4% increase in photobooth operating | | photoboothoperations. | revenue, and a 53.5% in revenue from Other | Vending and Feed.ME operations which mainly Total operating revenue increased by 18.7% year- related to the successful expansion of freshly on-year, primarily driven by Wash.ME, which grew squeezed orange juice vending operations in by 28.2% and Photo.ME, which grew by 16.1%. Wash. Japan. Asia Pacific continues to be the only ME delivered consistent quarter-on-quarter growth market in which the Group operates fresh fruit reflecting continued expansion of operations, with juice vending machines, with 441 orange juice a further 779 laundry units deployed, of which 491 machines installed by 31 October 2023. were installed in France. Photobooth operations benefited from higher consumer demand and Operating profit in the region more than doubled the rollout of 547 next-generation photobooths, to £4.3million (2022: £2.0 million). alongside consumer price increases implemented across France (from €6 to €8) and Germany (€8 As set out above, the Group acquired 3,548 to €10) during FY 2022. The Group’s other business photobooths in Japan at the end of the financial areas saw strongest year-on-year revenue growth year for £4.8 million. As a consequence, the Group in Q1 2023 and Q2 2023, which reflects the recovery became the market-leading photobooth operator of operations in FY 2023 compared with FY 2022 in the Japanese market. To date, this acquisition which was still impacted by the pandemic. has performed in line with expectations and is expected to increase Asia Pacific revenue by 20% to | Operating profit grew significantly to £62.6 million, | 30% and to add approximately £2.2 million in profit | | | | | --- | --- | --- | --- | --- | | an increase of 22.0%. | in FY 2024. | | | | | At 31 October 2023, 26,232 units were in operation | As at 31 October 2023, there were 15,037 units in | | | | | in Continental Europe which represented 55.1% | operation in Asia Pacific, which represented 31.6% | | | | | of the Group’s total estate. Continental Europe | of the Group’s total vending estate. The region | | | | | contributed 68.9% of total Group revenue. | contributed 14.9% of total Group revenue. | | | | | UK & Republic of Ireland | Key performance Indicators (KPIs) | | | | | Revenue grew by 14.8% to £48.2 million, reflecting | The Group measures its performance using | | | | | further expansion in the number of laundry units | different types of indicators. The main | | | | | and demand for laundry services, with Wash.ME | objective ofthese KPIs is to monitor the Group’s | | | | | operating revenue up 45.7%. Photo.ME operating | cash generation, long-term profitability, | | | | | revenue was up 2.2%, and Other Vending and | preservationofthe value of its assets, and | | | | | Feed.ME operations were up5.8%. | ofreturns to shareholders. | | | | | In the UK and Republic of Ireland, the Group has | | | Performance | | | strategic relationships in retail sectors, leading | | 12 months | | 12 months | | | | ended 31 | | ended 31 | shopping centres, supermarkets and forecourts. October October Wehave over 3,000 photobooths and 1,300 Description Relevance 2023 2022 laundry units sited across this region with key | | Total Group | £297.7m £259.8m | | --- | --- | --- | | partners including Tesco, Morrisions, Co-op, | revenue at | | | Musgraves, BWG, Circle K and Applegreen. The | actual rate of | | exchange Group remains focused on growing its vending estate within these key accounts, which will provide Group Profit £67.1m £53.4m before tax it with the opportunity to continue building market share in the UK & Republic of Ireland. Increase in 3,137 (242) number of photobooths Operating profit grew by 6.9% to £12.4 million | (2022: £11.6 million). | Increase in | The increase in | 779 660 | | --- | --- | --- | --- | | | number of | number of | | | | Laundry units | Revolutions is | | | | (operated) | aconstant | | priority and a main driver forgrowth MEGroup plc Annual Report 2023 33 Strategic Report # Section 172(1) statement **Directors are required to act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard, amongst other matters, to the factors listed in section 172(1) (a) to (f) of the Companies Act 2006.** Engagement therefore is crucial to ensuring that Directors fully understand stakeholder needs and can make well-informed decisions that have addressed differing and sometimes conflicting priorities. Our overview of stakeholder engagement that has taken place during the year can be found on pages 56 to 57. The following pages comprise our section 172(1) statement in which we explain how the Board has fulfilled its duty in section 172 whilst having regard to the matters set out in that section. ## How the directors fulfil their duty under Section 172(1) of the Companies Act 2006: ### Diverse set of skills, knowledge and experience The Board has a diverse set of skills, knowledge and experience which help the Directors to make informed decisions that promote the long-term success of the Company whilst considering the needs of the Company's stakeholders. Further information on the Board's composition, including the skills and experience of the individual Directors appears on pages 70 to 71. ### Board information and monitoring The Board receives detailed papers and in-person updates from management which they question challenge and debate, to ensure conflicting views are carefully considered. Management also gives regular updates on the progress of the implementation of actions and decisions to allow the Board to review and if appropriate, course-correct, as situations (and stakeholder priorities) inevitably evolve. Further information on the Board's activities can be found on pages 78 to 86. ### Board discussion All Directors are expected to constructively challenge and contribute to discussions, as well as offer additional perspectives, advice and strategic guidance. Further information can be found within the Division of Responsibilities and Meeting Attendance section on page 80. ### Strategic direction and culture The Board is responsible for setting the strategic direction, values and culture of the Company. It sets the tone of how business is done throughout the Group. Stakeholder considerations are central to decision-making at all levels of the Group. Further information on corporate strategy can be found on pages 6 to 17. 16 Group of Annual Report 2006 ## The Board has a diverse set of skills, knowledge ## and experience which help the Directors to make ## informed decisions that promote the long-term ## success of the Company whilst considering the ## needs of the Company’s stakeholders. These matters permeate the entire range and gamut of the Directors’ considerations, deliberations and actions. The table below outlines other main areas of this report which detail how the Directors have had regard to the section 172(1) limbs. Section 172 duty Where you can find more information (a) The likely consequence of any decisions in Our Business Model: pages 6 to 7 the long term Strategic Report: pages 2 to 67 Stakeholder Engagement: pages 36 to 37 Principal risks (primarily steps taken in mitigation): pages 38 to 40 (b)The interests of the Company’s employees Stakeholder Engagement: pages 36 to 37 Remuneration Committee Report: pages 90 to 107 (c) The need to foster the Company’s Our Business Model: pages 6 to 7 businessrelationships with suppliers, Stakeholder Engagement: pages 36 to 37 customers and others (d) The impact of the Company’s operations Strategic Report: pages 2 to 67 on the community and the environment Sustainability statement; pages 42 to 50 TCFD Report: pages 59 to 65 Also, visit: https://me-group.com/our-ambition/ (e) The desirability of the Company Our Business Model: pages 6 to 7 maintaining a reputation for high standards TCFD: pages 59 to 65 of business conduct Risk Management: page 86 Audit Committee Report: pages 83 to 84 (f) the need to act fairly as between Stakeholder Engagement: pages 36 to 37 members of the Company MEGroup plc Annual Report 2023 35 Strategic Report ### Section 172(1) statement continued ### Stakeholder Engagement Consumers How we engage How this engagement influenced Board discussions and decision-making Senior management considers the needs of A number of the changes we have made to our products are in response the consumer and how to provide the to consumer needs. In making its decisions, the Board pays regard to the best-in-class service for the most need to balance consumer needs with customer and commercial competitive price. outcomes. Some examples of the product changes include photobooths that are designed to allow easy access and use for persons with disability. Customers How we engage How this engagement influenced Board discussions and decision-making Continual contact with customers through Feedback can be shared with the Executive Directors and the Board. customer-relation managers. Employees How we engage How this engagement influenced Board discussions and decision-making Briefings from management as to how the The Executive Directors and the CFO* have regular briefings with senior Company is doing management and through the medium of these meetings are able to learn about employee concerns and views so that they can be taken into account in making decisions which are likely to affect their interests. There are open forums for staff to come forward with any queries. Consultations required by law are complied with (e.g. in cases of redundancy). The Company operates an executive share option scheme, and rewards senior management with bonuses. The Company encourages a common awareness on the part of all employees of the financial and economic factors affecting the performance of the Company is achieved through the regular meetings referred to above. Although the CFO is a not a statutory director of the Company, he regularly attends board meetings and interacts closely with the Board, particularly the audit committee. Shareholders How we engage How this engagement influenced Board discussions and decision-making Regular engagement by the Chairman In July 2022, the Company announced it was adopting a new distribution andSenior/Independent Director with policy under which for the foreseeable future it would pay annual majorshareholders. dividends in excess of 50% of its annual profits after tax subject to market and capital requirements. This total would be split between interim dividends (1/3) (generally to be paid in the month of November) and final dividends (2/3) (generally to be paid in the month of May). In August 2023, with members’ approval, the Company embarked on a share buyback programme which is still ongoing. As at 31 October 2023, the Company had repurchased 1,260,534 ordinary shares of 0.5p each all of which are held in treasury. * Although the CFO is a not a statutory director of the Company, he regularly attends board meetings and interacts closely with the Board, particularly the audit committee. MEGroup plc Annual Report 2023 36 Partners and suppliers How we engage How this engagement influenced Board discussions and decision-making Regular engagement with suppliers and The Executive Directors plus the CFO (and where necessary the partners, including through our: Non-executive Directors) review and approve material contracts with suppliers and partners, joint ventures and acquisitions. ▪ Supplier/procurement processes engaged at the time of appointment and during the relationship ▪ Regular monitoring and reviews of financial and operating resilience ▪ Reporting on payment of suppliers The community and environment How we engage How this engagement influenced Board discussions and decision-making The Board relies on regular updates from the See Sustainability Statement: pages 42 to 50 Executive Team who in turn rely on direct or indirect feedback from senior management and other colleagues and customers, as well as general observations on current best practices and individual customer recommendations. These provide useful insights and guides to help shape the Group’s activities. Investors How we engage How this engagement influenced Board discussions and decision-making Comprehensive investor relations The Remuneration Committee consults with major investors and external programme including formal presentations remuneration specialists before introducing, and then updating, any to investors and analysts on the half-year changes to the implementation of the remuneration policy. In and full-year results; formal investor discharging its duties, the Remuneration Committee takes advice from roadshows in the UK; and an ongoing external remuneration consultants to ensure that it is up to date with programme of one-to-one meetings and market trends, expectations and best practises. group meetings with institutional investors, The Board reviews the Group’s dividend. fund managers and analysts. Involvement of the Chairman including his meeting with major Meetings which relate to governance are shareholders highlights the importance of governance from the attended by the Chairman or another topdown. Non-executive Director The AGM in particular provides a convenient forum for shareholders to ▪ Annual Report and Annual General question the Board, give useful feedback and make helpful suggestions. Meeting (AGM) It is normally very well attended and constructive. ▪ Corporate website and market announcements ▪ Active consultation on remuneration framework and policies MEGroup plc Annual Report 2023 37 Strategic Report ## Principal risks ## As with any business, the Group faces risks ## and uncertainties that could impact the ## achievement of the Group’s strategy. These risks are accepted as inherent to the Group’s business. The Board recognises that the nature and scope of these risks can change; it therefore regularly reviews the risks faced by the Group as well as the systems and processes to mitigate them. The table below sets out what the Board believes to be the principal risks and uncertainties, their impact, and actions taken to mitigate them. Economic Nature of risk Description and impact Mitigation Global economic Economic growth has a major influence on The Group focuses on maintaining the conditions consumer spending. characteristics and affordability of its needs-driven products. A sustained period of economic recession and a period of high inflation could lead to Like most businesses around the world, the a decrease in consumer expenditure in Group has had to face a significant increase in discretionary areas. supply chain and raw material costs, however, its strong position in the markets in which it operates gives the Group significant pricing power. The Group has no exposure to the invasion of Ukraine by Russia and other conflict areas. Volatility of foreign The majority of the Group’s revenue and The Group hedges its exposure to currency exchange rates profit is generated outside the UK, and the fluctuations on transactions, as relevant. Group’s financial results could be However, by its nature, in the Board’s opinion, it adversely impacted by an increase in the is very difficult to hedge against currency value of sterling relative to those fluctuations arising from translation in currencies. Current and imminent global consolidation in a cost-effective manner. events (including upcoming elections in both the UK the US) could well cause currency volatility. Regulatory Nature of risk Description and impact Mitigation | Centralisation of | In many European countries where the | The Group has developed new systems that | | --- | --- | --- | | theproduction of | Group operates, if governments were to | respond to this situation, leveraging 3D | | IDphotos | implement centralised image capture, for | technology in ID security standards, and | | | biometric passport and other applications, | securely linking our booths to the administration | | | or widen the acceptance of self-made or | repositories. Solutions are in place in France, | | | home-made photographs for official | Ireland, Germany, Switzerland and the UK. | document applications, the Group’s Furthermore, the Group also ensures that its revenues and profits could be affected. IDproducts remain affordable and of a high-quality. MEGroup plc Annual Report 2023 38 Strategic Nature of risk Description and impact Mitigation Identification of new The failure to identify new business areas. Management teams constantly review business opportunities This may impact the ability of the Group to demand in existing markets and potential new grow in the long-term. opportunities. The Group continues to invest in research in new products and technologies. Furthermore, the Group also ensures that its IDproducts remain affordable and of a high-quality. Inability to deliver The realisation of long-term anticipated The Group regularly monitors the performance anticipated benefits benefits depends mainly on the continued of its entire estate of machines. New from the launch of growth of the laundry and food businesses technology-enabled secure ID solutions are newproducts and the successful development of heavily trialled before launch and the integrated secure ID solutions. Failure in performance of operating machines is this regard could lead to a lack of continually monitored. competitiveness. Market Nature of risk Description and impact Mitigation Commercial The Group has well-established, long-term The Group’s major key relationships are relationships relationships with a number of site- supported by medium-term contracts. The owners. The deterioration in the Group actively manages its site-owner relationship with, or ultimately the loss of, relationships at all levels to ensure a high a key account would have an adverse, quality of service. albeit contained, impact on the Group’s The Group continues to monitor the situation in results, bearing in mind that the Group’s both the French and the UK markets. turnover is spread over a large client base and none of the accounts represent more than 2% of Group turnover. To maintain its performance, the Group needs to have the ability to continue trading in good conditions in France and the UK, taking into account the situation in these two countries. Operational Nature of risk Description and impact Mitigation Reliance on foreign The Group sources most of its products Extensive research is conducted into quality manufacturers from outside the UK. Consequently, the and ethics before the Group procures products Group is subject to risks associated with from any new country or supplier. The Group international trade. This could impact also maintains very close relationships with competitiveness and profitability. both its suppliers and shippers to ensure that risks of disruption to production and supply are managed appropriately. Reputation The Group’s brands are key assets of the The protection of the Group’s brands in its core business. Failure to protect the Group’s markets is sustained with certain unique reputation and brands could lead to a loss features. The appearance of the machine is of trust and confidence. This could result in subject to high maintenance standards. a decline in our customer base. Furthermore, the reputational risk is diluted asthe Group also operates under a range ofbrands. Product and service The Board recognises that the quality and The Group continues to invest in its existing quality safety of both its products and services estate, to ensure that it remains contemporary, are of critical importance and that any and in constant product innovation to meet major failure could affect consumer customer needs. confidence and the Group’s The Group also has a programme in place to competitiveness. regularly train its technicians. MEGroup plc Annual Report 2023 39 Strategic Report ### Principal risks continued Technological Nature of risk Description and impact Mitigation Failure to keep up with The Group operates in fields where The Group mitigates this risk by continually advances in upgrades to new technologies are critical. focusing on R&D. technology Failure to exceed or keep in step could result in a lack of ability to compete. Cyber risk: Third party The Group operates an increasing number The Group undertakes an ongoing assessment attack on secure ID of photobooths capturing ID data and of the risks and ensures that the infrastructure data transfer feeds transferring these data directly to meets the security requirements. government databases. The rising threat of cybercrime could lead to business disruption as well as to data breaches. Enviromental Nature of risk Description and impact Mitigation Increased potential The rising costs associated with Reducing the amount of waste produced; and legislation and the compliance with such increased demands the recovery, refurbishment and resale of rising cost of waste could impact on overall profitability. electrical equipment such as children’s rides disposal. Energy which promote the principle embodied in consumption, water recent legislation of reuse before recycling. scarcity, and rising car fuel prices (for employees, suppliers, transportation and final consumers) and raising awareness of the climate crisis amongst consumers MEGroup plc Annual Report 2023 40 MEGroup plc Annual Report 2023 41 Strategic Report ## Sustainability at MEGroup ### Non-financial and sustainability Central to our mission is aligning our approach to sustainability with the Directors’ duty to drive ### information statement the progress of the Company, as mandated by the Companies Act 2006. This duty aligns At MEGroup, sustainability is not just a concept, with the principle of ‘enlightened shareholder but the core of our operations. Ourjourney value’, ensuring we remain forward-thinking and encompasses everything from innovative responsible in our sustainable endeavours. photobooths to our environmentally friendly self-service laundry machines and other instant- Stakeholder engagement vending equipment, which all aim to make Engaging with our stakeholders is key to our everyday life easier. sustainability journey. We maintain an open dialogue with employees, customers, suppliers, We are committed to weaving sustainable and investors, ensuring that our sustainability practices into the fabric of our business, strategies are well-informed and inclusive. understanding its critical importance to us, our customers, our employees, and the planet at large. Strategic sustainability focus areas In March 2023, following extensive engagement Our strategy for managing sustainability with internal and external stakeholders, we is twofold: mitigating risks and uncovering identified 25 key material topics for MEGroup. business opportunities. Our efforts are guided Details of the assessment methodology can be by four principal factors. First, adherence to found in the Specific Sustainability Metrics and legal requirements and staying ahead of future Reporting section on page 52. policy trends is crucial. Secondly, we consider the attitudes of our customers, employees, and These material topics fall into five strategic focus investors. Thirdly, we focus on cost savings and areas: operational innovation; strategy and enhancing business efficiency. And, finally, we development; services and customers; HR and concentrate on fostering employee awareness employees; and communities and corporate and strengthening our employer brand. socialresponsibility. Information Section/policy Environmental matters (including the impact of the A summary of the Company’s approach to corporate social company’s business on the environment) responsibility and environmental matters, including a report on the Group’s greenhouse gas emissions for the 12 months ended 31 October 2023, can be found in the Sustainability The Company’s employees Statement on page 44. Social matters Respect for human rights Anti-corruption and anti-bribery matters The Company operates an anti-bribery and corruption policy.This can be found on the Company’s website (https://me-group.com) MEGroup plc Annual Report 2023 42 ### 1. Operational innovation MEGroup’s dedication to operational innovation is deeply rooted in our commitment to sustainability and efficiency. This philosophy is reflected in our approach to product development,especially seen in our Revolution laundry units. These units are designed with a range of eco-friendly features that showcase our dedication both to environmental protection andmeeting consumer needs. ### Case study | MEGroup’s Revolution laundry units | Quality assurance | | --- | --- | | – eco-innovation in action | Our commitment to quality is evidenced | | MEGroup’s Revolution laundry units | by our subsidiary KIS SAS’s achievement | | blend eco-performance with advanced | ofISO 9001 certification. This was | | technology, to significantly reduce | recognised in November 2021 when we | | environmental impact while providing | received the sustainability prize at the | | outstanding laundry services. | System U exhibition. | | Environmentally friendly technology | Environmental impact mitigation | | Central to these units are precision washing | To address global waste disposal concerns, | | liquid pumps, dispensing an exact amount | MEGroup focuses on recycling and reuse | | of eco-friendly detergent per cycle. This | of decommissioned products. We are | | detergent adheres to the strict French | continuously investing in energy-efficient | | ECOCERT standard, and is free from | enhancements in response to rising energy | | phosphates, colourants, and preservatives, | costs and climate change concerns as | | ensuring safety, an allergen-free experience, | detailed in our sustainability report. | and efficiency at lower temperatures Accessibility and enhanced services | Energy efficiency and solar | Our units, compliant with CE standards | | --- | --- | | energyutilisation | and the 2012 decree, are designed for | | In addition, Revolution laundry units have | accessibility, featuring appropriately | | been designed to reduce energy usage. | positioned machines and touchpads. | | The units’ boilers heat water only when the | Theyoffer high-capacity laundry | | dryers are off, conserving energy. The dryers | machines that cut washing time by 60%, | | significantly reduce power use, and LED | accommodating large items efficiently. | | lighting further cuts energy consumption. | Additionally, consumers benefit from SMS | | With a power requirement of just 13KW – | alerts, adding to the convenience. (Not all | | less than half that of traditional models | laundry units are accessible for disabled | | – these units are extremely efficient. We | customers at present). | have incorporated solar panels in new unitswhichreduces electricity use by 10-30% per machine. MEGroup plc Annual Report 2023 43 Strategic Report ### Sustainability at MEGroup continued ### 2. Strategy and development MEGroup’s strategy and development are closely tied to its sustainability objectives. We have integrated sustainability into our corporate strategy, recognising that effective management of sustainability can reduce risks and unlock new business opportunities. This integration is evident in the development of products such as our Revolution laundry units, which are not only environmentally friendly but also cater to customer needs and preferences. The strategic focus on sustainability is also reflected in the Company’s four-year sustainability plan, which includes commitments to reduce its carbon footprint and energy consumption, and engage in social dialogue, demonstrating a comprehensive approach to sustainable business development. 2022 2023 2024 2025 2026 Actions | ▪ Integration of | | ▪ Annual audit by | ▪ Annual audit by | ▪ Annual audit by | | --- | --- | --- | --- | --- | | sustainability in the | | Ecovadis on our | Ecovadis on our | Ecovadis on our | | Company’s risk | | sustainability | sustainability | sustainability | | management | | performance | performance, open | performance to all | | framework, as | | ▪ Important | to all the European | the subsidiaries | | disclosed in the | | sustainability | subsidiaries | ▪ Important | | 2022 Annual Report | | matters will be | ▪ Important | sustainability | | ▪ Important | | discussed during | sustainability | matters will be | | sustainability to be | | Executive Team | matters will be | discussed during | | matters discussed | | meetings. | discussed during | Executive Team | | during Executive | | ▪ Official anti- | Executive Team | meetings. | | Team | meetings. | corruption | meetings. | ▪ Official anti- | | ▪ Annual audit by | | statement from the | ▪ Official anti- | corruption | | Ecovadis on the | | Group and national | corruption | statement from the | | Group’s | | and international | statement from the | Group and national | | sustainability | | communication | Group and national | and international | | performance | | ▪ For the French | and international | communication to | | ▪ The Company to | | company, answer to | communication to | be signed by 50% of | | align its | | CSRD requirements | be signed by 20% of | major partners | | commitments with | | | major partners | | – and communicate its progress towards – the United Nations Sustainable Development Goals (SDGs) KPIs ▪ Four review ▪ Four review ▪ Four review ▪ Four review meetings on the meetings on the meetings on the meetings on the sustainability sustainability sustainability sustainability strategy strategy strategy strategy ▪ Two sustainability ▪ Two sustainability ▪ Two sustainability ▪ Two sustainability strategic meetings strategic meetings strategic meetings strategic meetings to define the course to define the course to define the course to define the course and readjustments and readjustments and readjustments and readjustments In managing our sustainability efforts, we focus on tangible goals and effective strategies. Our product development, particularly in Revolution laundry units, is guided by environmental principles, including reducing water and energy consumption. We respond to customer needs by innovating our products, ensuring they not only meet customers’ expectations for convenience and entertainment but also for environmental performance. MEGroup plc Annual Report 2023 44 | 3. Services and customers | 4. HR and employees | | --- | --- | | We take a holistic approach to engagement | Our workforce is a key factor in MEGroup’s success | | across departments within the Group and with | and the achievement of our sustainability goals. | | customers. Our operations and management of | We foster employee engagement through various | | sustainability are tailored to meet the specific | means, such as business networking tools, internal | | needs of different national markets and to comply | communication of policy updates, and operational | | with relevant national legislation and market | meetings, and we encourage employee feedback. | expectations. This decentralised approach enables us to respond effectively to customer We do everything in our power to support and needs. Examples of this include our adaptation protect human rights. As a responsible company of photobooths for consumers with disabilities with international operations, we believe that and the integration of environmentally friendly strong ethics and good business go hand-in- features in laundry units. Customer-centric hand. We commit to complying with the laws and innovations like the SMS alert system in laundry regulations of the countries in which we operate. units further highlight our commitment to enhancing customer experience while maintaining While MEGroup has a decentralised management sustainable practices. approach, we nurture a common culture among our workforce throughout the entire Group through openness, honesty and the pursuit of a universal goal that focuses on core corporate values. The Company’s commitment to equal opportunities and diversity is evident through our policies and practices, ensuring a supportive and inclusive work environment for all employees, including those with disabilities. Equal opportunities and diversity MEGroup is an equal opportunities employer. We are committed to ensuring equal career opportunities for all our employees without discrimination and pursuing fair and equitable policies and procedures for recruitment, training and development. We ensure that full consideration is given to all applications from those with disabilities, with due regard to their aptitudes and abilities. Responding to customer needs We ensure that, wherever possible, employees Our customers’ needs are important who develop a disability during their engagement to us. This drives a continual review of can continue their employment through retraining, our products and the development redeployment and reasonable adjustments where of solutions to meet these needs. For practicable, enabling them to remain within example, we have improved services the Group. Opportunities for training, career offered to consumers with disabilities, development and progression into and within the and complied with the Equality Act 2010 Group do not operate to the detriment of people by introducing on-screen instructions with disabilities. within our photobooths for hard-of- hearing customers, and voice instructions and carefully selected screen colours and font sizes for consumers with visual impairments. In addition, the development of the universal photobooth enables access for wheelchair users. MEGroup plc Annual Report 2023 45 Strategic Report ## Sustainability at ME Group continued ### Gender diversity The table below shows the gender diversity of the Group's employees as at 31 October 2023 with corresponding figures at 31 October 2022: | As at 31 October 2023 | Total | Male | Female | | --- | --- | --- | --- | | The Board of ME Group | 8 | 5 | 3 | | Senior managers in the Group (excluding directors of ME Group) | 23 | 17 | 6 | | Employees (excluding above) | 1,151 | 960 | 191 | | **Total** | **1,183** | **983** | **200** | | As at 31 October 2022 | Total | Male | Female | | --- | --- | --- | --- | | The Board of ME Group | 8 | 5 | 3 | | Senior managers in the Group (excluding directors of ME Group) | 20 | 14 | 6 | | Employees (excluding above) | 1,055 | 875 | 180 | | **Total** | **1,083** | **894** | **189** | For more on gender diversity, please refer to the Corporate Governance section on page 78. ![img-10.jpeg](img-10.jpeg) ME Group (continued page 2022) ### 5. Communities andCSR Our commitment to the communities we serve is delivered through a wide range of initiatives in the field of corporate social responsibility (‘CSR’) that extend beyond environmental concerns to encompass community engagement and customer well-being. The Company’s commitment to CSR is not only a response to legal requirements but also a reflection of its dedication to ethical practices and making a positive impact. ### Case study Revolution Pizzas: donating food, cutting waste, avoiding emissions Inflation and the rising cost of energy in the UK is pushing the price of food ever higher. This is particularly impacting lower-income individuals and families across the country. At the same time, foodwaste is having a negative impact on the environment. Recognising these two issues, our Revolution Pizza team in the UK partnered with FareShare, an organisation that redistributes surplus food and drink from the food industry to charities and community groups supporting vulnerable people. Our collaboration began in November 2023 and in just two months we donated 0.6 tonnes of food, the equivalent of 1,423 meals. The food was received by 28 separate charities and community groups dedicated to supporting the homeless, those on low or no income, children, young people, families and older people. In addition to providing much needed food for some of the most vulnerable in the UK today, through our donations wehave avoided 1.2 tonnes of embeddedCO 2e and 1.6m litres of watergoing to waste. We will be continuing with this partnership in 2024. MEGroup plc Annual Report 2023 47 Strategic Report ### Sustainability at MEGroup continued ### Health and safety For children’s rides, previously under Jolly Roger (Amusement Rides) Limited, we comply ### Health and safety are fundamental to with British Amusement and Catering Trades Association (BACTA) guidelines and ensure RoHS2 ### MEGroup’s operational philosophy, CE marking. As a registered inspection body in the ### extending to consumers, customers UK, we are authorised to issue safety certifications ### and employees. We recognise that for these rides. ### safeguarding stakeholders from Employee health and safety ### risksrelated to our products and The well-being of our employees is paramount. ### services is not only ethically as well Our health and safety policies and procedures are ### aslegally essential but also key to regularly reviewed and updated to reflect current ### ourbusiness success. legislation and best practices. We perform risk assessments for new tasks and annual reviews for Customer health and safety ongoing compliance and improvement. We prioritise our customers’ safety by maintaininga network of trained service Since the introduction of the Essential Skillz online engineers. These professionals regularly service training system in 2014, we have consistently and inspect equipment at customer sites, with a updated our employee induction process, commitment to respond to safety concerns within including training modules on security awareness | 24 hours of a report. | and refresher courses for regional engineers. | | --- | --- | | All new products from external suppliers are | MEGroup UK is accredited under two safe | | subjected to thorough safety assessments to | contractor schemes by Alcumus and Altius and has | | ensure they meet relevant standards before their | received an Assured Vendor award. We undergo | | introduction to the market. Our photobooths, | annual health and safety audits, including external | | designed with a focus on security, feature a | reviews by bodies like Avetta, and have achieved | | multipoint locking system and adhere to electrical | PCI DSS certification to mitigate online fraud risks. | standards, including DOC and CE markings for | RoHS2 compliance. These photobooths undergo | Collaborative approach to health | | --- | --- | | regular testing to meet Portable Appliance | andsafety | | Testing (PAT) and Amusement Device Inspection | Our health and safety management involves | | Procedures Scheme (ADIPS) standards. | collaborative efforts from all workforce levels, | with a diverse Health and Safety Committee driving comprehensive coverage and continual improvement in our practices. MEGroup plc Annual Report 2023 48 ### Environmental stewardship Thispractice not only aligns with recent environmental legislation but also creates ### MEGroup recognises the asecondary income stream ### responsibility it bears towards ▪ Technological Innovations – We continually ### environmental protection, and it is adopt new technology to reduce our ### aware of the impact that its environmental impact. Initiatives include: ### businessactivities have on our - Implementing automatic shutdown and ### planet. Our approach to restart in photobooths, saving about 30% ### environmental protection is not ofpower consumption ### justabout compliance; it’s about - Using remote telemetry systems to reduce ### leadership and innovation. service visits and consumable waste - Replacing traditional lighting with low-energy We are dedicated to integrating environmental LED lamps in photobooths and factories, considerations into the core of our operations, eliminating hazardous waste and cutting focusing on the circular economy, resource- energy usage consumption reduction, and minimising our carbon footprint. - Upgrading infrastructure in our offices with improved insulation and more efficient air Navigating environmental challenges conditioning and heating systems In a world where environmental concerns increasingly influence legislation and consumer Proactive climate change mitigation behaviour, we understand the challenges posed by Though not significantly exposed to climate- waste disposal costs, energy consumption, water related risks currently, we are proactive in scarcity, and the rising costs of fuel. These factors reducing energy use and curbing our demand not only impact our operations but also resonate for natural resources. We operate a ‘green fleet deeply with our stakeholders. To address these policy,’ ensuring our vehicles are chosen based challenges, we have embraced several strategies: onenvironmental impact, primarily CO₂ emissions. This policy, combined with the measures outlined, ▪ Waste Reduction Initiatives – We prioritise underscores our commitment to increasing reducing waste generation across all our energyefficiency. processes ▪ Resource Recovery and Reuse – Embodying theprinciple of ‘reuse before recycle,’ we refurbish and resell electrical equipment suchasphotobooth cameras and printers. MEGroup plc Annual Report 2023 49 Strategic Report ### Sustainability at MEGroup continued ### Sustainability governance age, disability, sex, sexual orientation, pregnancy/ maternity, race or ethnicity, religion or belief, ### Our governance structure places gender identity or marital status. The statement outlines the steps we take to ensure that we create ### sustainability at its core. The Board, a diverse and inclusive culture. These include: ### with the Chief Operating Officer diversity and inclusion training, with unconscious ### taking a leading role, oversees our bias training for all line managers; establishing ### sustainability strategies, ensuring employee representative groups; training our recruiters; recognising holidays for each religious ### alignment with our corporate group or culture; and promoting pay equity. ### objectives. We have established clear ### roles and responsibilities, ensuring Anti-corruption and bribery policy ### every team member contributes to This detailed policy covers our commitment to ensuring MEGroup – and every employee and ### our sustainability goals. associated person– comply fully with the Bribery Act 2010. The policy contains details of how a The Group operates in highly differentiated potential; act of bribery or corruption can be national markets with differing national laws, reported and the steps that MEGroup will take to preferences and cultures. As a result, operational investigate and respond. direction and management of sustainability lie primarily with national business managers, Whistleblowing policy who are best placed to ensure compliance with MEGroup’s Whistleblowing Policy provides details national legislation and market expectations. of how an employee can report any potential The Executive Team, who report to the Board, act of wrongdoing or an act that contravenes therefore take a holistic approach to overseeing our ethical practices. The policy ensures that the sustainability initiatives implemented at a employees are able to make such a report in national level and take responsibility for ensuring complete confidence, anonymously and without that such initiatives are in line with investor any fear of reprisal. It also provides details of the expectations, and for consolidating the outcomes steps we will take to investigate and respond to of such initiatives into the five strategic areas, as any report we receive. further explained below. Diversity policy ESG-related policies Our Diversity Policy acknowledges that Board MEGroup has a certain number of key ESG- diversity, that is not restricted to gender alone, related policies in place. These are detailed below. can aid the effectiveness of the Board. The policy Additional policies – particularly those relating commits us to making Board appointments on to our environmental performance – are under merit, Board composition, skills, background and consideration for introduction. experience. It also commits us to disclosing the composition and structure of the board annually in We have a formal process for the development our Annual Report. and approval of policies. When a policy is updated or a new policy is created, the initial work is Sustainability risk management undertaken by the appropriate department, which We acknowledge the challenges in our then seeks the input from relevant internal or sustainability journey. Managing environmental external stakeholders to ensure that our policies impacts, while maintaining high safety standards, are robust. All sustainability-related policies are requires diligent effort. Our risk management submitted to the Sustainability Task Force for strategies are robust and designed to navigate approval. The CFO and/or COO then reviews and these challenges effectively. approves all policies before they are finalised and socialised across the business to ensure broad Sustainability metrics and reporting awareness and full compliance. Our commitment to transparency is evident in our detailed sustainability metrics and reporting. Equality, diversity and inclusion statement We track greenhouse gas emissions, energy This statement outlines MEGroup’s desire to consumption, and other key indicators, presenting create a diverse workforce and an inclusive them in a clear and accessible format. workplace. We operate a zero-tolerance approach to any form of discrimination, and we are committed to providing equal opportunities to all current and prospective employees regardless of MEGroup plc Annual Report 2023 50 ## We are committed to weaving sustainable ## practices into the fabric of our business, ## understanding its critical importance to us, ## ourcustomers, our employees, and the planet ## atlarge. MEGroup plc Annual Report 2023 51 Strategic Report ## Specific sustainability ## metricsand reporting ### 1. Materiality assessment ### The materiality analysis was carried out in ### accordance with the spirit and the process ### of a sustainability approach. That is to say ### through dialogue with our internal and ### external stakeholders. This matrix aims at prioritising the main challenges of the Group, with regard to its short- and long-term ambitions and the expectations of its main stakeholders. In total, more than 30 individual interviews were conducted, prepared beforehand by a questionnaire to be completed by the people interviewed, in order to analyse the context of the Group’s activity, current or suggested sustainability best practices, as well as the risks, opportunities and challenges. In a second step, the results were validated by the Executive Team before being shared during five workshops involving all of the Group’s businesses at the national level. The last workshop was organised with international managers. In total, around 50 employees were involved. This approach made it possible to analyse the risks and opportunities and identify 25 issues reflecting the economic, environmental, and social impacts of our activities. These issues have been classified into five strategic areas highlighting the uniqueness of our activity. The last step consisted of prioritising the issues in the materiality matrix. MEGroup plc Annual Report 2023 52 ### Materiality matrix Sustainability of the ID and Photo range Optimisation of Pride of Internal the commercials For the stakeholders communication belonging/recognition relationshipwithB2B Global Digtal transition Satisfaction of users Brand Cybersecurity awareness Our CSR Strength of the approach network technicians HR policy/Collaborative management R&D Attractiveness of the employerbrand Training policy Onboarding Increased flow Circular economy of consumers Growth of the Success of the Laundromat range Food range Key accounts co-ordination Cloud operating system Financial Optimisation of performance Strategic axes products Services and clients Operational innovation CSR approach International development HR and employees Strategy and development For the business MODERATED IMPORTANT VERY IMPORTANT MODERATED IMPORTANT VERY IMPORTANT MEGroup plc Annual Report 2023 53 Strategic Report ### Specific sustainability metricsand reporting continued ### 2. Greenhouse gas (GHG) and energy consumption Reporting GHG emissions In accordance with the disclosure requirements for listed companies, the table below shows the Group’s greenhouse gas emissions for the current and preceding financial year. The Group is required to report the emissions it is responsible for (as defined below), and to provide at least one ‘intensity ratio’ together with an explanation of methodology used. The table below explains what data we have included in this report and why. Assessment parameters MEGroup comments Consolidation approach The figures below are based on subsidiary companies owned by MEGroup, except for those non-material subsidiary companies whose vending estate comprises less than 50 machines. This is because it would not be practicable for the Company to include those subsidiary companies in the data. For those investments where the Group has less than 50% of the issued share capital, the Group does not have operational control for day-to-day activities and these entities are not included in the above figures. Boundary summary The Group has included vending estates which are owned by the Group even though it does not directly control the operational use (i.e. period of operation) for these assets. Emission factor source Department of Business, Energy & Industrial Strategy, 2016 GHG Conversion Factors for Company Report (2016: DEFRA 2014). Methodology The Company followed the Greenhouse Gas Protocol Corporate Standard. Materiality threshold As mentioned above, subsidiary companies with less than 50 units of operating equipment have been excluded, as have depots and other property units where the total amount spent on heating, lighting and power is less than £50,000 per annum per site. It would not be practicable for the Company to include sites where the consumption is below this threshold. Fugitive emissions The Group has not reported fugitive emissions (which include leakages from refrigerantsused in air conditioning units, etc.) because no data were available and, given the low number of such units in the Group, management did not consider such emissions to be material. Intensity ratio The GHG intensity ratio is calculated as the total GHG emissions in tons of CO 2e (including Scope 1, 2, and 3 based on the availability of the data) per unit of operating equipment. MEGroup plc Annual Report 2023 54 Global GHG emissions (UK incl.) Breakdown of GHG emissions | | | 12 months ended | | 12 months ended | | --- | --- | --- | --- | --- | | | | 31 October 2023 | | 31 October 2022 | | Emissions scope | | | tons of CO2e tons of CO2e | | | Scope 1 | Energy – Gas 241 332 | | | | Scope 2 Energy – Electricity 360 300 Scope 3 Use 3,573 7,239 Scope 3 Travel – 524 Scope 3 Inputs for machine production – – Scope 3 Car fleet 241 – Scope 3 Purchasing for the Group – – Scope 3 Inputs for machine user – – Scope 3 Direct Waste 43 37 UK and offshore total 4,458 7,908 UK and offshore Per number of units of operating equipment 0.71 1.15 intensity ratio Scope 1 Energy – Gas 295 232 Scope 2 Energy – Electricity 376 598 Scope 3 Use – – Scope 3 Travel 107,461 – Scope 3 Inputs for machine production 5,475 5,176 Scope 3 Car fleet 3,457 – Scope 3 Purchasing for the Group 472 446 Scope 3 Inputs for machine user 188 178 Scope 3 Direct Waste 79 78 Overseas total 117,803 6,708 Overseas Per number of units of operating equipment 2.85 0.18 intensity ratio Scope 1 Energy – Gas 536 564 Scope 2 Energy – Electricity 736 898 Scope 3 Use 28,852 29,058 Scope 3 Travel 107,461 5,287 Scope 3 Inputs for machine production 5,475 5,176 Scope 3 Car fleet 3,698 1,108 Scope 3 Purchasing for the Group 472 446 Scope 3 Inputs for machine user 188 178 Scope 3 Direct Waste 122 115 Group total 122,261 14,616 Group intensity Per number of units of operating equipment 2.57 0.97 ratio During the year ended 31 October 2023, the Company used emissions equal to 122 261 tonnes of carbon dioxide resulting from the purchase of electricity, heat, steam or cooling by the company for its own use, as well as indirect emissions (including emissions from business traveling, car fleet, supply chain, etc). MEGroup plc Annual Report 2023 55 Strategic Report ### Specific sustainability metricsand reporting continued Energy consumption During the year ended 31 October 2023, the Company’s energy consumption was equal to 142,854.3 MWh resulting from the purchase of electricity, heat, steam or cooling by the company for its own use. | | 12 months ended | | | 12 months ended | | --- | --- | --- | --- | --- | | | 31 October 2023 | | | 31 October 2022 | | Type of energy consumed | | tons of CO2e tons of CO2e | | | | Gas | | | 1,031.8 4.7 | | Electricity HQ 10.7 128.4 Electricity Machines 15,324.6 14,232.0 Heat – – Cooling – – Other type of fuel (petrol & diesel for cars) 1,034.3 1,223.3 UK and offshore total 17,401.4 15,588.3 Gas 987.7 1,247.5 Electricity HQ 1,209.8 1,317.8 Electricity Machines 108,429.1 99,579.0 Heat – – Cooling – – Other type of fuel (petrol & diesel for cars) 14,826.2 12,928.3 Overseas total 125,452.9 115,072.6 Gas 2,019.5 1,252.2 Electricity HQ 1,220.6 1,446.3 Electricity Machines 123,753.8 113,811.0 Heat – – Cooling – – Other type of fuel (petrol & diesel for cars) 15,860.5 14,151.6 Group total 142,854.3 130,660.9 Methodology used to calculate energy and GHG emissions data: ▪ The data detailed in the table above represents the emissions and energy used for which MEGroup is responsible and is incorporated by reference in the Corporate Governance section on pages 78 to 86 ▪ Data based on actual utilities invoices for Head Office consumption ▪ Kilometres travelled by cars, multiplied by the CO₂ emissions (by kilometre) for every car in the Groupfleet ▪ Theoretical consumption by machines, multiplied by average number of machines for each country of operation. Mainly it is the partners who pay for the electricity consumed by the Group’s operating machines, not the Group. A theoretical consumption has therefore been calculated based on an average hourly consumption and an average number of hours of uptime per day ▪ 12 months ended 31 October 2023 compared with the 12 months ended 31 October 2022 ▪ Indirect (Scope 3) GHG emissions in the categories ‘Energy – gas’ and ‘Energy – electricity’ have been corrected due to improvements in the calculation methodology. The difference between the corrected total GHG emissions and those published in the Annual Report for FY2022 is less than 3%. The intensity ratio was recalculated accordingly. MEGroup plc Annual Report 2023 56 GHG targets for 2024-2026 Carbon footprint Management have engaged Reporting 21, an independent expert in sustainability data capture and analysis. Their work will help the Group better understand its carbon footprint, give management access to clear data and aid the creation of plans and targets moving forward. Energy consumption of the machine park 2022 2023 2024 2025 2026 Actions | 24,674 tons of CO | 2 | ▪ Discussion group on | ▪ Reporting of energy | ▪ Reporting of energy | ▪ Reporting of energy | | --- | --- | --- | --- | --- | --- | | (=81% of our global | | the energy and | consumption of | consumption of | consumption of | | carbon footprint) | | electricity | machines | machines | machines | | | | consumption of | ▪ Integration of CSR | ▪ Integration of CSR | ▪ Integration of CSR | | | | machines | in the product | in the product | in the product | | | | ▪ Develop the areas | design process | design process | design process | | | | for improvement | ▪ External audit on | ▪ External audit on | ▪ External audit on | | | | detected during the | areas for | areas for | areas for | | | | 1st discussion group | improvement to | improvement to | improvement to | | | | in 2022: adaptation | reduce our energy | reduce our energy | reduce our energy | | | | of the number of | consumption | consumption | consumption | cycles and weight of linen, shorten the rinsing cycle, generalize the Stop and Go device on all machines, equip all machines with LEDs ▪ Integration of sustainability in the product design process KPIs | ▪ (3%) tons of CO | 2 | ▪ (5%) tons of CO | 2 | ▪ (7%) tons of CO | 2 | ▪ (7%) tons of CO | 2 | | --- | --- | --- | --- | --- | --- | --- | --- | | compared to 2021 | | compared to 2021 | | compared to 2021 | | compared to 2021 | | | for the total | | for the total | | for the total | | for the total | | | machine park | | machine park | | machine park | | machine park | | | ▪ (5%) tons of CO | 2 | ▪ (7%) tons of CO | 2 | ▪ (10%) tons of CO | 2 | ▪ (10%) tons of CO | 2 | | compared to 2021 | | compared to 2021 | | compared to 2021 | | compared to 2021 | | | for new machines | | for new machines | | for new machines | | for new machines | | Offsetting our carbon footprint 2022 2023 2024 2025 2026 Actions Investment in carbon offset projects KPIs | ▪ 400 Tons | ▪ 600 tons | ▪ 800 tons | ▪ 1,000 tons | ▪ 1,200 tons | | --- | --- | --- | --- | --- | | compensated with | compensated with | compensated | compensated | compensated | | Microsol | Microsol | | | | Going4Zero MEGroup plc Annual Report 2023 57 Strategic Report ### Specific sustainability metricsand reporting continued Renewable energies 2022 2023 2024 2025 2026 Actions | Laundry units with | ▪ Development of the | ▪ Development of the | ▪ Development of the | ▪ Development of the | | --- | --- | --- | --- | --- | | solar panels represent | use of solar panels | use of solar panels | use of solar panels | use of solar panels | | 10% of the laundry | across laundry units | across laundry units | across laundry units | across laundry units | | estate | ▪ Create a customer | ▪ Testing of solar | | | | | interview | heaters | | | highlighting the advantages of solar panels from a profitabil-ity and communication point of view KPIs | ▪ Laundry units with | ▪ Laundry units with | ▪ Laundry units with | ▪ Laundry units with | | --- | --- | --- | --- | | solar panels will | solar panels will | solar panels will | solar panels will | | represent 11% of the | represent 20% of | represent 25% of | represent 30% of | | laundry estate | the laundry estate | the laundry estate | the laundry estate | Transport of people 2022 2023 2024 2025 2026 Actions | ▪ Driver training with | ▪ Driver training with | ▪ Driver training with | ▪ Driver training with | | --- | --- | --- | --- | | the lowest | the lowest | the lowest | the lowest | | eco-driving ratings | eco-driving ratings | eco-driving ratings | eco-driving ratings | | 10% French drivers | 20% French drivers | 25% French drivers | 30% French driver | | | + 5% European | + 10% European | +15% European | drivers KPIs | ▪ (2%) litres of fuel | ▪ (4%) litres of fuel | ▪ (7%) litres of fuel | ▪ (7%) litres of fuel | | --- | --- | --- | --- | | saved in France | saved in France and | saved in France and | saved in France and | | ▪ (2%) of trained | Europe at constant | Europe at constant | Europe at constant | | French drivers | scope | scope | scope | | | ▪ (5%) of French | ▪ (5%) of French | ▪ (5%) of French | | | drivers trained + 2% | drivers trained + 2% | drivers trained + 2% | | | of European drivers | of European drivers | of European drivers | | | at constant scope | at constant scope | at constant scope | MEGroup plc Annual Report 2023 58 ### 3. TCFD report ### MEGroup acknowledges the ### significance of climate change and ### its impact on the environment and ### society. Mitigating climate risks ### andreducing our carbon footprint ### are integral responsibilities for ### everybusiness. As a company, we are at the early stages of our journey towards becoming a carbon-neutral enterprise. Although climate risks are currently perceived as relatively low for MEGroup, we are proactively taking steps to minimise our footprint, and manage and mitigate our impact on the climate to contribute positively to the environment and society. The Company is reporting on climate-related issues in line with the UK Listing Rule 9.8.6(8), the Task Force on Climate-related Financial Disclosures (“TCFD”) framework and the Companies Act 2006. The Company’s disclosure is aligned to the five pillars of TFCD below: ▪ Governance – explanation of the TCFD framework and its significance for MEGroup ▪ Strategy – discussion on the impact of climate- related risks and opportunities on MEGroup’s business strategy and financial planning ▪ Risk Management – description of processes for identifying, assessing, and managing climate-related risks ▪ Metrics and Targets – detailed metrics and targets used to assess and manage climate- related risks and opportunities, including GHGemissions data and energy consumptionfigures MEGroup plc Annual Report 2023 59 Strategic Report ### Specific sustainability metricsand reporting continued Compliance statement andprogress In our second year of TCFD reporting for FY2023, MEGroup acknowledges that it is not fully compliant with all the TCFD recommended disclosers. Despite the identified gaps, we are committed to achieving full disclosure in the coming three years. We have established preliminary deadlines for each of the recommended disclosures in the TCFD Compliance Index table. Detailed disclosures are also provided in the TCFD Disclosures table. Recognising the importance of environmental issues in business management, we are dedicated to enhancing the management of climate-related risks and opportunities, setting specific greenhouse gas emissions and financial climate-related targets. TCFD compliance index FY 2023 Steps to be undertaken to achieve full Commitment to full Recommended disclosure Compliance compliance compliance Governance a) Describe the Board’s Full – – oversight of climate- related risks and opportunities b) Describe management’s Full – – role in assessing and managing climate-related risks and opportunities Strategy | a) Describe the climate- | Partial (In progress) Conduct deep-dive analysis of identified | | FY2025 | | --- | --- | --- | --- | | related risks and | | risks and opportunities in respect of its | | | opportunities the | | influence over the short, medium and | | | Company has identified | | long term. | | over the short, medium and long term | b) Describe the impact of | Partial (In progress) Enhance assessment of climate-related | | FY2025 | | --- | --- | --- | --- | | climate-related risks and | | risks and opportunities in order to | | | opportunities on the | | understand their impact on the | | | Company’s businesses, | | business financially, on its strategy and | | | strategy and financial | | business model, as well as on all stages | | | planning | | of the supply chain. | | | c) Describe the resilience of | Non-compliant Currently, our company has not | | FY2026 | | the Company’s strategy, | | conducted climate resilience testing | | | taking into consideration | | under different scenarios due to | | | different climate scenarios, | | resource constraints, the novelty of | | | including a 2°C or lower | | climate risks within our strategic | | | scenario | | framework, and their relatively low | | materiality compared to other risks influencing the business. Insufficient qualified resources and the absence of an integrated strategy for climate risk management have contributed to this delay. However, we acknowledge the importance of incorporating climate resilience into our risk management practices. As part of our commitment to continuous improvement, we intend to allocate resources, enhance our expertise, and integrate climate resilience testing into our strategic framework in the future, with the intention of reporting on the results. MEGroup plc Annual Report 2023 60 FY 2023 Steps to be undertaken to achieve full Commitment to full Recommended disclosure Compliance compliance compliance Risk management a) Describe the Company’s Full – – processes for identifying and assessing climate- related risks. b) Describe the Company’s Full – – processes for managing climate-related risks. | c) Describe how processes | Partial (In progress) The Company will continue to review its | | FY 2025 | | --- | --- | --- | --- | | for identifying, assessing, | | risk management framework and the best | | | and managing climate- | | way to effectively integrate climate- | | | related risks are integrated | | related risks into its processes, considering | | | into the Company’s overall | | how climate change may interact with the | | | risk management. | | Company’s Principal Risks whilst not being | | a principal risk itself. Metrics and Targets | a) Disclose the metrics | Partial (In progress) The Company is currently working to | | FY 2025 | | --- | --- | --- | --- | | used by the Company to | | identify metrics in line with its business | | | assess climate-related | | strategy and risk management | | | risks and opportunities in | | processes as recommended and will | | | line with its strategy and | | consider whether additional metrics | | | risk management process. | | may be developed and added over time | | (with the support of Sirsa data reporting platform). b) Disclose Scope 1, Scope Full – – 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks. c) Describe the targets Full – – used by the Company to manage climate-related risks and opportunities and performance against targets. TCFD Disclosures FY 2023 Description, location of disclosure progress to date and reason Recommended disclosure Compliance foromission (if appropriate) Governance Disclosure of the Company’s governance around climate-related risks and opportunities a) Describe the Board’s Full The Board is ultimately accountable for environmental responsibility oversight of climate- and exercises oversight of climate-related risks and opportunities related risks and through: opportunities ▪ information received from senior management quarterly on any significant matter ▪ general observations on current best practices and individual customer recommendations (among the 50 Best Practices identified in 2021, some directly concern climate change: water, energy and recycling for instance); and ▪ recommendations (if any) from major shareholders and other stakeholders Climate-related risks and opportunities were not deemed material for business in FY 2023. Consequently, they were not integrated into our strategic planning and financial considerations. It’s important to note that our governance framework dictates that should any climate- related issues emerge as material concerns, they will be duly considered by the Board. This approach ensures that our decision- making remains aligned with our commitment to effective risk management and responsible governance practices. For further details of the Company’s integrated corporate governance and organisational structure, and how climate is dealt with within the governance and organisation structure, please see the Corporate Governance section on pages 78 to 86. MEGroup plc Annual Report 2023 61 Strategic Report ### Specific sustainability metricsand reporting continued FY 2023 Description, location of disclosure progress to date and reason Recommended disclosure Compliance foromission (if appropriate) Governance Disclosure of the Company’s governance around climate-related risks and opportunities b) Describe management’s Full The Chief Operating Officer has specific responsibility for risk role in assessing and management and health, safety and environmental matters, with managing climate-related delegated authority through line management. risks and opportunities The Sustainability Task Force comprises the Group Human Resources Director and a global network of CSR representatives. The Sustainability Task Force makes recommendations to the Executive Team. A more detailed overview of the Company’s corporate governance and organisational structure is included within the Corporate Governance section on pages 78 to 86. The Group operates in very different national markets with differing national laws, preferences and cultures. As a result, operational direction and management of sustainability lie primarily with national business managers, who are best placed to ensure compliance with their national legislation and market expectations. The Executive Team, who report to the Board, therefore take a holistic approach to overseeing sustainability and take responsibility for assessing climate-related risks and opportunities. Disclosure of the actual and potential impacts of climate-related risks and opportunities on the Strategy Company’s material business, strategy, and financial planning a) Describe the climate- In progress The Group, through its risk monitoring undertaken in accordance with related risks and the Company’s corporate governance and organisational structure, opportunities the has identified: 1) Increased potential legislation (in climate change Company has identified area), 2) the increasing awareness of the climate crisis amongst over the short, medium consumers. 3) energy consumption 4) rising car fuel prices 5) water and long term scarcity (due to the climate change) as potential areas of future risk and opportunity. The Company has identified a number of further key opportunity focus areas which are explained in the Sustainability Statement on pages 42 to 58. The Company has set out below the initial categorisation ofshort-, medium- or long-term risks and opportunities, although these remain under review by the Company on an ongoing basis. Type of climate risk Risk Impact timeline Transitional Increased potential Short-term (1-3 years) risks legislation (in climate change area) The increasing Short-term (1-3 years) awareness of the climate crisis amongst consumers Rising car fuel prices Mid-term (3-10 years) Physical Water scarcity (due to Mid-term (3-10 years) risks the climate change The Company has identified its main climate-related risks through its existing governance framework. However, we do not consider these to be material risks. Considering the need to react and adapt in the face of climate change, the Company is well-equipped to meet these new challenges. By launching its collective long-term transformation initiative, the Company aims to improve its competitiveness, performance, and resilience throughout its value chain. As part of this transformation, it will continue to monitor short, medium and long-term climate-related risks and opportunities to ensure full disclosure in the future. MEGroup plc Annual Report 2023 62 FY 2023 Description, location of disclosure progress to date and reason Recommended disclosure Compliance foromission (if appropriate) Disclosure of the actual and potential impacts of climate-related risks and opportunities on the Strategy Company’s material business, strategy, and financial planning b) Describe the impact of In progress Although not presently exposed to material risks related to climate climate-related risks and change, the Company is taking steps to ensure that its use of natural opportunities on the resources, such as energy and water, are reduced wherever possible. Company’s businesses, The Company mitigates its exposure to these risks, and the emissions strategy and financial which the business generates, by taking the actions detailed in the planning Environment section on page 49 et seq . The Company understands the wider impact of climate-related issues on the whole business which is one of the reasons why the Company adopted its new systemic sustainability approach. This approach supports the Group’s growth strategy and operations by integrating social, environmental, and economic expectations into its strategy and operations. In addition to the work undertaken to formulate the Group Sustainability Materiality Matrix disclosed on page 53, The Company will continue to further assess climate-related issues in order to understand their impact on the business financially, on its strategy and business model, as well as on all stages of the supply chain. c) Describe the resilience of Non-compliant In the current reporting period, the Company did not conduct a climate the Company’s strategy, scenario analysis. As we look to the future, we are committed to taking into consideration monitoring climate-related risks and opportunities that impact our different climate scenarios, operations. Specifically, we plan to conduct a scenario analysis within including a 2°C or lower the next three years while working on reducing energy consumption scenario and gradually transitioning to renewable energy sources to lower our carbon footprint. Risk Management Disclosure of how the Company identifies, assesses, and manages climate-related risks. a) Describe the Company’s Full The Company has identified its main climate-related risks through its processes for identifying existing governance framework. A broad range of economic, and assessing climate- environmental and social risks were considered, and each risk was related risks. prioritised according to its importance to the Company and in relation to its short and long-term ambitions, and the expectations of our key stakeholders. In relation to the identified risk of an increase in potential legislation (including in relation to climate reporting), the Company ensures its policies and procedures keep pace with legislative advances as part of continual improvement. As part of this, the Company has started the process of reporting on climate changed related risks and mitigation actions and it is committed to complying in full with the TCFD recommendations in future reporting periods. b) Describe the Company’s Full Given the nature of the Company’s business, it is not presently exposed processes for managing to material risks related to climate change. However, steps are being climate-related risks. taken to mitigate any exposure to the risks highlighted above, and the emissions which the business generates. Further details in relation to mitigating actions areoutlined in the Sustainability Statement to be found on pages42 to 58. c) Describe how processes In progress Since 2021, the Company has been integrating a systemic sustainability for identifying, assessing, approach in the Company’s strategy that involves all its business to and managing climate- help deliver its aim of being carbon neutral by 2040. This systemic related risks are integrated environmental approach and focus on inventing eco-responsible local into the Company’s overall services together supports the company’s growth strategy and risk management. operations by integrating social, environmental, and economic expectations into the Group’s strategy and operations. The Company’s materiality matrix which is updated annually prioritises the main challenges of the Group, with regard to its short and long-term ambitions. The materiality analysis identified 25 issues classified into five strategic areas: (i) operational innovation; (ii) strategy and development; (iii) services and customers; (iv) HR and employees; and (v) communities and CSR, with sustainability of the ID and the Photo range ranking as very important for stakeholders and the business. For further details of the Company’s integrated corporate governance and organisational structure, please see the Corporate Governance section on pages 78 to 86. The Company will continue to review its risk management framework and the best way to effectively integrate climate-related risks into its processes, considering how climate change may interact with the Company’s Principal Risks whilst not being a principal risk itself. MEGroup plc Annual Report 2023 63 Strategic Report ### Specific sustainability metricsand reporting continued FY 2023 Description, location of disclosure progress to date and reason Recommended disclosure Compliance foromission (if appropriate) Disclosure of the Company’s metrics and targets used to assess and manage relevant climate- Metrics and Targets related risks and opportunities where such information is material. a) Disclose the metrics In progress The Company follows the Greenhouse Gas Protocol Corporate used by the Company to Standard in calculating its Scope 1, Scope 2. See pages 54 and 56 for assess climate-related the assessment parameters and detailed methodology. risks and opportunities in The Company is currently working to identify metrics in line with its line with its strategy and business strategy and risk management processes as recommended risk management process. and will consider whether additional metrics may be developed and added over time (with the support of Sirsa data reporting platform). b) Disclose Scope 1, Scope Full See page 55 for Scope 1 and Scope 2 emissions related to the 2, and, if appropriate, Company’s operations in line with the GHG Protocol methodology and Scope 3 greenhouse gas page 54 for the assessment parameters. (GHG) emissions, and the The Company has not reported fugitive emissions (which include related risks. leakages from refrigerants used in air conditioning units, etc.) because no data were available and, given the low number of such units in the Company, management did not consider such emissions to be material. The Group’s current climate change strategy has been formulated based on its Scope 1 and Scope 2 emissions. The Company does not yet report Scope 3 emissions in full compliance with the TCFD recommendations, as Scope 3 emissions are calculated based on the data obtain from third parties (suppliers, partners), which increases the scale and complexity of collating such data. The Group will keep the appropriateness of collating Scope 3 emissions data under review each year and will disclose to the market when it has determined that collating such data is appropriate. The evolution will consist in evaluating the scope 3, the indirect emissions upstream, the downstream freight transport and distribution, the other downstream indirect emissions and the other upstream indirect emissions of the supply chain. We are planning to improve completeness and accuracy of scope 3 emissions in line with best practice and estimation techniques in the coming 3 years. c) Describe the targets Full In line with our purpose “Create eco-responsible local services that used by the Company to make everyday life easier”, we have identified the following materiality manage climate-related focus areas: risks and opportunities ▪ Carbon footprint reduction and performance against ▪ Circular economy through eco-design and continuous improvement of targets its machines ▪ Protection of natural resources through reduction of energy and water consumption ▪ Reduction of paper consumption More information on carbon emissions reduction targets can be found in the section on our four-year sustainability plan of the current report pages 57 to 58 et seq . Additionally, several KPIs have been identified relating to (i) the Company’s circular economy, (ii) energy saving for Photobooths, (iii) energy saving for laundry machines and (iv) organic detergent. We are using the following KPIs to track progress on reduction of GHG emissions: - Laundry units with solar panels | - tons of CO | 2 for the total machine park | | --- | --- | | - tons of CO | 2 for new machines | | - tons of CO | 2 compensated | - litres of fuel saved More information on carbon emissions reduction targets can be found in the section on our four-year sustainability plan of the current report pages 57 to 58 et seq . Further information is available on me-group.com (Our approach andKPIs). MEGroup plc Annual Report 2023 64 ### Supplementary information ### forTCFD disclosure Governance of climate-related risks Resilience of business model andopportunities R&D is vital in our strategy, focusing on Despite its low risk in the climate change sector, manufacturing innovation, recycling, and ME Group has established a robust environmental reintegration of machine components. Legal strategy overseen by a Steering Committee obligations in certain jurisdictions are also a under the Board and Executive Team. Key actions keyconsideration. include forming an environmental group in | late 2021, integrating sustainability in our 2021 | Targets and KPIs for managing risks | | --- | --- | | Annual Report’s risk management chapter, and | andopportunities | | undergoing annual environmental performance | Our targets include increasing the percentage | | audits by Ecovadis. We align our efforts with the | of laundry units with solar panels annually and | | United Nations Sustainable Development Goals | expanding the deployment of our Revolution | | (SDG) and hold regular sustainability strategy | machines. We also aim to reduce fuel consumption | | review meetings. | through eco-driving initiatives and competitions | among our technicians. Process for managing climate-related | risks and opportunities | Compliance statement and progress | | --- | --- | | We use the MEGroup materiality matrix – first | In our second year of TCFD compliance, we | | created in 2021 and adjusted annually – to | acknowledge gaps but are committed to | | identify and manage climate-related risks and | achieving full disclosure. For each of the TCFD | | opportunities. This involves discussions validated | requirements, we identified the status of | | by employee groups, businesses, and external | compliance as of FY2023 and indicated our plans | | stakeholders. Key focus areas include energy | and timeframe toward becoming fully compliant. | | consumption, water scarcity, and the impact of | We recognize the importance of environmental | | rising fuel prices. | issues in business management and are dedicated | to enhancing the management of climate- Integration into overall risk management related risks and opportunities, setting specific Our risk management strategy includes training greenhouse gas emissions, and financial climate- staff in environmental practices, adopting related targets. best practices for reducing energy and water consumption, switching to green energy, and exploring hybrid and electric vehicles. Our R&D department in Grenoble, France plays a key role indeveloping green solutions. Principal climate-related risks andopportunities We focus on increasing green energy usage, improving water efficiency in our laundry machines, and addressing the impact of rising fuel prices. Our strategic locations in shopping centres offer a combined activity advantage forcustomers. Impact on business model and strategy Our business model adapts to varying levels of risk, particularly in water scarcity and fuel price fluctuations. We aim to encourage the use of our machines through public information and local authority guidance. MEGroup plc Annual Report 2023 65 Strategic Report ## Viability statement ## The Directors have assessed the viability and ## prospects of the Group in accordance with the ## requirements of theUK Corporate Governance Code. In doing so, the Directors have considered and To stress test the viability of the Group, the taken into account the Group’s present position Directors tested four scenarios and their projected and the principal risks facing it, the latter being financial impact over a five-year period. The four set out in the Strategic Report. The Directors have scenarios, and the assumptions used in each, are carried out their assessment by: detailed opposite: i. considering the potential repercussions of In all four scenarios, exchange rate assumptions those principal risks at least annually as well are as per the budget. The forecasts assume as the risk impact of each major event or payment of dividends commensurate with results transaction; and the Group’s dividend policy. ii. examining the effectiveness of the actions taken to mitigate the principal risks; In all four scenarios tested, the Group continues to comply with its bank covenants and loan iii. continually reviewing strategy and market repayment terms and is in a strong financial developments through regular executive position after five years. briefings; and iv. taking into account the Group’s operational Brexit impact was considered by management to processes and financial resources. have no significant impact on the business of the Group, nor will the Ukrainian or Israeli conflicts, as Based on this robust assessment, the Directors the Group has no activity in these regions. have a reasonable expectation that the Group will be able to continue in operation and meet its Management does not consider interest rate risk liabilities over a five-year period to October 2028. to be a threat to the Group’s viability, as all current debt is at fixed rates and the forecasts indicate no This assessment included stress tests on the future requirement for new debt facilities. performance and solvency for changes in the base assumptions over the five years and also for As a result, the cash flow projections indicate that the principal risks facing the business in severe the Group and the Parent Company will remain but plausible combination scenarios together within their available banking facilities over the with the effectiveness of any mitigating actions. 12 months from signing these financial statements. Consideration has also been given to the risk of regional changes such as Brexit; however, the Serge Crasnianski Board believes that having diverse geographical Chief Executive Officer operations means that the Group is less susceptible to the effects of regional changes. 27 February 2024 The Directors decided that a five-year period is appropriate for this assessment because it gives a good level of confidence due to a number of factors including: (i) the Group’s considerable financial resources including the high cash generation of its operations; (ii) the inherent unlikelihood of all or even most of the identified potential principal risks materialising simultaneously; (iii) the length of major operating contracts; (iv) the Group’s diverse geographical operations plus its established business relationships with many customers and suppliers in countries throughout the world; and (v) its proven track record in R&D development and its ability to adapt to market trends. MEGroup plc Annual Report 2023 66 ## In all four scenarios tested, the Group continues to comply ## with its bank covenants and loan repayment terms and is ## in a strong financial position after five years ### Scenario 1: The budget, elaborated with each country manager and validated by the top management, which we consider as the best scenario. ### Scenario 2: The “most likely scenario” is based on the budget, but with the following sensitivities added: ▪ A 5% decrease in machine installations due to supply chain issues ▪ A 5% price increase in spare parts and consumables ▪ A 1% increase in labour costs ▪ A 5% increase in paper costs ▪ A 1% drop in total revenue due to loss of key accounts ▪ A 1% drop in revenue due to the potential impact of a future pandemic or other global event ▪ This scenario does not consider the potential impact of new regulations regarding photo identification or permission of selfies as official photos within the five year forecast ### Scenario 3: The “mild” scenario is based on the budget, but with the following sensitivities added: ▪ A 10% decrease in machine installations due to supply chain issues, ▪ A 10% price increase in spare parts and consumables ▪ A 2% increase in labour costs ▪ A 10% increase in paper costs ▪ A 1% drop in total revenue due to loss of key accounts ▪ A 3% drop in revenue due to the potential impact of a future pandemic or other global event ▪ Revenue is reduced by 3% each year due to the potential impact of new regulations regarding photo identification or permission of selfies as official photos ### Scenario 4: The “worst case” scenario is based on the budget, but with the following sensitivities added: ▪ A 30% decrease in machine installations due to supply chain issues, ▪ A 15% price increase in spare parts and consumables ▪ A 3% increase in labour costs ▪ A 15% increase in paper costs ▪ A 3% drop in total revenue due to loss of key accounts ▪ A 5% drop in revenue due to the potential impact of a future pandemic or other global event ▪ Revenue is reduced by 5% each year due to the potential impact of new regulations regarding photo identification or permission of selfies as official photos MEGroup plc Annual Report 2023 67 ## Corporate ## Governance Board of Directors and Company Secretary 70 Report of Directors 72 Corporate governance 78 Statement of Directors’ Responsibilities 88 Directors’ RemunerationReport 90 Remuneration PolicyReport 94 Annual report on Remuneration 100 MEGroup plc Annual Report 2023 68 ### Artifical Intelligence is helping to transform ### our business by automating tasks, enhancing ### decision-making, optimising processes, and ### personalising customer experiences. MEGroup plc Annual Report 2023 69 Corporate Governance ## Board of Directors ## and Company Secretary 1 2 3 4 5 6 7 8 9 MEGroup plc Annual Report 2023 70 # The current Directors of the Company, all of whom served throughout the year ended 31 October 2023, are: # 1. Sir John Lewis OBE Non-executive Chairman Sir John joined the Board in 2008 and was appointed Chairman in 2010. He is Chairman of the Nomination Committee and a member of the Audit and Remuneration Committees. Until early 2019, Sir John was a Consultant to Eversheds Sutherland (International) LLP (as now is). He is a Director of Macdonald and Company Holdings Ltd (previously the AIM market company, Prime People plc), as well as various private companies. He was previously a practising Solicitor and senior partner in Lewis, Lewis & Co which became part of Eversheds Sutherland (International) LLP (as now is) after a series of mergers. He served as Chairman of Clenden plc and Principal Hotels plc and as Vice Chairman of John O Wood & Co plc and Pubmader Group Ltd. # 2. Serge Crasnianski Chief Executive Officer & Deputy Chairman Serge was appointed to the Board in 2009, having previously served on the Board from 1990 to 2007 (as a Non-executive Director until 1994, and from 1994 as an Executive Director). He is Chief Executive Officer, Deputy Chairman and member of the Executive Team. Serge founded KIS in 1963. # 3. Tania Crasnianski Executive Director Tania, the daughter of the CEO, Serge Crasnianski, was appointed to the Board in June 2021. Prior to that, Tania had been an independent legal adviser for seven years and before that held the role of Head of Global Investments at Stratford Capital between 2006 and 2014. She spent 12 years in the legal field, having worked in that time as a Criminal Lawyer for SCP Venom-Compimch & Associés, Paris. Tania joined the Group on 1 June 2020 as head of legal and general secretary, and shortly thereafter took over the supervision of the Group's entities in Germany and Austria. Tania is also a member of the Executive Team. # 4. Jean-Marc Janailhac Non-executive Director Jean-Marc joined the Board in 2019. He was designated Executive Director in July 2020. He was the first chairman of Strategic Committee (now the Executive Team) that is responsible for reviewing and implementing operational decisions across the Group until 31 October 2022. He chaired that committee until 31 October 2022. He returned to being a Non-executive Director on 1 November 2023. He is a senior adviser of Macquarie Capital (Europe) Limited, which he joined in 2018. In October 2010, he was appointed a Non-executive Director of Athena Investments A/S, a Danish company dedicated to renewable energy (wind and solar) listed on Noodles Copenhagen and included in the OMX Copenhagen Small Cap Index, a role he retains. # 5. René Praglio Non-executive Director René was appointed to the Board in June 2021, and appointed chairman of the Audit Committee on 29 April 2022. He worked at Morgen Stanley for 17 years and during that time he held senior roles, including as Managing Director (2004-2007) and as Head of Investment Banking (2008-2010). He was then country head for France from 2010 to 2020, and he recently joined PJT Partners as a Partner. Before this, he was a Partner at Ernst & Young. The Board considers Mr Praglio to be independent. # 6. Emmanuel Olympitis Non-executive Director Emmanuel was appointed to the Board in 2009. He is the Senior Independent Non-executive Director, Chairman of the Remuneration Committee, and a member of the Nomination and Audit Committees. Previous directorships include China Cablecom Holdings Limited (NASDAQ), Consel International Energy Limited (Canada), Matica plc, Secure Fortress plc, Bulgarian Land Development plc, Norman 95 plc, Pacific Medicplc (Executive Chairman) and Belle Medic plc (Chairman). Early career in merchant banking and financial services, including as Executive Director of Bankers Trust International Ltd, Group Chief Executive of Aitken Hume International plc, and Executive Chairman of Johnson & Higgins Ltd. # 7. Françoise Coutaz-Replan Non-executive Director Françoise was appointed to the Board in 2009 as Group Finance Director and retired from that executive role in August 2015. Since then she has been a Non-executive Director and was appointed to the Audit Committee in October 2016. Françoise joined KIS in 1991. The Board considers Miss Coutaz-Replan to be independent. # 8. Camille Claverie Non-executive Director Camille was appointed to the Board in June 2021. She has previously held roles at Sagard, latterly as Principal, and at Morgen Stanley and she is a Partner at Montefiore Investment where her responsibilities cover deal origination, and execution and investment monitoring to support companies and management teams in their growth plans. The Board considers Ms Claverie to be non-independent because she works for FFCI Montefiore Investment IV which holds 11.18% of the issued share capital of ME Group. # Company Secretary # Del Mansi Company Secretary The company secretary is Del Mansi, a qualified solicitor, who joined the Group in 2006. He served as interim Company Secretary from April to July 2008, and was appointed Group General Counsel in 2009, a role retained on being appointed Company Secretary in May 2018. 25 ME Group plc Annual Report 2023 Corporate Governance # Report of Directors **The Directors submit to the shareholders their report, the audited consolidated financial statements of the Group, and such audited financial statements of ME Group International plc as required by law for the year ended 31 October 2023.** The Corporate Governance Statement, the Corporate Responsibility Statement and the Sustainability Statement should be read as forming part of this report. In this document, references to the "Group", the "Company", "ME Group", "we", or "our" and cognates, refer to ME Group International plc, its subsidiary companies and, where applicable, its associated undertakings, or any of them as the context may require. In addition to the powers conferred on the Directors by law, the Company's Articles of Association also set out powers of the Directors. Under these powers, the Directors may, subject to any statutory provision requiring prior shareholder approval, exercise all powers of the Company to borrow money, issue shares, appoint and remove Directors and recommend dividends and declare interim dividends. A copy of the Articles of Association can be found on the Company's website. Details of the Directors' contracts, emoluments and interests in shares and share options are given in the Remuneration Report on pages 90 to 107. ## Directors' and Officers' Liability Insurance The Company maintained directors' and officers' liability insurance cover throughout the 12-month period ended 31 October 2023. This insurance cover extends to Directors and officers of subsidiary undertakings and remains in force. Article 191 of the Company's Articles of Association allows the indemnification of directors of the Company and associated companies and of Directors of a company that is the trustee of an occupational pension scheme for employees of the Company or an associated company against liability incurred by them in certain situations, and would, if granted, constitute a "qualifying indemnity provision" within the meaning of Section 236 (1) of the Companies Act 2006. No such indemnities have been granted. ## Results and dividends The results for the year are set out in the Group Statement of Comprehensive Income on page 118. The Directors are recommending a final dividend for the year ended 31 October 2023 of 4.42 pence per ordinary share. The ex-dividend date will be 25 April 2024 and, if approved by shareholders at the Company's AGM on 26 April 2024, the dividend will be paid on 25 May 2024 to shareholders listed on the register at the close of business on 26 April 2024. An interim dividend of 2.97 pence per share was paid for the year ended 31 October 2023. ## Review of business and future developments The Strategic Report describes the activities of the business during the year ended 31 October 2023 as well as recent events (including any important events affecting the Group which have occurred since the end of that period) and gives an indication of likely future developments in the Group's business. A discussion of the key risks facing the Group and an analysis of key performance indicators are provided in the Strategic Report. The Strategic Report also contains the Board's Long-term Viability Statement. ## Research and development The Group is committed to its research and development programme in order to maintain its introduction of innovative products to the market. The expenditure incurred on the development of new products is shown in notes 14 and 11 of the financial statements. ME Group International Report 2023 72 | Employees | Corporate responsibility, greenhouse gas | | --- | --- | | Information on the Company’s employment | emissions, energy consumption and | | practices including: its policy regarding | energy efficiency action. | | applications for employment by persons with | A summary of the Company’s approach to | | disabilities; the continuing employment of | corporate social responsibility and environmental | | employees who have developed disabilities; and | matters, including a report on the Group’s | | the training, career development and promotion | greenhouse gas emissions, energy consumption | | of persons with disabilities employed by the | and energy efficiency action for the 12 months | | Company, as well as employee communication | ended 31 October 2023, can be found in the | | and involvement, is contained within the | Sustainability Statement on pages 42 to 50. | Sustainability Statement on pages 42 to 50. Interests in voting rights Employee engagement Information provided to the Company pursuant The Board understands the importance of to the Financial Conduct Authority’s DTRs considering the views of all stakeholders, including is published on a Regulatory Information its employees. Service and on the Company’s website. As at 31 October 2023, the following information has | The senior management team has held | been received, in accordance with DTR 5, from | | --- | --- | | several internal consultations and released | holders of notifiable interests in the Company’s | | internal memoranda outlining the movement | issued share capital. | of the business throughout the year. These communications also help to achieve a common The information provided below was correct at awareness on the part of all employees of the the date of notification; however, the date it was financial and economic factors affecting the received may not have been within the current performance of the Company. financial year. It should be noted that these holdings are likely to have changed since the The Board understands the importance of Company was notified. However, notification of considering the views of all stakeholders, including any change is not required until the next notifiable its employees. The Executive Directors have threshold is crossed. regular meetings with all managers. These meetings provide an opportunity for the Directors % Voting Number of Shareholder Name Rights shares to learn about the views of the employees at large, 1 and to report back to the Board as a whole so that Serge Crasnianski 36.64 137,803,041 in making any decisions affecting the employees, FCPI Montefiore Investment IV 12.01 45,355,481 the Board can take those views and any decisions Schroders plc 10.50 39,693,875 made can take into account those employee views. FIL Ltd 8.34 31,343,390 The Company operates an executive share Premier Miton Group plc 4.87 18,398,718 option scheme that was introduced in 2014 Norges Bank 2.65 10,000,845 (itself replacingan earlier similar scheme). 1 Except for 63,750 ordinary shares of 0.5p each held in Senior members of staff receive annual bonuses Mr Crasnianski’s own name, the remaining shares are owned depending on personal performance and the through a nominee by Tibergest PTE LTD, a person closely Group’s performance. The above sets out how associated with Mr Crasnianski, and Mr Crasnianski’s interest in those remaining shares is indirect. Except for the above, the Directors have engaged with employees. Subject Company had not been advised of any shareholders with interests to shareholder approval at the AGM to be held on of 3% or more in the issued ordinary share capital of the Company as at such date. 26 April 2024, the Company intends to introduce a new executive share option scheme based closely As at 19 February 2024, the following changes had on the existing one. been notified to the Company: Engagement with suppliers, customers ▪ On 8 January 2024, Schroders plc notified the and others Company that its holding of total voting rights in The Executive Directors (and where necessary the Company was 45,808,015 representing the Non-executive Directors) meet suppliers, 10.08% of the Company’s total voting rights. customers and major shareholders, as do senior management. This gives them an opportunity ▪ On 9 January 2024, FIL Limited notified the to learn of their wishes and concerns, thereby Company that its holding of total voting rights in acquiring information to which they can have the Company was 14,930,258 representing regard when making strategic and other decisions. 3.96% of the Company’s total voting rights. MEGroup plc Annual Report 2023 73 Corporate Governance ### Report of Directors continued | ▪ On 23 January 2024, Norges Bank notified the | Report of Directors’ continued authority | | --- | --- | | Company that its holding of total voting rights in | to purchase shares | | the Company was 11,275,000 representing | Pursuant to a resolution passed at a general | | 2.99% of the Company’s total voting rights. | meeting (held on 18 August 2023), the Company | is authorised to purchase its own shares in the The number of voting rights in the Company has market. Although post the upcoming AGM on been reducing (and may continue to do so until 26 April 2024, the Company will not be continuing the 2024 AGM) as a result of the buyback of shares the share buyback authorised by members approved by members at a general meeting on at a general meeting in August 2023, it shall 18 August 2023. Taking the total number of voting seek approval at the 2024 AGM (to be held on rights as at close of business on 19 February 2024 26 April 2024) to renew the authority for the (376,136,253), the percentage of voting rights Company to make market purchases of up to as at that date using the above data would be 10% of its own ordinary shares at a maximum recast as follows: Serge Crasnianski (36.53%); FCPI price per share of not more than the higher of: Montefiore Investment IV (12.0%); Schroders plc (a)an amount that is not more than 5% above the (12.18%); Premier Miton Group plc (4.89%); FIL Ltd average of the closing middle market quotations (3.97%); and Norges Bank (3.00%). for an ordinary share (derived from the London Stock Exchange Daily Official List) for the five Share option grants to PDMRs business days immediately before the date on On 4 April 2023, Tania Crasnianski, an Executive which that ordinary share is contracted to be Director, and Stéphane Gibon, Chief Financial purchased; or (b) the higher of the price of the Officer (non-Board), were each granted an option last independent trade or the highest current over 100,000 and 150,000 Ordinary Shares of independent bid on the London Stock Exchange. 0.5p each of the Company respectively, under the This authority will expire on the earlier of 15 Company’s Executive Share Option Scheme (2014); months from the passing of the relevant special in each case, the performance conditions attached resolution or the conclusion of the following AGM. to the options relate to 2025 earnings per share The Company repurchased 1,260,534 ordinary (“EPS”). There were no other notifications to the shares of 0.5p each in the 12-month period ended Company under article 19 of the Market Abuse 31 October 2023. These shares are held by the Regulation in the year ended 31 October 2023. Company in treasury. Share capital Additional information The issued share capital of the Company, plus Where not provided elsewhere in the Report of the details of the movements in the Company’s issued Directors, the following provides the additional share capital during the year, is shown in note 21 information required to be disclosed in the Report of the financial statements. Each ordinary share of the Directors. The structure of the Company’s of the Company carries one vote at each annual share capital, including the rights and obligations general meeting (AGM) and general meetings of attaching to the shares, is set out within note 21 to the Company. the financial statements. MEGroup plc Annual Report 2023 74 No person holds securities carrying special rights The rules governing the appointment of Directors with regards to control of the Company. are set out in the Corporate Governance Statement on pages 78 to 86. The Company’s There are no restrictions on the transfer of Articles of Association may only be amended by a ordinaryshares in the capital of the Company special resolution at an AGM or general meeting of other than certain restrictions that may from shareholders. The Company is party to a number time to timebe imposed by law; for example, of agreements with site owners (such as major insider trading law. In accordance with the Listing supermarket chains), which could be terminated Rules of the Financial Conduct Authority, certain by the site owners following a change of control of employees are required to seek the approval of the Company. the Company to deal in its shares. There are no agreements between the Company On a show of hands at an AGM or general meeting and its Directors or employees which provide for of the Company, every holder of ordinary shares compensation for loss of office or employment entitled to vote and who is present in person or (whether through resignation, purported by proxy shall have one vote and on a poll, every redundancy or otherwise) that occurs because of member present in person or by proxy and entitled atakeover bid. to vote shall have one vote for every ordinary | share held (except as otherwise stated in Article | The Company is not aware of any contractual | | --- | --- | | 81 of the Company’s Articles of Association). Any | or other agreements that are essential to its | | notice of AGM or general meeting issued by the | businesswhich ought to be disclosed in this | | Company will specify deadlines for exercising | Reportof the Directors. | voting rights and in appointing a proxy or proxies in relation to resolutions to be passed at the AGM Related-party transactions or general meeting. All proxy votes are counted Details of related-party transactions are set out in and the numbers for, against or withheld in note 28 to the financial statements. relation to each resolution are announced at the AGM or the general meeting and published on Financial instruments the Company’s website after the meeting. Proxy Details of the financial risk management appointments and voting instructions must be objectives and policies of the Group and exposure received by the Company’s registrars not less than of the Group to foreign exchange risk, interest rate 48 hours before an AGM or general meeting. risk and liquidity risk are given in note 16 to the financial statements. Under its Articles of Association, unless the Board otherwise determines, no member shall be entitled Political donations to vote in respect of any share unless all calls or No member of the Group made any political other sums presently payable by them in respect donations during the 12-month period ended of that share shall have been paid. The Company 31October 2023. is not aware of any agreements between shareholders that may result in restrictions on the Important events post balance sheet date transfer of shares or on voting rights. On 23 November 2023 the Group paid an interim dividend in respect of the year ended 31 October 2023 of 2.97 pence per ordinary share, totalling £11,240,000. MEGroup plc Annual Report 2023 75 Corporate Governance ### Report of Directors continued | On 14 November 2023, the Group converted | and on normal commercial terms, and that at all | | --- | --- | | 100,000 of the 500,000 convertible bonds held | times a majority of the Directors of the Company | | in Energy Observer Developments SAS to 125 | shall be independent of Tibergest PTE Ltd and | | ordinary shares of the same company. The Board | Mr Crasnianski. | have no plans to convert the remaining 400,000 convertible bonds held by the Group to shares. Statement of Compliance with UK Listing Rules, Rule 9.8.4 (14). | Going concern | The Company has complied with, and so far | | --- | --- | | In adopting the going concern basis for preparing | as the Company is aware, the controlling | | these financial statements, the directors have | shareholder and its associates have complied | | considered the Group’s business activities, | with the following undertakings: (a) transactions | | together with factors likely to affect its future | have been conducted at arm’s length and | | development and performance, as well the | on normal commercial terms; (b) neither the | | principal risks and uncertainties that could affect | controlling shareholder nor any of its associates | | the Group up to October 2028. | will take action that would prevent the Company | from complying with the Listing Rules; and (c) Having reviewed forecasts, cash flow, financial neither the controlling shareholder nor any of its resources and financing arrangements and after associates will propose or procure the proposal making enquiries, the Directors consider that of a shareholder resolution which is intended or theCompany and the Group have adequate appears to be intended to circumvent the proper resources to remain in operation for the application of the Listing Rules. So far as the foreseeable future. Accordingly, the Directors Company is aware, the controlling shareholder can continue to adopt the going concern basis in and does procure the compliance of its associates. preparing the financial statements. AGM 2024 | The Directors have stress-tested the Group’s | The Company’s AGM this year will be held on | | --- | --- | | goingconcern status by assessing several | 26 April 2024 at the offices of Hudson Sandler | | differentscenarios. Full details of the scenarios | LLP, 25 Charterhouse Square, London EC1M | | tested and assumptions used are provided in | 6AE at 10a.m. Notice of the AGM is sent to all | | the‘Viability Statement’ and in note 1.1 of the | shareholders of the Company, as well as to | | financial statements. | persons nominated by a shareholder of the | Company to enjoy information rights. The Notice Disclosure of information to the auditor convening the meeting provides full details of The Directors who held office at the date of all the resolutions to be proposed, together with approval of this Report of the Directors confirm explanatory notes for both the ordinary and that: As far as they are each aware, there is special business. Hard copies of this Annual Report no relevant audit information of which the are sent only to shareholders who have requested Company’sauditor (Mazars LLP) is unaware; and or request a copy. each Director has taken all the steps that he or she ought to have taken as a director to make himself By order of the Board or herself aware of any relevant audit information | and to establish that the Company’s auditor is | Serge Crasnianski | | --- | --- | | aware of that information. | Chief Executive Officer | | Controlling shareholder – | 27 February 2024 | RelationshipAgreement The Company’s majority shareholder is Tibergest PTE Ltd which owns 36.64% of the issued share capital of ME Group International plc (and as of 19 February 2024, 36.41% of its total voting rights). Tibergest PTE Ltd is wholly owned by Mr Crasnianski. Mr Crasnianski and Tibergest PTE Ltd have entered into a Relationship Agreement with the Company (the “Relationship Agreement”) to ensure that the Group is capable of carrying on its business independently, that transactions and arrangements between the Group, Tibergest PTE Ltd and Mr Crasnianski (and each of their associates) are at arm’s length MEGroup plc Annual Report 2023 76 MEGroup plc Annual Report 2023 77 Corporate Governance ## Corporate governance ## Statement of compliance with the ## UKCorporate Governance Code. | The Board has complied with the UK Corporate | Although Mr Olympitis has been a director since | | --- | --- | | Governance Code (2018 edition) (the “Code”) | December 2009, he is considered by the Board | | except as set out in the table on page 79. | as independent on the basis that he continues to | demonstrate total independence in his behaviour The Group’s business model and strategy and in his interaction with the rest of the Board. The Group’s business model and strategy are summarised in the Strategic Report, and describe, Election of new Director amongst other things, how the Company If a new Director were to be appointed, the Board generatesand preserves value over the longer would ordinarily appoint someone whom it term and the strategy for delivering the objectives believes has sufficient knowledge and experience of the Company. to fulfil the duties of a director. (In doing so, the Board would continue to encourage and give consideration to candidates from a diverse range ### The Board of backgrounds and experiences as mentioned Board composition under the heading Equality, Diversity and Inclusion The Directors who served throughout the financial below.) If this were not the case, an appropriate year ended on 31 October 2023 are: Sir John Lewis, training course would be provided. An appropriate Serge Crasnianski, Tania Crasnianski, Jean-Marc induction programme is undertaken for all newly Janailhac, Manoli Olympitis, Françoise Coutaz- appointed Directors. All Directors have access to Replan, René Proglio and Camille Claverie. the advice and services of the Company Secretary. Any Director wishing to do so in furtherance of his The Chairman or her duties may take independent advice at the The Chairman has the overall responsibility for Company’s expense. managing the Board. The Chief Executive Officer has responsibilities for strategy, operations and All Directors are required to stand for re-election results. The Chief Executive Officer has responsibility every three years and newly appointed Directors for the day-to-day operation of the Group. A clear are subject to election by shareholders at the division of responsibility exists, such that no one first AGM after their appointment. However, in individual or group of individuals can dominate order to provide for stability and continuity, and the Board’s decision-making process. Throughout to avoid destabilising the Board, the Directors the year under review, Sir John Lewis served as have unanimously decided not to comply with the Chairman and Serge Crasnianski served as Chief Code’s recommendation that all Directors seek Executive Officer, Deputy Chairman and member annual re-election. of the Executive Team. In the Board’s opinion, even though Sir John Lewis has been a Director since Directors’ conflicts of interest 2008 and Chairman since 2010, it is proposed that During the year, Directors completed he remain in place for the time being. The Board questionnaires in respect of their interests. The considers Sir John to be a non-independent director. Board will continue to monitor and review actual or potential conflicts of interest on a regular basis Director independence and will consider whether or not it is appropriate to The Board structure has not complied with authorise any such conflicts. the Code provision that requires that at least half theBoard, excluding the chairman, should The Financial Reporting Council requires listed be Non-executive Directors whom the Board companies incorporated in the UK to include in considers to be independent. The table overleaf their annual financial report: (i) a statement of how contains more details on this. they have applied the main principles set out in theCode; and (ii) a statement as to whether they The Senior Independent Director have complied throughout the accounting period Emmanuel Olympitis has served as the Company’s with allrelevant provisions set out in the Code. Senior Independent Non-executive Director throughout the period. MEGroup plc Annual Report 2023 78 TheDirectors consider that the Company has, throughout the 12-month period ended 31October2023, complied with those provisions ofthe Codethat are applicable to it, except for thefollowing: Point of non-compliance with Code Reason for non-compliance Less than half the board, excluding the Excluding the Chairman, the Board comprised two Executive Directors and chair, are Non-executive Directors five Non-executive Directors, three of whom are considered independent by whom the board considers to be the Board. Strict compliance would have required an additional independent independent. non-executive director. The Board considers its composition to be sufficiently close to the Code’s prescription on this point to render its non-compliance in this regard inconsequential. For engagement with the workforce, The Executive Directors meet regularly with the general managers of the one or a combination of the following Group. This enables both sides to raise any matters of interest to either side. methods should be used: The Non-executive Directors are always available should anyone not be comfortable in dealing with the Executive Directors about anything. Also, the ▪ Director appointed from the whistle-blowing policy is in place as a further avenue should anyone wish to workforce; use it. Therefore, the Board believes that given the size of the Group and its ▪ formal workforce advisory panel; and resources, this is appropriate and additional measures to engage are ▪ designated Non-executive Director. unnecessary and overly cumbersome. ▪ (But none is used.) There is no annual re-election of The Board thinks this would distract the Board from its business, and that alldirectors. continuity enables people with deep knowledge of the Company to make more informed, effective and considered judgments. Chairman has been in office for more Sir John Lewis is considered by the Board to be an effective and engaged than nine years. chair. He has the full approval and confidence of the Board. Non-executive Director do not liaise After due consideration, the Board concluded that it was in order for the with work force as a matter of routine. Executive Directors to liaise with the work force. If anyone felt uncomfortable, for whatever reason, about liaising with the Executive Directors there was recourse to the Non-executive Directors, as well as recourse to the whistleblowing process. Mr Olympitis’s independence despite Despite having been a Director for more than nine years, Mr Olympitis is not meeting the criteria set out by the considered by the Board as independent on the basis that he continues to Code which raises a presumption demonstrate total independence in the opinion of the Board his behaviour against independence where a director and in his interaction with the rest of the Board. has served on the Board for more than nine years from the date of their first appointment. Sir John Lewis is a member of the Under the predecessor to the Code, there was no restriction on the Chairman AuditCommittee. of the Board being a member of the Audit Committee and such membership in the case of Sir John Lewis, in the opinion of the Board did not impede that committee’s functioning but enhanced it. The Remuneration Committee should The Remuneration Committee thinks it is advisable that the Executive have delegated responsibility for senior Directors address remuneration of the senior management and workforce pay management. It should review polices in general as the former have most interaction with them and are workforce remuneration and related therefore best placed to make meaningful and equitable assessments of their policies and the alignment of incentives performance and remuneration levels. and rewards with culture, taking these into account when setting the policy for Executive Director remuneration. Mr Crasnianski receives a pension Following a review of Mr Crasnianski’s pension provision and how this contribution equal to 15% of his basic compares with that of the general workforce, the Committee has agreed to remuneration. The Code recommends maintain the CEO’s current pension at 15% of salary going forward. Given the that pension contribution rates for diverse nature and geographies of the Company’s businesses and employees, executive directors, or payments in lieu, no single Group-wide pension plan operates and therefore pension should be aligned with those available contribution rates vary across the Group with pension levels not necessarily to the workforce. reflecting seniority. 1 The Code and associated guidance are available on the Financial Reporting Council website at https://media.frc.org.uk/documents/UK_ Corporate_Governance_Code_2018.pdf. MEGroup plc Annual Report 2023 79 Corporate Governance ### Corporate governance continued Board evaluation The Board has delegated various matters The Chairman and Chief Executive Officer review to Committees, as detailed below. These the performance of other Executive Directors. The Committees of the Board meet regularly (the Chairman reviews the performance of the Chief Nomination Committee meets as required. The Executive, the other two Executive Directors and Committees deal with specific aspects of the each Non-executive Director. The Non-executive management of the Company. The Board has Directors, led by the Senior Independent delegated authorityto the Committees and they Non-executive Director evaluate the performance have defined terms of reference; those of the of the Chairman, taking into account the views Nomination, Audit and Remuneration Committees of the Executive Directors. During the year, the are available on the Company’s website Chairman meets with the Non-executive Directors (https://me-group.com/). Decision-making without the Executive Directors being present. relating to operational matters is handled by the Executive Directors and senior management. Under the guidance and supervision of the Company Secretary, the Board undertakes an Board and Committee papers are circulated in internal process to assess the effectiveness of the advance of each meeting and are supplemented Board during each financial year. This consists by reports and presentations to ensure that Board of aconfidential survey. Areas identified in which members are kept fully informed. there is considered to be room for improvement are usually addressed by the Board during the Regular communication between the Directors current year. also takes place outside the formal forum of Board and Committee meetings. Operation of the Board The Board is normally scheduled to meet in The Board had five meetings during the year person four or five times a year, with ad hoc under review. A committee of the Independent meetings (including by way of conference and Directors meeting alone had one meeting in video calls) convened to deal with urgent matters. thatperiod. The Board has a formal schedule of matters reserved to it for decision. These include: the The attendance of Directors at those meetings and approval of the financial statements; dividend meetings of Board Committees is set out below: policy; major acquisitions, disposals and other transactions; significant changes in accounting policies; the constitution of Board Committees; risk management; and Corporate Governance policy. Meeting of | | | | Independent | | Audit | Remuneration | | Nomination | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Board | Committee only | | committee | | | committee | committee | | J Lewis | 4(4) 1(1) 3 (3) 2(2) 0(0) | | | | | | | | S Crasnianski 4(4) – – – – T Crasnianski 4(4) – – – – J-M Janailhac 4(4) – – – – F Coutaz-Replan 4(4) – 3 (3) – – E Olympitis 4(4) 1(1) 3 (3) 2(2) 0(0) C Claverie 4(4) – – – – R Proglio 4(4) – 3 (3) – – MEGroup plc Annual Report 2023 80 ### Equality, diversity and inclusion ▪ None of the Board members was from an ethnic minority background as defined under the Our commitment Listing Rules, although the Board is comprised The Board of MEGroup is a supporter of gender of individuals from four odifferent nationalities. and ethnic diversity as part of the Company’s | commitment to diversity and inclusion in the | The Board would point out the following by way | | --- | --- | | broadest sense. | of explanation and important context: | | We are committed to attracting and retaining the | - The Board is relatively small and consists of | | best people who reflect the diverse experiences | two Executive Directors, one of whom is a | | and characteristics of the customers we serve. | woman, and five Non-executive Directors, of | | This is central to our core values, which include a | whom two are women. (The roles of Chief | | commitment to the following ethics driving our | Marketing Officer and Head of HR are not | | behaviour: courage, creativity, solidarity, eco- | board level positions at the Company, but if | | responsibility and commitment. This encompasses, | they were (as is common in other | | but goes beyond, gender and ethnic diversity. | organisations), we would well exceed the 40% | | For example, we are focussed on supporting | target set by the Listing Rules.) | those people who may be disadvantaged or marginalised in connection with their educational - The composition of the Board has remained background, socio-economic background or caring relatively steady over the last few years. responsibilities, as well as characteristics which are Thatis by design: the Group has undergone protected under equality law. significant changes, making consistency andclarity of thought at Board level The Company has long been – and remains vitallyimportant – an equal opportunities employer. It has | had embedded a comprehensive equality, | - The Board comprises 37.5% female members, | | --- | --- | | diversity and inclusion policy in place the latest | representing (i) two Non-executive Directors | | revision ofwhich was made in 2022 (but which | one of whom sits on the audit committee and | | originates as far back as 2011) covering the | (i) one Executive Director, who is head of legal | | entire employment lifecycle and emphasising | and general secretary, and is also responsible | | our commitments and expected behaviours. A | for supervising the Group’s entities in | | statement by the Company on its approach to this | Germany and Austria. As mentioned above, | | topic can be found here: https://me-group.com/ | this is higher than the 33% target set by the | | company-documents/. | 30% Club Investor Group and is close to 40% | | The Board considers it a matter of the utmost | - It is important to recognise that the Group has | | importance in the best interests for shareholders | a large presence in, and the Company draws | | to fill positions with the best possible candidates | many of its leaders from, countries where the | | regardless of their gender, ethnic origin or other | cultural and legal approach to ensuring | | attributes. It believes this is what investors want. | Diversity & Inclusion is very different. For | example, in France and Germany asking | Listing rules: board targets regarding | candidates and employees to disclose their | | --- | --- | | gender and ethnicity | ethnicity can amount to a criminal offence, | | As at 31 October 2023 (the Company’s chosen | and it is counter-cultural to suggest the | | reference date for reporting under Listing Rule | introduction of targets or quotas for | | 9.6.8 R (9)(a)): | improvingrepresentation. Whilst the | Company and the Board will continue to strive | ▪ 37.5% of the Board consisted of women. None of | for improvement, it must do so in a way that | | --- | --- | | the Chair, CEO, SID, and CFO (the last of which is | remains respectful of, and sensitive to, | | not a statutory board position) is a woman, | differing expectations in our main markets | | although from 2009 to 2015 the CFO (that office | and the rule of law in other jurisdictions | being then a statutory board position) was a | woman. Whilst this falls short of the ‘40%’ and | - As an equal opportunities employer, the | | --- | --- | | ‘senior position’ targets set out in the Listing | Company is committed to providing equal | | Rules, it exceeds the 33% target set by the | career opportunities for all its employees | | Hampton-Alexander Review and the 30% Club | without discrimination, and pursuing fair and | | Investor Group in their widely adopted guidance. | equitable policies and procedures for | | It also represents material compliance as the | recruitment, training and development. It gives | | 2.5% shortfall represents less than one person | full consideration to all applications from | owing to the numbers on our Board MEGroup plc Annual Report 2023 81 Corporate Governance ### Corporate governance continued persons with protected characteristics and of employees’ behaviour and sets out steps the more broadly from a diverse range of Company is taking to ensure an inclusive culture. backgrounds, with due regard to their The ED&I Policy deliberately takes a broad and aptitudes and abilities. Indeed, we have a ambitious approach to diversity and commits paragraph stated on all our job postings as to trying to ensure that recruitment, promotion follow ‘As an equal opportunity’s employer, and retentionprocedures do not result in less ME Group is committed to the equal treatment favourable treatment because of someone’s of all current and prospective employees and disability, gender, gender identity or gender does not condone discrimination on the basis reassignment status, marital status, race, racial of age, disability, sex, sexual orientation, group, ethnic or national origin, or nationality, pregnancy and maternity, race or ethnicity, religion or belief, sexual orientation, age, civil religion or belief, gender identity, or marriage partnership status, pregnancy or maternity, and civil partnership.’ paternity, educational background, socio- economic background, caring responsibilities, We aspire to have a diverse and inclusive part-time status or fixed-term status. workplace and strongly encourage suitably qualified applicants from a wide range of The ED&I policy is shared with all our workers backgrounds to apply and join our Company. on the UK HR system available to all UK employees via self-service and easy access The Board recognises the risks of applying hard on laptops and mobile phones; it requires short-term targets, which can give rise to a acknowledgement. There is an Equality and perception of an uneven playing field, and which Diversity training programme which can be can discourage qualified applicants and existing rolled out to all employees in the UK through our employees from seeking positions. WorkWize training portal. The ED&I Policy also dedicates a section specifically to the ways in However, the Board will continue to encourage and which the Company seeks to ensure inclusion of give consideration to candidates from a diverse disabled people, to give tangible examples of range of backgrounds and experiences when theCompany’s approach and to showcase its seeking out the best talent whenever a position focus on disability inclusion. comes up to be filled. The Board does not believe that positions should be created for the ad hoc We are asked to report on the results of the ED&I purpose of meeting quotas, and therefore another Policy in the reporting period. It is difficult to reason for not meeting the 40% level stipulated point to quantitative evidence of improvements by the Listing Rule and other targets set out in in concepts like inclusion which are inherently the Listing Rules is simply that positions have not difficult to measure, especially where progress on arisen requiring to be filled partly as a result of the such matters is inevitably incremental. However, Group’s relatively low turnover of officers. we are encouraged to actively follow this policy to create a more inclusive workplace, which More broadly, the Board actively supports the helps the business attract candidates with a roll-out of initiatives under the Equality, Diversity, wide range of skills from diverse backgrounds. and Inclusion Policy, referred to below, to We believe that this helps keep the Company broadenthe diversity of the Company’s workforce, successful, andthatour employees are motivated and to ensure the Company’s culture is as inclusive and reassured by the fact that we are an equal as possible. opportunities employer. We collected the data which informs this part We are also required to report on the gender of our report by questionnaires sent to all the and ethnicity data in relation to our Board and relevant persons and which were adapted to executive management in tables prescribed under ensure compliance with local laws. the Listing Rules. These are set out below. We collected this information by asking each member | Equality, diversity and inclusion policy | of the Board and executive management, | | --- | --- | | The Board supported the Company’s embedding | where permitted by law to do so, to complete | | of its comprehensive Equality, Diversity and | a questionnaire to confirm which of the below | | Inclusion Policy (ED&I Policy) in July 2022. The | categories describes them. | ED&I Policy applies to anyone who works in the Company, including the Board (and its committees). It seeks to emphasise the Company’s commitments to equality, diversity and inclusion (ED&I), sets expectations in respect MEGroup plc Annual Report 2023 82 Table for reporting on gender identity or sex | | | | | | Number of | | Number in | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | senior positions | | | executive | % of executive | | | | | | | | on the Board | management | | management | | | | | Number of | | (CEO, CFO, SID | | (plus company | | (plus company | | | | Board members % of the Board | | | | and Chair | | secretary) | | secretary) | | Men | | | 5 62.5 3 4 66.7 | | | | | | | Women 3 37.5 – 2 33.3 Not specified/prefer not to say – – – – – Table for reporting on ethnic background | | | | | | Number of | | Number in | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | senior positions | | | executive | % of executive | | | | | | | | on the Board | management | | management | | | | | Number of | | (CEO, CFO, SID | | (plus company | | (plus company | | | | Board members % of the Board | | | | and Chair | | secretary) | | secretary) | | White British or other White | | | 2 25% – 1 16.7 | | | | | | | (including minority – white groups) Mixed/Multiple Ethnic Groups – – – – – Asian/Asian British – – – – – Black/African/Caribbean/ – – – – – BlackBritish Other ethnic group, – – – – – includingArab Not specified/prefer not to say – – – – – Notes 1. Data were acquired by using questionnaires seeking the information required by the Listing Rules. Having sought legal advice, the Company was informed that it could not lawfully ask questions around ethnicity to French nationals therefore it did not do so. 2 The Board consists of French Greek, German, Swiss and UK nationals. The Executive Management (which the Company calls its Executive Team) comprises French, Swiss and German nationals. ### Board committees External auditor The Audit Committee aims to meet with the Audit Committee external auditor, at least twice a year. On behalf This comprised René Proglio (Committee of the Board, the Committee reviews the Group’s Chairman), Emmanuel Olympitis (Senior accounting and financial reporting practices, Independent Director), Sir John Lewis (Chairman the reports of the internal auditor and external of the Board), and Françoise Coutaz-Replan (the auditor, and compliance with policies, procedures Group’s former Finance Director). The Board and applicable legislation. In addition, the considers that René Proglio, Emmanuel Olympitis, Committee monitors the effectiveness of both the Françoise Coutaz-Replan and Sir John Lewis have external and internal audit functions and reviews | suitable recent and relevant financial experience | the Group’s internal financial control systems | | --- | --- | | to satisfy the requirements of the Corporate | and reporting processes, and risk management | | Governance Code (2018 edition). | procedures. The Committee considers the | appointment of the external auditor and makes a Meetings are normally held at least twice a year. recommendation on the audit fee to the Board; it Three meetings were held during the year ended usually assesses the effectiveness of the external 31 October 2023. Other Directors, together with auditor by means of an internal review process, the Chief Financial Officer (currently a non-Board assisted by a confidential questionnaire; it sets position) and representatives of the external a policy for safeguarding the independence of auditor are generally invited to attend meetings. the external auditor; and reviews the external auditor’s work outside of the audit itself, taking into account the nature of the work, the amount of the fees and whether it is appropriate for the external auditor to carry out such work. Details of the audit and non-audit fees are provided in note 4 to the financial statements. MEGroup plc Annual Report 2023 83 Corporate Governance ### Corporate governance continued Mazars LLP has been the external auditor of the Impairment of PPE and tangible assets Group since the AGM in October 2019. The audit Management performs impairment tests if there partner is David Herbinet. The Audit Committee is an impairment trigger. Assets are tested at is satisfied with the effectiveness, objectivity the level of the cash generating units (“CGUs”) and independence of the external auditor. definedby the Group, being each vending machine. Accordingly, a resolution will be proposed at the An impairment loss is recognised if the net book forthcoming AGM for Mazars LLP’s re-election value of an asset or cash-generating unit is higher as auditor for the coming year. The Board is than its recoverable value. If the main machine committed to putting the audit contract out to (laundry or photobooth) on the site is impaired, all tender at least once every ten years. It conducted installation costs on the site are impaired. On our a tender process for the external audit role in Japanese entity’s impairment, the methodology is 2019 in whichit invited three firms to tender for simpler, comparison is made between EBITDA vs the role ofexternal auditor; Mazars LLP was the the carrying amount of the vending machine. successfultenderer. For other than vending equipment PPE, The Audit Committee has obtained confirmation management assesses the functionality and from Mazars LLP that no non-audit services were writes-off any machine if there is any indicator of provided by Mazars LLP during the year. The impairment. This is done at least once a year for AuditCommittee is satisfied that Mazars LLP tangible assets. remains independent. Recognition, valuation and impairment of Key matters considered intangible assets, including goodwill. In February 2024, the Committee met to review There is a risk that intangible assets don’t meet the this Annual Report and to receive the external recognition criteria to be recognised as intangible auditor’s update and report on its audit activity. assets. Due to its complex nature, there is a further risk over the valuation of the intangible assets. In February 2024, the Committee met to review this annual report and to receive the external Goodwill recognition is deemed as a judgmental auditor’s update and report on its audit activity. area by the audit team. The risk of error arising The Committee’s primary areas of focus were: from the appropriateness of the judgments and assumptions used in the impairment test of goodwill Management override of controls in particular discount rate, long term growth rate In all entities, management at various levels and country risk adjustment. Besides, the Group within an organisation are in a unique position acquired one company (Fujifilm) during the period. to perpetrate fraud because of their ability to | manipulate accounting records and prepare | Remuneration Committee | | --- | --- | | fraudulent financial statements by overriding | During the year period ended 31 October 2023, | | controls that otherwise appear to be operating | the Remuneration Committee comprised Mr | | effectively. Due to the unpredictable way in which | Emmanuel Olympitis (Committee Chairman) and | | such override could occur, we consider there to be | Sir John Lewis (Chairman of the Board). | a risk of material misstatement due to fraud and thus a significant risk on all audits. The Committee meets at least once per year. It met twice in the year ended 31 October 2023. Revenue recognition There is a presumed risk of fraud in the financial The Committee makes recommendations to the reporting relating to revenue recognition which we full Board in respect of the Group’s remuneration consider to be a significant risk on all audits. policy. The Committee also keeps under review the remuneration of the Chairman and the Group’s Going concern Executive Directors (the Chairman would not There is a risk that the going concern assumption play a part in deciding his own remuneration), has been inappropriately applied in preparing the to ensure that they are rewarded fairly for their financial statements. contribution. The Committee also makes awards under the Executive Share Option Scheme. The Investment in subsidiaries Committee’s Terms of Reference are available on Investments in subsidiaries and associates are the Company’s website. stated at cost less impairment. Management should review any indicators of impairment at The Remuneration Report on pages 90 to 107 least annually, and perform an impairment provides details of how the Committee applies the assessment where indicators have been identified. directors’ remuneration principles of the Code. MEGroup plc Annual Report 2023 84 | Nomination Committee | Executive Team | | --- | --- | | During the year ended 31 October 2023, the | As part of actions to further stabilise executive | | Nomination Committee comprised Sir John Lewis | governance, the Group has taken the decision to | | (Committee Chairman and member of the Audit | evolve what was the Strategic Committee into a | | and Remuneration Committees) and Emmanuel | new Executive Team. The Group believes this is the | | Olympitis (Senior Independent Director, | correct Committee to provide coherence, optimise | | member of the Audit Committee and Chair of | synergies, share best practices and support the | | the Remuneration Committee). The Chairman | Group’s succession process. | of the Board would not chair the Nomination Committee when it addresses the appointment Led by key operational management, the of his successor. Thus the Committee is compliant Executive Team will provide sustainable with the applicable provisions of the Code management and allow the Group to better plan which requires that a majority of members of for the future. the Committee are independent non-executive directors, and that its chairman should not The Executive Team comprises: chair the committee when it is dealing with the appointment of his or her successor. ▪ Serge Crasnianski, Chief Executive Officer, Deputy Chairman The Committee, which meets as required, ▪ Tania Crasnianski, Executive Director makes recommendations to the Board on the appointment of new directors. The Committee ▪ Stéphane Gibon, Chief Financial Officer did not meet in the year ended 31 October 2023 ▪ Christian Autié, Chief Operating Officer but its members speak frequently even in the (Chairman of the Executive Team) absence of formal meetings in order to keep board composition under review and to ensure that a ▪ Charlotte Delbès, Chief Marketing Officer proper succession plan is in place at all times. The Executive Team will meet once a month to The Nomination Committee is committed to the decide all strategies, resources and Group actions. pursuit of diversity, including gender diversity, Each member of the operational management throughout the business. Appointments to the team will be responsible for, and in charge of, Board are made on merit, against objective implementing the decisions from within their criteria and with due regard for the benefits of business area. diversity on the Board, including gender diversity. The Nomination Committee does not commit A larger Group Managers Committee will meet to any specific targets, therefore. The Group’s periodically, gathering country managers together Diversity Policy also recognises the benefits of with the Executive Team in order to discuss and diversity. The Nomination Committee will ensure review the implementation of communication, that its development in this area is consistent decisions and actions that have been decided by with the Group’s current and future requirements, the Executive Team meetings. enhances Board effectiveness, and reflects the Company’s UK listing and the international Shareholder communication activity of the Group. andengagement The Chief Executive Officer has regular meetings | During the year ended 31 October 2023, no | with the Company’s major institutional | | --- | --- | | vacancies for the Board arose, therefore no | shareholders to help ensure, amongst others, that | | appointments were required. As turnover of | the Board develops an understanding of the views | | Board members is low, as mentioned above, | of major shareholders about the Company and | | the Nomination Committee has not set any | the Group. | targets but as and when vacancies do arise, the Nomination Committee and the Board The Chairman also meets with major shareholders are committed to giving consideration to all and has contact with them as and when required. interestedand available candidates regardless The Senior Independent Non-executive Director ofage, disability, sex, sexual orientation, and, where appropriate, other Non-executive pregnancy and maternity, race or ethnicity, Directors, are also made available to meet with religion or belief, gender identity, or marital or major shareholders on request. Any pertinent civilpartnership status. feedback arising from such meetings is reported to the Board at its regular meetings and/or by correspondence or dialogue. MEGroup plc Annual Report 2023 85 Corporate Governance ### Corporate governance continued In normal circumstances, private investors are matterswas in place throughout the year. The encouraged to attend the AGM and have the whistle-blowing policy can be found on the opportunity to question the Board. All members of Company’s website. the Board usually attend the AGM. Shareholders are given the opportunity to vote on each separate Internal control and risk management in issue. The number of proxy votes lodged is given at relation to the financial reporting process the meeting after the vote on a show of hands for The Group has a thorough assurance process in each resolution and is published on the Company’s place in respect of the preparation, verification website after the meeting. and approval of periodic financial reports. Accountability and internal control This process includes: The Board is ultimately responsible for the Group’s systems of internal control and risk management, ▪ The involvement of qualified, professional and for reviewing their effectiveness. This is employees with an appropriate level of effected by receiving reports from the Audit experience (both in Group finance and Committee following its review. The Board throughout the business) confirms that it has reviewed the effectiveness ▪ Formal sign-offs from appropriate business of the systems of internal control and risk segment Managing Directors and Finance management for the year under review. The Board Directors is generally satisfied that such systems have operated adequately throughout the period. ▪ Comprehensive review and, where appropriate, challenge from key internal Group functions The system of internal control is designed to ▪ A transparent process to ensure full disclosure of manage, rather than eliminate, the risk of failure information to the external auditor to achieve business objectives. Such a system can, however, provide only reasonable and not absolute ▪ Engagement of a professional and experienced assurance against material misstatement or loss. firm as external auditor ▪ Oversight by the Audit Committee, involving The Group has in place processes for identifying, (amongst other things): evaluating and managing the significant risks that are applicable to the business. The Board regularly i. A detailed review of key financial reporting reviews these processes. judgments that have been discussed by management The Chief Executive Officer is ultimately ii. Review and, where appropriate, challenge on responsible for risk management. Executive matters including: the consistency of, and any Managers of individual Group companies are changes to, significant accounting policies responsible for the identification, evaluation and and practices during the year; significant management of the key risks applicable to their adjustments arising as a result of the external areas of responsibility. These risks are assessed on audit; the going concern assumption; and a regular basis. the Company’s statement on internal control systems, before endorsement by the Board The Managers of Group companies are aware of their responsibility to operate systems of The above process, plus the review by the Audit internal control that are effective and efficient Committee of a comprehensive note that sets out for their businesses, to provide reliable financial the details of the preparation, internal verification information and to ensure compliance with local and approval process for the Annual Report and laws and regulations. Accounts, provides comfort to the Board that the Annual Report and Accounts, taken as a whole, The Group has a comprehensive budgeting are fair, balanced and understandable, and give system, with an annual budget approved by the information necessary for shareholders to the Board. Actual results are reported monthly assess the Group’s position and performance, through the Group’s financial systems, and business model and strategy. In connection with variances are reviewed. The Audit Committee the audit for year ended 31 October 2023, the receives reports from the external auditor and above process and review did not result in any reports its conclusions to the Board. adverse findings, and the Audit Committee found the process and associated controls sufficient and A whistle-blowing procedure by which staff adequate for their purpose. mayraise concerns about possible improprieties in matters of financial reporting or other MEGroup plc Annual Report 2023 86 MEGroup plc Annual Report 2023 87 Corporate Governance ## Statement of Directors’ ## Responsibilities ## The Directors of the Company, whose names ## and respective functions are set out on ## page71 (and are deemed to be included in this ## statement), are responsible for preparing ## theAnnual Report and the financial ## statements inaccordance with applicable ## lawand regulations. Company law requires the Directors to prepare disclose with reasonable accuracy at any time the financial statements for the Group and the financial position of the Company and the Group Company for each financial year. Under that law, and enable them to ensure that their financial the Directors are required to prepare the Group statements and the Directors’ Remuneration financial statements in accordance with UK- Report comply with the Companies Act 2006 adopted international accounting standards and and as regards the Group’sfinancial statements, applicable law and have elected to prepare the Article 4 of the IASRegulation Company’s financial statements on the same basis. The Directors have general responsibility for Under company law, the Directors must not taking such steps as are reasonably open to approve the financial statements unless they are them to safeguard the assets of the Group and to satisfied that they give a true and fair view of the prevent and detect fraud and other irregularities. state of affairs of the Group and the Company and of their respective profit or loss for that period. In Under applicable law and regulations, the preparing each of the Group and the Company’s Directors are also responsible for preparing a financial statements, the Directors are required to: Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate ▪ Select suitable accounting policies and then GovernanceStatement that comply with that law apply them consistently; and those regulations. ▪ Make judgments and accounting estimates that The Directors are responsible for the maintenance are reasonable and prudent; and integrity of the corporate and financial information included on the Company’s website. ▪ State whether they have been prepared in Legislation in the UK governing the preparation accordance with UK-adopted international and dissemination of financial statements may accounting standards, subject to any material differ from legislation in other jurisdictions. departures disclosed and explained in the Group and Company financial statements respectively; Responsibility Statement of the Directors and in respect of the annual financial report Each of the Directors of the Company, whose ▪ Prepare the financial statements on the names and functions are listed on page 71, going-concern basis unless it is inappropriate to confirms that, to the best of his or her knowledge: presume that the Group and the Parent Company will continue in business ▪ The financial statements, which have been prepared in accordance with UK-adopted The Directors are responsible for keeping international accounting standards, give a true adequate accounting records that are sufficient to and fair view of the assets, liabilities, financial show and explain the Company’s transactions and position and profit or loss of the Company and MEGroup plc Annual Report 2023 88 the undertakings included in the consolidation Statement of Compliance with UK Listing taken as a whole; and Rules, Rule 9.8.4(14) The Company has in place a written and legally | ▪ The Strategic Report and Report of Directors in | binding agreement as required by Listing Rule | | --- | --- | | the Annual Report include a fair review of the | 9.2.2ADR(1). As one independent Non-executive | | development and performance of the business | Director, Françoise Coutaz-Replan, is being | | and the position of the Company and the | proposed for re-election at the Company’s AGM | | undertakings included in the consolidation taken | to be held on 26 April 2024, her re-election will | | as a whole, together with a description of the | be conducted in accordance with Listing Rules | | principal risks and uncertainties that they face. | 9.2.2ER and 9.2.2FR. | | Fair, balanced and understandable | By order of the Board | In accordance with the principles of the UK Corporate Governance Code, the Directors Sir John Lewis OBE have arrangements in place to ensure that the Non-executive Chairman information presented in the Annual Report is fair, balanced and understandable; these are 27 February 2024 described on page 86. The Board considers, on the advice of its Audit Committee, that the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company’s and the Group’s position and performance, business model and strategy. Significant accounting policies, critical estimates and key judgments Our significant accounting policies are set out on pages 125 to 134 and following of the consolidated financial statements and conform to UK-adopted international accounting standards. These policies and applicable estimation techniques have been reviewed by the Directors who have confirmed them to be appropriate for the preparation of the 2022/2023 consolidated financial statements. MEGroup plc Annual Report 2023 89 Corporate Governance ## Directors’ ## RemunerationReport ## In the 12 months ended 31 October 2023, the ## Committee’s work has largely been focused ## on reviewing the Directors’ Remuneration ## Policy in advance of the 2024 AGM to ## ensure that Executive Directors and ## seniorexecutives remain appropriately ## incentivised and rewardedin respect of ## theCompany’sperformance. MEGroup plc Annual Report 2023 90 Emmanuel Olympitis Chairman of the Remuneration Committee ### Annual Statement Photo-Me Executive Share Option Scheme 2014) is reaching the end of its ten-year-shareholder- | Dear Shareholder, | approved life, the Committee concluded that, | | --- | --- | | On behalf of the board, I am pleased to present | subject to shareholder approval, the existing | | ourDirectors’ Remuneration Report which covers | scheme should be renewed and updated to | | the12 months ended 31 October 2023. | govern future grants under the name of the | MEGroup Executive Share Option Scheme | This report has been prepared in line with | (2024). The terms of the new scheme materially | | --- | --- | | the provisions of the Companies Act 2006 | continue with the main features of the existing | | and Schedule 8 of the Large and Medium- | scheme savefor developments to align to the | | sized Companies and Groups (Accounts and | new Directors’ Remuneration Policy (including | | Reports) Regulations 2008 (as amended). The | enhanced malus and clawback provisions) and | | report has also been prepared in line with the | introducing scope for French tax-favoured options | | recommendations of the 2018 UK Corporate | to qualifying employees. | Governance Code and the requirements of the UKLA Listing Rules. Work of the committee during the 12months ended 31 October 2023 This report is divided into three sections being: The Committee’s main activities during the period were as follows: This Annual Statement, which summarises the work of the Committee, remuneration outcomes in ▪ Agreeing the performance against the targets 2022/23 and how the Remuneration Policy will be for the 2022/2023 annual bonus awards; operated in 2023/24; ▪ Agreeing the approach in respect of the The Remuneration Policy Report, which details the 2023/2024 annual bonus awards; Company’s proposed Policy for the remuneration of Executive and Non-executive Directors. As the ▪ Agreeing the targets for the 2023/2024 current Policy was last approved by shareholders annualbonus; at the 2021 AGM, a new Policy with no material | changes to the current Policy, will be put to a | ▪ Agreeing the award levels and performance | | --- | --- | | shareholder vote at the 2024 AGM; and | targets for the 2023 ESOS awards; and | | The Annual Report on Remuneration, which | ▪ Reviewing the Directors’ Remuneration Policy | | discloses details of the Committee, how the | given that the current Policy is reaching the end | | Policy was implemented in the year ended | of its shareholder approved term. | 31October 2023, and how the Policy will operate for the year ending 31 October 2024. In addition, the Committee has sought to ensure that the Policy and practices are consistent with The new Remuneration Policy will be subject the six factors set out in Provision 40 of the 2018 to a binding shareholder vote and the Annual UK Corporate Governance Code: Statement and Annual Report on Remuneration will be subject to an advisory shareholder vote at Clarity – The current and proposed Policy is the AGM on 26 April 2024. understood by our senior executive team and we have sought to articulate it clearly to our In addition, following a review of long-term shareholders and representative bodies (both on incentive provision and noting that the Company’s an ongoing basis and during consultation when existing long-term incentive arrangement (the material changes are being made). MEGroup plc Annual Report 2023 91 Corporate Governance ### Directors’ Remuneration Report continued Simplicity – The Committee is mindful of the of the target set, and the performance against need to avoid overly complex remuneration those targets are set out in the Annual Report structures which can be misunderstood and onRemuneration. deliver unintended outcomes. Therefore, a key | objective ofthe Committee is to ensure that our | Based on an EPS for the year ended | | --- | --- | | executive remuneration policies and practices are | 31 October 2023 of 13.40p against a target | | straightforward to communicate and operate. | range of 8p to 10.5p, ESOS awards granted | on 5 August 2021 are expected to vest in Risk – Our current and proposed Policy has been full on 5 August 2024. Details of the awards designed to ensure that inappropriate risk-taking vesting, and their pre-tax intrinsic value as at is discouraged and will not be rewarded via: (i) the 31 October 2023, are detailed in the Annual Report balanced use of both short-term incentives and on Remuneration. market value share options which employ a blend of financial, non-financial and share price hurdles; Implementation of the remuneration (ii)the significant role played by equity in our policy for 2023/24 incentive plans; and (iii) malus/clawback provisions. The Committee proposes to operate the Policy for the year ending 31 October 2024 as follows: Predictability – Our incentive plans are subject to individual caps, with our share plans also subject ▪ Executive Directors’ current base salaries, to market standard dilution limits. together with prior year comparators (split between Euro and GBP where salaries are split Proportionality – There is a clear link between into two currencies) are as follows: individual awards, delivery of strategy and our long-term performance. ▪ Benefit provision will be in line with the approvedPolicy Alignment to culture – Our executive pay policies are aligned to culture through the use of metrics ▪ Mr Crasnianski’s pension provision will continue | in both the annual bonus and share options that | at 15% of salary going forward. Given the diverse | | --- | --- | | measure how we perform against our KPIs and | nature and geographies of the Company’s | | the long-term performance of the share price. | businesses and employees, no single Group- | wide pension plan operates and therefore Remuneration outcomes in 2022/23 pension contribution rates vary across the Group The performance of the Group is summarised on with pension levels not necessarily reflecting page 1 , and in the financial statements on pages seniority. Miss Tania Crasnianski does not receive | 118 to 186. | a pension provision | | --- | --- | | In respect of the annual bonus for the year ended | ▪ The annual bonus for the year ending | | 31 October 2023, performance against the profit | 31 October 2024 will continue to be capped at | | and strategic targets resulted in bonus awards | 150% of salary, with targets based on pre-tax | | of 150% of salary for Mr Crasnianski and 20% of | profit growth (80% of the bonus) and a | | salary for Miss Tania Crasnianski. Further details | numberof key personal/strategic targets | Salary from 1/11/2023 Salary from 1/11/2022 Role Name € £ € £ CEO Serge Crasnianski – 560,211 – 560,211 1 Executive Director Tania Crasnianski 290,000 50,000 230,000 50,000 1 Ms Crasnianski is paid €290,000 (increased from €230,000 from 1 January 2023, following a review by the Committee, to reflect additional responsibilities and increased experience in the role since her appointment) under a contract with MEGroup GSS (previously known as Photo Me France SAS), and £50,000 under a contract with Photo-Me Limited. MEGroup plc Annual Report 2023 92 (20%of the bonus). The bonus targets are currently considered to be commercially sensitive and as such, the targets and performance against the targets will be disclosed retrospectively in next year’s Directors’ Remuneration Report ▪ Future grants of ESOS awards to Executive Directors will be kept under review Use of discretion In determining remuneration outcomes for the year ended 31 October 2023, theCommittee has not exercised discretion. Shareholder engagement The Committee takes an active interest in shareholder views on our Executive Directors’ Remuneration Policy and is mindful of the concerns of shareholders and other stakeholders. This is reflected in the Company’s voting results at the 2021 AGM (approval of the current Remuneration Policy) and more recent AGMs in respect of the Annual Statement and Remuneration Report resolutions which were supported by a significant majority of shareholders. The Committee hopes that shareholders continue to support the Remuneration Committee, and specifically the resolutions in respect of the new Remuneration Policy, the Annual Statement and Annual Report on Remuneration, and renewal of the 2014 ESOP at the AGM on 26 April 2024. Yours faithfully, Emmanuel Olympitis Chairman of the Remuneration Committee 27 February 2024 MEGroup plc Annual Report 2023 93 Corporate Governance ## Remuneration ## PolicyReport ## The following Remuneration Policy will ## be put to shareholders for approval at ## the AGM to be held on 26 April 2024. Other than an enhancement to the withholding In order to align the interests of shareholders (malus) and recovery (clawback) triggers and Executive Directors, a significant proportion (references to reputational damage and corporate of the remuneration of Executive Directors is failure have been added) and the addition performance-related, through an annual bonus of Committee discretion to adjust formulaic plan and the grant of share options. outcomes in respect of the annual bonus and | long-term incentives in line with best and market | The Committee will ensure that the incentive | | --- | --- | | practice, there are no proposed changes to the | structures for Executive Directors and senior | | Remuneration Policy approved by shareholders at | managers will not raise environmental, social | | the 2021 AGM. | or governance (“ESG”) risks by inadvertently | motivating irresponsible behaviour. More The Committee’s Remuneration Policy for generally, with regard to overall remuneration the Executive Directors is to have regard to structures, there is no restriction on the Committee the directors’ experience and the nature and that prevents it from taking into account ESG complexity of their work in order to provide a matters, nor do these remuneration structures competitive remuneration package that attracts, encourage inappropriate operational risk-taking. retains and motivates high-calibre executives from whom first-class performance is expected. The Remuneration Policy is also intended to be consistent with the Company’s business objectives, risk profile and shareholder interests. MEGroup plc Annual Report 2023 94 | | Purpose and link to | | | Performance | | --- | --- | --- | --- | --- | | Component | strategy Operation Maximum | | | measures | | Salary | Reflects the value of | Normally reviewed | The Committee is | N/A | | | the individual and | annually, effective 1 | guided by the | | | | their role | May | requirements of the | | Company and Reflects skills and Normally paid in cash; prevailing market experience over time pensionable levels Provides an Comparison against However, no Executive appropriate level of companies with Director will receive a basic fixed income, similar characteristics base salary increase avoiding excessive risk and comparators in excess of 10% p.a., arising from taken into account in except to reflect the over-reliance on review fact that their salary variable income was set at a lower level initially, with the intention that the salary be increased to a more market- reflective level as the individual gains experience (subject to performance) | Benefits | Provides insured | Includes company car | Benefits will not | N/A | | --- | --- | --- | --- | --- | | | benefits to support | and private medical | normally be provided | | | | the individual and | insurance, and may | with a value per | | | | their family during | include an overseas | Executive Director in | | | | periods of ill health or | housing allowance for | excess of £75,000 p.a. | | | | death | a director working | | | outside of his or her Gives allowances to country of normal support individuals in residence their relevant roles Other benefits may be offered where appropriate | Annual Bonus | Incentivises delivery of | Normally payable in | Up to 150% of base | Performance is | | --- | --- | --- | --- | --- | | | specific Company, | cash; non- | salary p.a. | assessed on an annual | | | divisional and | pensionable | | basis, based on the | | | personal annual goals | | | achievement of | Committee has the objectives relating to Maximum bonus only discretion to defer up financial payable for achieving to 50% of the bonus in performance, specified targets shares for three years progress of strategic priorities and/or personal targets. The specific measures used in the bonus and their weighting may vary each year depending on business context and strategy Withholding and recovery provisions are operated Pension Provides competitive Defined contribution Workforce aligned N/A retirement benefits Executive Directors (noting that no single may be offered cash in Groupwide pension lieu of pension plan operates and therefore pension contribution rates vary across the Group with pension levels not necessarily reflecting seniority) MEGroup plc Annual Report 2023 95 Corporate Governance ### Remuneration Policy Report continued | | Purpose and link to | | | Performance | | --- | --- | --- | --- | --- | | Component | strategy Operation Maximum | | | measures | | Executive Share | Aligns Executive | Annual awards of | Up to 150% of base | The Remuneration | | Option Scheme (ESOS) | Directors’ interests | market value options | salary p.a. | Committee may set | | | with those of | may be granted | | such performance | | | shareholders | | | conditions on awards | The Committee as it considers Retention reviews the quantum appropriate (whether of awards annually financial or non- and monitors the financial; and whether continuing suitability corporate, divisional of the performance or individual) measures EPS (based on sliding Awards vest after scale vesting targets) three years and a two is currently the sole year post vesting performance metric holding period will used. operate Up to 25% of salary vests at threshold, increasing to 150% vesting at maximum Withholding and recovery provisions are operated | Share Ownership | Provides alignment of | In employment: | In employment: 200% | | --- | --- | --- | --- | | Guidelines | interests between | Executive Directors | of salary | | | Executive Directors | are required to build | | Post cessation: 100% and shareholders and maintain a of the in-employment shareholding guideline (or actual equivalent to at least shareholding if lower) two years’ base salary excluding: (i) own through the retention shares purchased/ of 50% of the shares currently held; net-of-tax vested and (ii) shares vesting share awards or from any share award through open-market granted prior to the purchases 2021 AGM Post cessation: Executive Directors will be required to retain a shareholding for two years post cessation of employment Non-executive Provides fees Cash fee paid on a The Committee is N/A Directors reflecting time monthly basis; fees guided by market commitments and are reviewed annually rates, time responsibilities, in line commitments and Not entitled to with those provided by responsibility levels participate in any similarly sized Group pension However, aggregate companies | scheme. No awards to | annual fees will not | | --- | --- | | be granted under the | exceed £750,000 or | | annual bonus or ESOS | such other figure as | provided for in the No Non-executive Company’s Articles of Director receives any Association from time benefits in kind (other to time than in respect of the expenses relating to The Board may the performance of request that a that individual’s Non-executive duties, such as travel Director undertake to/from Board services not within the meetings) normal scope of his or her role. Should this be the case in the future, a commercial rate would be paid and full disclosure would be provided in the relevant Directors’ Remuneration Report MEGroup plc Annual Report 2023 96 Withholding and recovery provisions (but not limited to) major acquisitions, changes in The Committee operates withholding (malus) and accounting policies and major share issues. recovery (clawback) provisions. If, at any point before the third anniversary of the date that a The Committee operates the Executive bonus was paid or an option becomes exercisable, ShareOption Scheme in accordance with the it is discovered that there has been: (i) a material scheme rules, the Listing Rules and HMRC misstatement of the Company’s financial results, legislation. The Committee, consistent with (ii) an error of calculation (including on account of marketpractice, retains discretion over a inaccurate or misleading information); (iii) serious number of areas relating to the operation and misconduct on the part of the Director in question; administration of the plan. (iv) serious reputational damage caused by the Director in question; or (v) corporate failure, the How employees’ pay is taken into account Committee may invoke the withholding and The Committee is aware of the general pay recovery provisions by way of a reduction in the and conditions in the Group as a whole when amount of any future bonus, existing options or determining the directors’ Remuneration Policy future share awards and/or a requirement to and its implementation. However, reflecting make a cash payment. standard practice, employees are not consulted in the formulation of the policy. Committee discretion The Committee retains discretion to adjust the How the Executive Directors’ level of incentive awards (i.e. annual bonus awards Remuneration Policy relates to the Group and/or ESOS vesting) either up or down from The Remuneration Policy described above that which would otherwise result (for example, provides an overview of the structure that that would otherwise result by reference to operates for most senior executives in the formulaic outcomes alone). The Committee Group. Employees below executive level have would only exercise such discretion in exceptional a lower proportion of their total remuneration circumstances and in its exercise may have regard made up ofincentive-based remuneration, with to corporate and personal performance. remuneration driven by market comparators and the impact of the role of the employee in Choice of performance measures question. Long-term incentives are reserved for The Committee has given careful consideration those judged as having the greatest potential to the performance measures applicable to to influence the Group’s earnings’ growth and both the annual bonus and the Executive Share share-price performance. OptionScheme. How shareholders’ views are taken | The choice of the performance metrics | intoaccount | | --- | --- | | applicable to the annual bonus scheme reflects | The Committee continues to take an active | | the Committee’s belief that any incentive | interest in shareholder views on our executive | | compensation should be appropriately | Remuneration Policy and is mindful of the | | challenging, with the majority (or the entirety) | concerns of shareholders and other stakeholders. | | linked to the achievement of profit-related targets. | This is reflected in the voting result at the AGM | | The Committee may also link a proportion of | held on 30 April 2021, with 94.84% shareholder | | the annualbonus to strategic and/or personal | support (of votes cast) in respect of the current | | objectives if it deems this appropriate with | Directors’ Remuneration Policy. | regard to the Company’s key objectives. The earnings pershare (EPS) performance condition, Approach to recruitment and promotions applicable to the Executive Share Option Scheme, The remuneration package for a new Executive was selected by the Committee on the basis Director would be set in accordance with the that it incentivises the delivery of sustainable terms of the Company’s prevailing approved long-term financial performance and rewards Remuneration Policy at the time of appointment management for growing the Company while and takes into account the skills and experience of retaining an appropriate profit margin. The use the individual, the market rate for a candidate of of share optionsretains a robust link between that experience and the importance of securing management and shareholders by incentivising the relevant individual. management to deliver long-term growth in the Company’s share price. The Committee Service contracts will be subject to any mandatory retains discretion over the use of other financial/ provisions of foreign laws where such laws govern share price-based performance metrics and a director’s contract of employment providing that the calculation of EPS in order to appropriately the use of such foreign law is not deliberately used adjust for any material one-off items including to circumvent this policy. MEGroup plc Annual Report 2023 97 Corporate Governance ### Remuneration Policy Report continued Reward scenarios Other DirectorCEO | share price | 35% | 44% | | 21% | £1,925k | share price | 31% | 46% | | 23% | £983k Maximum | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | growth | | | | | | growth | | | | | | | Maximum | 38% | 48% | 14% | £1,757k | | Maximum | 34% | 51% | 14% | £892k | Maximum | Salary, pension On-target 55% 35% 10% £1,210k On-target 51% 38% 11% £597k On-target andbenefits Annual bonus Minimum 100% 664k Minimum 100% £302k Minimum ESOS The scenarios in the above graphs for the Executive Directors are based on the following: Maximum with share Director Minimum On-target Maximum price Fixed pay Current base salary levels (using a €1.1489:£1 Exchange rate for Tania Crasnianski) Estimated value of benefits (CEO only) 15% of salary pension (CEO only) Annual bonus 0% 50% of maximum 100% of maximum 100% of maximum 150% of salary max 1 ESOS 0% 50% of the value assumed 30% of 150% Assumes a 50% share 2 150% of salary max at the maximum of salary price growth 1 This is the maximum award level permitted. The Committee will determine the extent to which ESOS awards will be granted to Executive Directors and the award levels and the treatment of the shares under award at exercise. | 2 Based on 30% of the face value of the maximum ESOS awards that may be granted. | | | --- | --- | | The salary would be provided at such a level | the prior role may be allowed to pay out according | | as required to attract the most appropriate | to its original terms. | candidate, and may be set initially at a below mid-market level on the basis that it may progress For external and internal appointments, the towards the mid-market level once expertise and Committee may agree that the Company performance have been proven and sustained. will meetcertain relocation and/or incidental expenses, as appropriate. Pension provision will be in line with the Company’s prevailing approved Remuneration Fee structure and quantum for Non-executive Policy at the time of appointment. Director appointments will be based on the prevailing Non-executive Director fee policy. Consistent with Part 4 of the Large and Medium- | sized Companies and Groups (Accounts and | Approach to leavers | | --- | --- | | Reports) (Amendment) Regulations 2013 as | No Executive Director has the benefit of | | amended, the cap on benefit provisions does not | provisionsin his or her service contract for the | | apply to new recruits, although the Committee | payment of predetermined compensation in the | | would not envisage exceeding this caps in practice | event of a termination of employment. It has been | | unless absolutely necessary. | the Committee’s general policy that the service | contracts of Executive Directors (none of which is The annual bonus potential would be limited to for a fixed term) should provide for termination 150% of salary, and grants under the Executive of employment by giving notice or by making Share Option Scheme would be limited to 150% a payment of an amount equal to base salary of salary. In addition, the Committee may offer (and in the case of the CEO and other Executive additional cash and/or share-based elements Directors, an additional amount equal to the to replace deferred or incentive pay forfeited cost of providing any benefits for the period of by an executive leaving a previous employer. It notice) in lieu of any unserved notice period. It is would seek to ensure, where possible, that these the Committee’s general policy that no Executive awards would be consistent with awards forfeited, Director should be entitled to a notice period or in termsof vesting periods, expected value and payment on termination of employment in excess performance conditions. of the levels set out in his or her service contract. Indetermining amounts payable on termination, Maximum with Maximum with For an internal Executive Director appointment, the Committee also considers, where it is able any variable pay element awarded in respect of to do so, appropriate adjustments to take into MEGroup plc Annual Report 2023 98 account accelerated receipt and the Executive addition, and consistent with market practice, Director’s duty to mitigate his or her loss. in the event of the termination of an Executive Director, the Company may make a contribution An annual bonus may be payable for a good leaver towards that individual’s legal fees and fees for (e.g. death, ill health, disability, redundancyor other outplacement services as part of a negotiated circumstances at the discretion of the Committee) settlement. Any such fees will be disclosed as part with respect to the period of the financial year of the detail of termination arrangements. For the served, although it will be prorated for time served avoidance of doubt, the policy does not include an and paid at the normal pay-out date. explicit cap on the cost of termination payments. The treatment of any share awards granted to an Service contracts Executive Director will be determined based on Details of the Executive Directors’ service the relevant scheme rules. contracts are as follows: Date of Notice Executive Director contract period The default treatment under the Executive Share 2 Serge Crasnianski¹ 01/05/2010 12 months Option Scheme is that any outstanding awards 2 or unexercised options lapse on cessation of Tania Crasnianski 23/06/2021 12 months employment. However, in certain prescribed | circumstances (e.g. death, injury, disability or | All Non-executive Directors are appointed for | | --- | --- | | other circumstances at the discretion of the | specified terms, subject to re-election at the | | Committee), “good leaver” status can be applied | AGM immediately following their appointment, | | at the discretion of the Committee or shall apply in | and every three years thereafter. None of | | relation to HMRC tax-favoured options as relevant. | the Non-executive Directors will ordinarily be | | In this scenario, any outstanding options will | entitled to compensation upon termination of | | normally be exercisable on the date of cessation | their involvement with the Company. However, | | and remain exercisable for a period of six months | if a Non-executive Director should be removed | | (or 12 months in the case of death). Alternatively, | as a result of a resolution duly proposed and | | in the case of non-tax favoured options, the | resolved by members of the Company during | | Committee has the discretion to determine that | the Non-executive Director’s normal term | | good leavers’ awards should continue to be | of appointment, he or she will be entitled to | | exercisable based on the normal timetable. | compensation equal to three months’ fees, and | in the case of the chairman, six months’ fees. The The extent to which outstanding option awards relevant appointment letter and term dates of the become exercisable for good leavers will Non-executive Directors are set out below: depend on the satisfaction of any applicable performanceconditions (over a curtailed or full External appointments performance period, as relevant). Time pro rating The Board may allow Executive Directors to accept ofoptions will apply to good leavers’ awards appropriate outside commercial Non-executive unlessthe Committee determines that time Director appointments provided the aggregate prorating is inappropriate. commitment is compatible with their duties as an Executive Director. Whether or not the Executive The Company has the power to enter into Director concerned may retain fees paid for these settlement agreements with Directors and to pay services will be considered on a case-by-case compensation to settle potential legal claims. In basis, and will be subject to approval by the Board. Appointment Year of last Expected year of Director letter date election expiry of current 3 Sir John Lewis 03/07/2008 2021 2024 4 Françoise Coutaz-Replan 27/08/2015 2021 2024 Emmanuel Olympitis 11/11/2009 2022 2025 5 Camille Claverie 23/06/2021 2022 2025 6 René Proglio 23/06/2021 2022 2025 7 Jean-Marc Janailhac 01/11/2023 2022 2025 1 Mr Crasnianski’s contract is with Photo-Me Limited, a wholly-owned subsidiary of the Company. Mr Crasnianski’s services are also made. Available under a consultancy agreement with Photo-Me Limited and a third party that makes Mr Crasnianski’s services available to the Company. 2 Where served by the Company; six months, notice where served by the Director or where applicable their service company. 3 Appointed Chairman on 26 July 2010. 4 First appointed to the Board as Group Finance Director on 24 September 2009, and resigned as an Executive Director on 27 August 2015. MissCoutaz-Replan has remained as a Non-executive Director since that date. 5 First appointed to the Board on 23 June 2021. Ms Claverie’s contract is with Photo-Me Limited, a wholly-owned subsidiary of the Company. 6 First appointed to the Board on 23 June 2021, Mr Proglio’s services are made available under a consultancy agreement with Photo-Me Limited and a third party that makes Mr Proglio’s services available to the Company. 7 Appointed to the Board on 22 July 2019 as a Non-executive Director, he became an Executive Director on 27 July 2020 and reverted to being a Non-executive Director on 1 November 2023. MEGroup plc Annual Report 2023 99 Corporate Governance ## Annual report on ## Remuneration ## Implementation of the ## RemunerationPolicy for the ## yearending 31 October 2024. The Committee proposes to operate the Policy for ▪ The annual bonus for the year ending the year ending 31 October 2024 as follows: 31 October 2024 will continue to be capped at 150% of salary, with targets based on pre-tax | ▪ Executive Director base salaries were not | profit growth (80% of the bonus) and a number | | --- | --- | | increased from 1 November 2023. Details of | of key personal/strategic targets (20% of the | | thecurrent salary levels are set out in the | bonus). The bonus targets are currently | | AnnualStatement | considered to be commercially sensitive and as | such, the targets and performance against the | ▪ Benefit provision will be in line with the | targets will be disclosed retrospectively in next | | --- | --- | | approvedPolicy | year’s Directors’ Remuneration Report | | ▪ Mr Crasnianski’s pension provision will continue | ▪ Future grants of ESOS awards to Executive | | at 15% of salary going forward. Given the diverse | Directors will be kept under review | nature and geographies of the Company’s businesses and employees, no single Group- Non-executive Directors wide pension plan operates and therefore The fees for Non-executive Directors are reviewed pension contribution rates vary across the Group at least once every three years, the last increase with pension levels not necessarily reflecting having taken place in 2022. Current Non-executive seniority.Miss Tania Crasnianski does not receive Director fee levels are as follows (with prior year apension provision comparators also presented): | | 1 November | | | 1 November | | | | --- | --- | --- | --- | --- | --- | --- | | | | 2023 | | | 2022 | | | Non-executive Director Role Committee chairman | | | £ | | | £ | | Sir John Lewis Chairman Nomination | 145,000 145,000 | | | | | | Committee Emmanuel Olympitis Senior Independent Director Remuneration 67,500 67,500 Committee Françoise Coutaz-Replan Non-executive Director – 47,500 47,500 1 1 1 Camille Claverie Non-executive Director – – – René Proglio Non-executive Director Audit Committee 57,500 57,500 Jean-Marc Janailhac Non-executive Director – 45,000 – 1 Ms Claverie has chosen not to receive any fee. MEGroup plc Annual Report 2023 100 Single total figure of remuneration (audited) The detailed emoluments received by the Executive and Non-executive Directors for the 12 months ended 31 October 2023 and the 12 months ended 31 October 2022 are shown below: Total | | Salary/ | | | | | | | | | | Total fixed | | variable | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 1 | | 2 | | 3 | | 4 | | | | | | Fees | | Benefits | | Bonus | | LTI | | Pension | | remuner | | remuner | | Executive Directors Year | | £ | | £ | | £ | | £ | | £ Total | | -ation | -ation | 5 Serge Crasnianski 2023 560,212 23,183 840,318 771,800 84,032 2,279,545 667,427 1,612,118 2022 560,212 18,774 840,318 0 84,032 1,503,336 663,018 840,318 6 Jean-Marc Janailhac 2023 222,564 – – 308,720 – 531,284 222,564 308,720 2022 285,340 – 169,851 – – 455,191 285,340 169,851 7 Tania Crasnianski 2023 293,716 – 60,058 74,690 – 428,464 293,716 134,748 2022 245,333 – 58,598 – – 303,931 245,333 58,598 Total | | Salary/ | | | | | | | | | | Total fixed | | variable | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 1 | | 2 | | 3 | | 4 | | | | | | Fees | | Benefits | | Bonus | | LTI | | Pension | | remuner | | remuner | | Non-executive Directors Year | | £ | | £ | | £ | | £ | | £ Total | | -ation | -ation | 8 Sir John Lewis 2023 145,000 – – – – 145,000 145,000 – 2022 132,000 – – – – 132,000 132,000 – 9 Françoise Coutaz-Replan 2023 47,500 – – – – 47,500 47,500 – 2022 44,000 – – – – 44,000 44,000 – 10 Jean-Marcel Denis 2023 – – – – – – – – 2022 29,985 – – – 29,985 29,985 – Emmanuel Olympitis 2023 67,500 – – – – 67,500 67,500 – 2022 55,000 – – – – 55,000 55,000 – Camille Claverie 2023 – – – – – – – – 2022 – – – – – – – – 11 René Proglio 2023 57,500 – – – – 57,500 57,500 – 2022 57,500 – – – – 57,500 57,500 – 1 Taxable benefits comprise the provision of private medical insurance and, where appropriate, an accommodation allowance. 2 The annual bonus for 2023 is in respect of the year ended 31 October 2023 (see annual bonus section below) while the annual bonus for 2022 is in respect of the year ended 31 October 2022. 3 The EPS for the year ended 31 October 2023 was 13.40p against a target range of 8p to 10.5p, therefore of the ESOS awards granted on 5 August 2021 to Executive Directors will vest post year end (see Scheme Interests Vesting Based on Performance to 31 October section below). The EPS for the year ended 31 October 2022 was 10.26p against a target range of 9p to 11p, therefore of the ESOS awards granted on 27 August 2019 to Mr Crasnianski over 816,509 shares, 564,752 vested post year end following audit completion. As the share price at 31 October 2022 was lower than the exercise price of 101.4p, no value was shown in the table for 2022 above. 4 The pension payment to Mr Crasnianski in the financial period ended 31 October 2023 represented 15% of base salary which was paid as a salary supplement. Mr Janailhac and Miss Tania Crasnianski do not receive pension provision. 5 The emoluments of Mr Crasnianski shown above for the 12 months ended 31 October 2023 include fees totalling £405,969 (£405,969 for the 12 month-period ended 31 October 2022), payable to a third party in respect of making available the services of Serge Crasnianski to the Company. 6 Mr Janailhac was paid partially in GBP (£45,000) and partially in euros which when converted amounted to £240,340 which were paid to a third party in respect of making available the services of Mr Janailhac to the Company. The euro amounts have been translated at the exchange rate set out in note 12. 7 Ms Crasnianski was paid €280,000 (increased from €230,000 from 1 January 2023 to reflect additional responsibilities and increased experience in the role since appointment) under a contract with MEGroup GSS (formerly called Photomaton France SAS), and £50,000 under a contract with Photo-Me Limited. The euro amount has been translated at the exchange rate set out in note 12. 8 The emoluments of Sir John Lewis shown above include fees of £49,500 paid to a third party in respect of making available the services of Sir John Lewis to the Company (£49,500 for the 12 month-period ended 31 October 2022). 9 Ms Coutaz-Replan stepped down as an Executive Director on 27 August 2015, and was appointed as a Non-executive Director on the same date. 10 The emoluments of Mr Denis shown above were paid to a third party in respect of making available the services of Mr Denis to the Company. Mr Denis left the Board on 29 April 2022. 11 The emoluments of Mr Proglio shown above were paid to a third party in respect of making available the services of Mr Proglio to the Company. 12 Exchange rate: of €1.1489: £1. MEGroup plc Annual Report 2023 101 Corporate Governance ### Annual report on Remuneration continued ### Annual Bonus for the year ended 31 October 2023 Details of the performance against the profit before tax targets for the year ended 31 October 2023 annualbonuses is as follows: Financial Targets (80% of Bonus Potential) 2021/22 Annual Bonus Executive (% of salary) Group pre-tax profit between 100% and 105% of prior year Committee discretion depending on year-on-year growth Group pre-tax profit 5% more but less than 10% higher that of prior year 60% Group pre-tax profit 10% or more than prior year 120% Prior year profit £53.4m Current year actual profit result £67.1m % of bonus payable (out of 120% of salary) 120% of salary Personal/Strategic Targets (20% of Bonus Potential) Details of performance against the personal/strategic targets are as follows: Serge Crasnianski & Tania Crasnianski Targets Weighting Committee Assessment | Continue to drive the expansion of | 10% of salary Met in full. During the period, the Group significantly | | | --- | --- | --- | | the Company’s business activities | | extended its presence inJapanthrough the | | through identifying and negotiating | | acquisition of 3,548 photobooths acquired from | | acquisitions | | FUJI in September 2023, positioning the Group as | the leading operator in the Japanese photobooth market, with over 15,000 machines in operation today Actively invest in R&D to drive 10% of salary Met in full. The Committee noted the significant R&D technological innovation to further investment during the year to drive technological diversify and expand the breadth of innovation, particularly in respect of the next products and services offered generation in Photobooths, which offer a range of new functionalities, focused around enhancing the user experience. These new features include ‘Mobile to Print’, user personalisation services using AI and photo filters. The Group expects other new functions will be added over time Continue to make material progress 10% of salary Met in full. The Committee noted significant against the delivery of Company’s progress made in the year under review across the sustainability strategy Group – at our head office, at our R&D centre in France, and at our other sites – to reduce industrial waste, limit packaging, favour local suppliers, and reduce water and energy consumption 30% of salary Following the Committee’s assessment of the financial and personal/strategic targets, the Committee awarded: ▪ Mr Crasnianski a bonus of 150% of salary based on performance against both the financial targets (80% of bonus potential) and the personal/strategic targets (20% of bonus potential) ▪ Miss Tania Crasnianski a bonus of 30% of salary (i.e. 20% of bonus potential) reflecting progress made against her strategic targets (she was not eligible to receive a bonus against the pre-tax profit targets for the year ended 31 October 2023) MEGroup plc Annual Report 2023 102 ESOS (Audited) Scheme Interests Vesting Based on Performance to 31 October 2023 (Audited) Pre-tax Intrinsic Gain at 1 2 Executive Director Granted Vesting (100%) 31 October 2023 Serge Crasnianski 1,000,000 1,000,000 £771,800 Jean-Marc Janailhac 400,000 400,000 £308,720 Tania Crasnianski 96,774 96,774 £74,690 1 EPS for the year ended 31 October 2023 was 13.40 pence compared against a target range of 8p to 10.5p. 2 Based on the 3 month average share price to 31 October 2023 of 154.68p less the 77.5p exercise price. Scheme interests awarded in the year (Audited) The Company granted the following market value share option awards (exercise price of 126.7 pence pershare) to Executive Directors during the year ended 31 October 2023: Number of ESOS 1 Executive Director Date of grant Awards Basis Face Value Tania Crasnianski 4 April 2023 100,000 Fixed number £126,700 ofshares 1 Based on a share price of £1.267 which was the average share price over the three days immediately prior to grant. The EPS performance targets, with pro-rata vesting between targets, are as follows: EPS 2025 Portion of option that becomes exercisable 14.5p Up to portion with an aggregate Exercise Price of no more than 25% of the Participant's Salary 15p Up to portion with an aggregate Exercise Price of no more than 50% of the Participant's Salary 15.5p Up to portion with an aggregate Exercise Price of no more than 75% of the Participant's Salary 16p Up to portion with an aggregate Exercise Price of no more than 100% of the Participant's Salary 16.5p Up to portion with an aggregate Exercise Price of no more than 125% of the Participant's Salary 17p Up to portion with an aggregate Exercise Price of no more than 150% Between the On straight-line basis between the above above points Directors’ interests in shares (audited) According to the records kept by the Company, the Directors had interests in the share capital of the Company as shown below. Beneficially owned at 31 October 31 October ESOS ESOS Requirement Shareholding 1 Executive Director 2023 2022 Awards Awards² (% of salary) (% of salary)³ Guideline 4 Serge Crasnianski 137,803,041 137,803,041 1,564,752 – 200% 34,487% Yes Jean-Marc Janailhac 225,555 225,555 400,000 – 200% 113% No Tania Crasnianski – – 96,774 200,000 200% 0% No 1 Options with no further performance conditions attached that have not Beneficially owned at been exercised. | | | | | | 2 Options with outstanding performance conditions attached. | | --- | --- | --- | --- | --- | --- | | | 31 October | | 31 October | | | | | | | | | 3 Executive Directors are required to build and maintain a shareholding | | Non-executive Director | | 2023 | | 2022 | | equivalent to at least 200% of base salary through the retention of Sir John Lewis 25,000 25,000 50% of the net-of-tax vested share awards or through open-market purchases. Calculated using the closing share price on the last trading Françoise 200,000 200,000 day in October 2023 (140.2p) and current salary levels (based on an 5 exchange rate of €1.1489: £1 where relevant). The shareholding guideline Coutaz-Replan is calculated using only beneficially owned shares. 4 Of the shares beneficially owned by Serge Crasnianski, 63,750 shares Emmanuel Olympitis 45,000 45,000 (2022: 63,750) were registered in his name, the balance in other names. 5 Françoise Coutaz-Replan stepped down as an Executive Director on 27 August 2015, continuing as a Non-executive Director. MEGroup plc Annual Report 2023 103 Corporate Governance ### Annual report on Remuneration continued Directors’ interests in share options (audited) Details of outstanding share awards held by Directors are set out below. | | | Number of | Granted | Exercised | Lapsed | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | options as at 1 | | during | during | during | | As at | Exercise | | Exercisable | | | Executive Director | | Nov 2022 | period | period | period | 31 Oct 2023 | | | price | | from Expiry date | Serge Crasnianski 27 August 2019 816,509 – – 251,757 564,752 101.4p 27 Aug 22 27 Aug 26 1 5 August 2021 1,000,000 – – – 1,000,000 77.5p 5 Aug 24 4 Aug 28 Jean-Marc Janailhac 1 5 August 2021 400,000 – – – 400,000 77.5p 5 Aug 24 4 Aug 28 Tania Crasnianski 1 5 August 2021 96,774 – – – 96,774 77.5p 5 Aug 24 4 Aug 28 12 May 2022 100,000 – – – 100,000 68.7p 12 May 25 11 May 29 4 April 2023 – 100,000 – – 100,000 126.7p 4 Apr 26 3 Apr 30 1 See the Scheme Interests Vesting Based on Performance to 31 October 2023 (Audited) section above. Relative importance of the spend on pay The following table sets out the percentage change in distributions to shareholders and employee remuneration costs: Paid during FY 2022 Pence per share £’000 Interim (paid 3 November 2022) 2.6 9,829 Final for FY 2022 (paid 12 May 2023) 3 11,345 Special (paid 19 May 2023) 0.6 2,269 Total 6.2 23,433 1 Based on the cash returned to shareholders through dividends, as shown in note 9 to the Financial Statements. The Company purchased 1,260,534 of its own shares into treasury in the financial period ended 31 October 2023, returning a further £1,969,000 to shareholders. Group (£’000) 2023 2022 Total employee remuneration costs 56,864 51,943 1 Based on the figure shown in note 5 to the Financial Statements TSR performance graph The graph below shows the Company’s performance, measured by total shareholder return (TSR) (share price growth plus dividends reinvested) compared with the performance of the FTSE SmallCap Index (calculated on the same basis) from 1 May 2013. As the Company has been a constituent of the FTSE SmallCap Index for much of the relevant period, this index is considered an appropriate form of “broad equity market index” against which the Company’s performance should be compared. MEGroup plc Annual Report 2023 104 Total shareholder return 600 500 400 300 200 100 0 | 30 April | | 30 April | 30 April | 30 April | 30 April | | 30 April | 30 April | 30 April | 30 April | | 30 April | 30 April | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2013 | | 2014 | 2015 | 2016 | 2017 | | 2018 | 2019 | 2020 | 2021 | | 2022 | 2023 | | | Source: Datastream (omson Reuters) | | | | | ME Group plc FTSE SmallCap | | | | | FTSE 250 | | | Percentage increase in the remuneration of the members of the Board The table below shows the change in the salary, benefits and annual bonus for the members of the Board who served in both the period just ended and the previous financial year in full, compared with the change in remuneration for the UK employee population. Comparative numbers for the year to 31 October 2022 and the year to 31 October 2021 are also presented. Year to 31 October 2023 Year to 31 October 2022 Year to 31 October 2021 Base Annual Base Annual Base Annual salary Benefits bonus salary Benefits bonus salary Benefits bonus Executive Directors Serge Crasnianski 0% 23% 0% 18% 14% 0% 0% 0% 0% Jean-Marc Janailhac (22%) 0% 0% 46% 0% 100% 27% 0% 0% Tania Crasnianski 20% 0% 2% 176% 0% 100% N/A N/A N/A Non-executive Directors Sir John Lewis 10% N/A N/A 21% N/A N/A 0% N/A N/A Françoise Coutaz-Replan 8% N/A N/A 18% N/A N/A 0% N/A N/A Jean-Marcel Denis N/A N/A N/A -29% N/A N/A 0% N/A N/A Emmanuel Olympitis 23% N/A N/A 18% N/A N/A 0% N/A N/A René Proglio 0% N/A N/A 218% N/A N/A 0% N/A N/A Camille Claverie N/A N/A N/A 0% N/A N/A 0% N/A N/A UK Employee Population 1% 26% 60% 11% 0% 16% 11% 1% 16% MEGroup plc Annual Report 2023 105 Corporate Governance ### Annual report on Remuneration continued CEO remuneration The table below shows the total remuneration for the CEO over the same 10.5-year period as the TSR chart on the previous page. All share awards are valued at the date of vesting. Long-term Annual incentives 1 CEO Total (£) (% of max) (% of max) 2023 (12 months to 31 October 2023) Serge Crasnianski 2,279,545 100% 100% 2022 (12 months to 31 October 2022) Serge Crasnianski 1,503,336 100% 69% 2021 (12 months to 31 October 2021) Serge Crasnianski 1,404,423 100% – 2020 (18 months to 31 October 2020) Serge Crasnianski 984,248 0% – 2019 (12 months to 30 April 2019) Serge Crasnianski 650,380 0% – 2018 (12 months to 30 April 2018) Serge Crasnianski 681,954 0% – 2017 (12 months to 30 April 2017) Serge Crasnianski 1,498,113 100% – 2016 (12 months to 30 April 2016) Serge Crasnianski 1,429,209 100% 100% 2015 (12 months to 30 April 2015) Serge Crasnianski 1,031,628 100% – 2014 (12 months to 30 April 2014) Serge Crasnianski 914,278 100% – 1 Shows the number of share options that vested as a percentage of the maximum number of share options that could have vested. For the years ended 30 April 2011 to 30 April 2019 (but excluding 2016), Serge Crasnianski did not have any outstanding share option awards that could have vested in the relevant years. For the year ended 31 October 2022, partial vesting was achieved between the 9p and 11p target range in respect of the 2020 ESOP awards. CEO pay ratio The data shows how the CEO’s single figure remuneration for the year ended 31 October 2023 compares with equivalent single figure remuneration for full-time equivalent UK employees, ranked at the 25th, 50th and 75th percentile. The 2020 salary and total pay and benefits data (18 months) have been annualised to aid with year on year comparison. | | | 25th | | | 75th | | --- | --- | --- | --- | --- | --- | | | percentile | | Median | percentile | | | Period Method | pay ratio | | pay ratio | pay ratio | | 2023 Option A 80:1 71:1 57:1 2022 Option A 58:1 53:1 42:1 2021 Option A 74:1 58:1 41:1 2020 Option A 44:1 30:1 24:1 No components of pay and benefits have been omitted for the purpose of the above calculations. Option A was selected given that this method of calculation was considered to be the most statistically robust approach in respect of gathering the required data for 2023. The respective quartile salary and total pay and benefits numbers are as follows: Salary Total pay and benefits 25th 75th 25th 75th Period percentile Median percentile percentile Median percentile 2023 £26,599 £29,217 £35,000 £28,652 £31,970 £39,991 2022 £25,094 £26,662 £34,795 £25,847 £28,555 £36,189 2021 £18,309 £23,533 £32,187 £18,858 £24,286 £34,336 2020 £14,410 £21,185 £25,687 £14,825 £21,824 £28,579 MEGroup plc Annual Report 2023 106 ### Committee role and membership The Remuneration Committee comprises two Non-executive Directors: Emmanuel Olympitis (Committee Chairman, member of the Audit and Nomination Committees, and Senior Independent Director), and Sir John Lewis (Chairman of the Board and the Nomination Committee, and member of the Audit Committees). The Board considers Mr Olympitis to be independent, and also considers Sir John Lewis to have been independent on his appointment as Chairman. Biographies of the members of the Committee are set out on page 71. Details of their membership of the Committee and attendance at the meetings during the year are as follows. | Name | Position | Appointment date | Number of Meetings attended (Maximum possible) | | --- | --- | --- | --- | | Emmanuel Olympitis | Committee Chairman | 11 November 2009 | 2 (2) | | Sir John Lewis | Committee Member | 3 July 2008 | 2 (2) | It remains the Committee's policy that it will meet on an ad hoc basis when the needs of the Company require it. At the invitation of the Chairman, the CEO and other Executive Directors and Non-executive Directors may attend meetings of the Committee, except when their own remuneration is under consideration. No Director is involved in determining his or her own remuneration. The Company Secretary acts as the Secretary to the Committee. The members of the Committee can, where they judge it necessary to discharge their responsibilities, obtain independent professional advice at the Company's expense. The Committee's terms of reference are published in the "Investor Relations" section of the Company's website at https://me-group.com. ### Payments to past Directors No payments were made to past Directors. ### Advisers FIT Remuneration Consultants LLP advised the Committee during the period ended 31 October 2023 in respect of the preparation of this Remuneration Report and the renewal of the ESOS at the forthcoming AGM. Fees paid to FIT in respect of the year ended 31 October 2023 totalled £53,085 (exclusive of VAT). The Committee is satisfied that the advice provided by FIT is objective and independent, and fees were charged based on time and material. The Committee also receives advice from the CEO in relation to the remuneration of certain senior executives, but not in relation to his own remuneration. ### Statement of shareholder voting The table below shows the advisory vote on the 2021/22 Directors' Remuneration Report at the 2023 AGM held on 28 April 2023 and the last binding vote on the Remuneration Policy at the 2021 AGM. | | Total Votes For | % | Total Votes Against | % | Total Votes Cost (excluding withheld) | % of total votes cost/ issued capital | Votes Withheld | | --- | --- | --- | --- | --- | --- | --- | --- | | Directors' Remuneration Report (excluding the Remuneration Policy) | 269,821,992 | 91.19% | 26,068,419 | 8.81% | 296,043,584 | 78.29% | 153,173 | | Directors' Remuneration Policy | 250,728,194 | 94.84% | 13,656,756 | 5.16% | 264,364,950 | 69.94% | 15,044 | * A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cost "for" and "against" in resolution. By order of the Board **Emmanuel Olympitis** Chairman of the Remuneration Committee 27 February 2024 ME Group plc Annual Report 2023 107 ## Financial ## Statements Independent auditor’s report to the members of ME Group International plc 110 Group Statement of Comprehensive Income 118 Group Statement of Financial Position 119 Company Statement of Financial Position 120 Group Statement of Cash Flows 121 Company Statement of Cash Flows 122 Group Statement of Changes in Equity 123 Company Statement of Changes in Equity 124 Notes to the Financial Statements 125 Company Information & Advisers 188 Shareholder Information 189 MEGroup plc Annual Report 2023 108 ### Augmented Reality in our photobooths ### adds digital overlays, enhancing the users’ ### viewwith makeup, filters or bespoke ### backdrops, creating better identification ### orprofessional pictures. MEGroup plc Annual Report 2023 109 Financial Statements ## Independent auditor’s report ## to themembers of ME Group ## International plc Opinion We have audited the financial statements of Me Group International plc (the ‘parent company’) and its subsidiaries (together the ‘group’) for the year ended 31 October 2023 which comprise the Group Statement of Comprehensive Income, the Group Statement of Financial Position, the Company Statement of Financial Position, the Group Statement of Cash Flows, the Company Statement of Cash Flows, the Group Statement of Changes in Equity and the Company Statement of Changes in Equity, and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. 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October 2023 and of the group’s profit for the year then ended; ▪ have been properly prepared in accordance with UK-adopted international accounting standards and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006; and ▪ have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities and public interest entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our audit procedures to evaluate the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis of accounting included but were not limited to: ▪ Undertaking an initial assessment at the planning stage of the audit to identify events or conditions that may cast significant doubt on the group’s and the parent company’s ability to continue as a goingconcern; ▪ Making enquiries of the directors to understand the period of assessment considered by them, the assumptions they considered and the implication of those when assessing the group’s and the parent company’s future financial performance; ▪ Challenging the appropriateness of the directors’ key assumptions in their cash flow forecasts, as described in note 1.1, by reviewing supporting and contradictory evidence in relation to these key assumptions and assessing the directors’ consideration of severe but plausible scenarios; ▪ Testing the accuracy and functionality of the model used to prepare the directors’ forecasts; ▪ Assessing the historical accuracy of forecasts prepared by the directors; ME Group plc Annual Report 2023 110 - Considering the consistency of the directors' forecasts with other areas of the financial statements and our audit; and - Evaluating the appropriateness of the directors' disclosures in the financial statements on going concern. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and the parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorized for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. In relation to Me Group International plc's reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors' statement in the financial statements about whether the director's considered it appropriate to adopt the going concern basis of accounting. ### Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We summarise below the key audit matter in forming our opinion above, together with an overview of the principal audit procedures performed to address this matter and our key observations arising from those procedures. This matter, together with our findings, was communicated to those charged with governance through our Audit Completion Report. | Key Audit Matter | How our scope addressed this matter | | --- | --- | | **Recognition, valuation and impairment of intangible assets, including goodwill (Group)** This first Refer to note 1A (significant accounting policies), note 1 (critical accounting estimates and key judgements), note 30 (business combinations) and note 31 (Goodwill and other intangible assets) to the consolidated financial statements. Intangible assets, including goodwill, represented £319 million at 31 October 2023 and £32.8 million at 31 October 2022. In the year ended 31 October 2023, in accordance with IFRS 3 – Business Combinations and its requirements on 'measurement period': - The group finalised the valuation of the intangible assets recognised on the acquisition of one entity in France resulting in an increase in other intangibles of £0.8 million and residual goodwill of £0.8 million. - Additionally, the group recognised an a provisional basis £3.3 million of goodwill resulting from the acquisition of one entity in Japan, where the Purchase Price Allocation (PPA) has not been finalised at the date of this report. | Our audit procedures included, but were not limited to: - For the acquisition in the year, we reviewed the sale and purchase agreement and financial information at the date of acquisition of the entity acquired to confirm the level of initial goodwill recognised in the year. - In respect of the recognition of other intangible assets arising from measurement period adjustments, we obtained and reviewed management expert's report and engaged our valuation experts to assess the proposed purchase price allocation (PPA) adjustments, including the review of the methodology and key inputs used by management. - In respect of the impairment assessment performed by management, we reviewed the impairment testing process implemented by group management, based on cash-flow forecasts from the budget and five-year plan presented to and approved by the Board. In addition, we assessed management's identification of CQUs and allocation of intangibles and goodwill, tested the mathematical accuracy of the impairment model, reviewed the accuracy of historical forecasting to actual results and with the assistance of our valuation experts we challenged key assumptions. - We assessed the sensitivity of the impairment test to changes in key assumptions. | ME Group plc Annual Report 2023 193 Financial Statements ### Independent auditor’s report to the members ### ofME Group International plc continued Key Audit Matter How our scope addressed this matter The recognition and valuation of intangible assets including Our observations the assessment of the recoverable value of these assets is a Based on our audit work performed, the movements in key audit matter, given the high degree of estimation and intangible assets, including goodwill, in the year and their judgment required by management. These include carrying value reflected in the consolidated financial assumptions used in finalising the provisional PPA during the statements are appropriate. Overall, the key assumptions measurement period, identification and valuation of used by management in their impairment assessment were additional intangible assets recognised, assumptions considered reasonable. regarding the future evolution of trading, the determination The prior year balance for Intangible assets was restated to of long-term growth rates and discount rates applied to the correct a classification error of £3.8m, previously showing in appropriate future cash flows. “Other debtors”. There was no impact on the Group Statement of Comprehensive Income or Total shareholders’ funds in the current year or in the prior year. Our application of materiality and an overview of the scope of our audit The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing, and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Group materiality and Parent company materiality Key Audit Matter Group Parent company | Overall materiality £3,250,000 | | £1,720,000 | | --- | --- | --- | | How we determined it Our materiality has been determined with | | Materiality has been determined with | | | reference to a benchmark of profit before | reference to a benchmark of net assets, of | | | tax of which it represents 5%. | which it represents 2%. | | Rationale for benchmark | We used profit before tax as, in our view, this | We used net assets as, in our view, this | | applied | provides us with the most relevant | provides us with the most relevant | | | performance measure of the group. | performance measure of the company, | being primarily the parent company of thegroup. | Performance materiality Performance materiality is set to reduce to | | Performance materiality is set to reduce to | | --- | --- | --- | | | an appropriately low level the probability | an appropriately low level the probability | | | that the aggregate of uncorrected and | that the aggregate of uncorrected and | | | undetected misstatements in the financial | undetected misstatements in the financial | | | statements exceeds materiality for the | statements exceeds materiality for the | | | financial statements as a whole. | financial statements as a whole. | | | We set performance materiality at | We set performance materiality at | | | £2,275,000, which represents 70% of overall | £1,205,000, which represents 70% of | | | materiality. This was based on our risk | overallmateriality. | assessments, together with our assessment of the group’s overall control environment. Reporting threshold We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £97,000 for the group and £52,000 for the parent company, which is set at 3% of overall materiality, as well as misstatements below those amounts that, in our view, warranted reporting on qualitative reasons. We also reported to the Audit Committee disclosure matters that we identified during the course of assessing the overall presentation of the financial statements. ME Group plc Annual Report 2023 112 As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due to fraud or error, and then designed and performed audit procedures responsive to those risks. In particular, we looked at where the directors made subjective judgements, such as assumptions on significant accounting estimates. We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a whole. We used the outputs of our risk assessment, our understanding of the group and the parent company, their environment, controls, and critical business processes, to consider qualitative factors to ensure that we obtained sufficient coverage across all financial statement line items. Our group audit scope included an audit of the group and parent company financial statements. Based on our risk assessment, the eight most significant entities within the group representing 86% of the relevant materiality benchmark (profit before tax) were subject to full scope audit which was performed by the group audit team for two entities and by component auditors for the other entities. Where we relied on work performed by component auditors, we issued audit instructions, directed component audit teams, reviewed component audit files and maintained appropriate oversight throughout the audit. For entities that we did not subject to a full scope audit, we performed specified audit procedures and desktop analytical reviews. At the parent company level, the group audit team also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information. Other information The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information. Ouropinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: ▪ the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable legal requirements; ME Group plc Annual Report 2023 113 Financial Statements ### Independent auditor’s report to the members ### ofME Group International plc continued ▪ the information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance and Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with applicable legal requirements; and ▪ information about the parent company’s corporate governance code and practices and about its administrative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules. Matters on which we are required to report by exception In light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the: ▪ strategic report or the directors’ report; or ▪ information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCARules. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: ▪ adequate accounting records have not been kept 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; or ▪ a corporate governance statement has not been prepared by the parent company. Corporate governance statement The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to Me Group International plc’s compliance with the provisions of the UK Corporate Governance Statement specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: ▪ Directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified, set out on page 76; ▪ Directors’ explanation as to its assessment of the entity’s prospects, the period this assessment covers and why they period is appropriate, set out on page 66; ▪ Directors’ statement on fair, balanced and understandable, set out on page 89; ▪ Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks, set out on page 38; ▪ The section of the annual report that describes the review of effectiveness of risk management and internal control systems, set out on page 86; and; ▪ The section describing the work of the audit committee, set out on page 83. ME Group plc Annual Report 2023 114 Responsibilities of Directors As explained more fully in the statement of the directors’ responsibility set out on page 88, the directorsare responsible for the preparation of the financial statements and for being satisfied that theygive a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the 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 the directors 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 for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The extent to which our procedures are capable of detecting irregularities, including fraud is detailedbelow. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Based on our understanding of the group and the parent company and their industry, we considered thatnon-compliance with the following laws and regulations might have a material effect on the financialstatements: employment and tax legislation, health and safety regulation and anti-money laundering regulation. To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to: ▪ Gaining an understanding of the legal and regulatory framework applicable to the group and the parent company, the industry in which they operate, and the structure of the group, and considering the risk of acts by the group and the parent company which were contrary to the applicable laws and regulations, including fraud; ▪ Inquiring of the directors, management and, where appropriate, those charged with governance, as to whether the group and the parent company is in compliance with laws and regulations, and discussing their policies and procedures regarding compliance with laws and regulations; ▪ Inspecting correspondence with relevant regulatory authorities; ▪ Reviewing minutes of directors’ meetings in the year; and ▪ Discussing amongst the engagement team the laws and regulations listed above, and remaining alert to any indications of non-compliance. ME Group plc Annual Report 2023 115 Financial Statements ### Independent auditor’s report to the members ### ofME Group International plc continued We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as tax legislation, pension legislation and the Companies Act 2006. In addition, we evaluated the directors’ and management’s incentives and opportunities for fraudulent manipulation of the financial statements, including the risk of management override of controls, and determined that the principal risks related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in significant accounting estimates, in particular in relation to recognition, valuation and impairment of intangible assets, including goodwill, revenue recognition (which we pinpointed to the manipulation of vending machine revenue, and significant one-off transactions. Our procedures in relation to fraud included but were not limited to: ▪ Making enquiries of the directors and management on whether they had knowledge of any actual, suspected or alleged fraud; ▪ Gaining an understanding of the internal controls established to mitigate risks related to fraud; ▪ Discussing amongst the engagement team the risks of fraud; ▪ Addressing the risks of fraud through management override of controls by performing journal entry testing, including consolidation journals; ▪ Reviewing accounting estimates and financial statement disclosures for management bias; and ▪ Reviewing transaction outside of normal course of business. The primary responsibility for the prevention and detection of irregularities, including fraud, rests with both those charged with governance and management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls. The risks of material misstatement that had the greatest effect on our audit are discussed in the “Keyaudit matters” section of this report. A further description of our responsibilities is available on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Other matters which we are required to address Following the recommendation of the audit committee, we were appointed by the directors on 3September 2019 to audit the financial statements for the period ending 31 October 2020 and subsequent financial periods. The period of total uninterrupted engagement is 4.5 years, covering the years ending 2020 to 2023. No non-audit services prohibited by the FRC’s Ethical Standard were provided to the group or the parent company and we remain independent of the group and the parent company in conducting our audit. Our audit opinion is consistent with our additional report to the audit committee. Use of the audit report This report is made solely to the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the ME Group plc Annual Report 2023 116 company and the company’s members as a body for our audit work, for this report, or for the opinions we have formed. As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements form part of the ESEF-prepared annual report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no assurance over whether the annual report has been prepared using the single electronic format specified in the ESEF RTS. David Herbinet (Senior Statutory Auditor) for and on behalf of Mazars LLP Chartered Accountants and Statutory Auditor London 27 February 2024 ME Group plc Annual Report 2023 117 Financial Statements ## Group Statement of Comprehensive Income For the 12 months ended 31October 2023 | | 31October | | 31October | | | --- | --- | --- | --- | --- | | | | 2023 | | 2022 | | Notes | | £’000 | | £’000 | Revenue 3 2 9 7, 6 62 259,780 Cost of Sales (19 5,01 7) (178, 37 7) Gross Profit 102 ,6 4 5 81 , 4 03 Other Operating Income 4 194 7, 9 1 6 Administrative Expenses (35,351) (32,638) Share of Post-Tax Profits from Associates 15 14 – Operating Profit 67, 5 0 2 56,6 81 Other net gains/(losses) 4 701 (1 ,176) Finance Income 6 1,4 01 – Finance Cost 6 (2 ,537) (2 ,15 1) Profit before Tax 3 67 ,067 5 3, 35 4 Total Tax Charge 7 (1 6,401) (14 , 561) Profit for the year 50 ,666 38,793 Other Comprehensive Income Items that are or may subsequently be classified to Profit and Loss: Exchange Differences Arising on Translation of Foreign Operations 454 829 Total Items that are or may subsequently be classified to profit and loss 4 54 829 Items that will not be classified to profit and loss: Remeasurement (loss)/gains in defined benefit obligations and other post-employment benefit obligations (2 20) 1 ,15 1 Deferred tax on remeasurement loss/(gains) 48 (248) Total Items that will not be classified to profit and loss (1 7 2) 903 Other comprehensive income for the year net of tax 2 82 1, 732 Total Comprehensive income for the year 50, 9 48 4 0, 525 Profit for the Year Attributable to: Owners of the Parent 50,666 3 8, 7 93 Non-controlling interests – – 50,666 3 8, 7 93 Total comprehensive income attributable to: Owners of the Parent 50, 94 8 40, 52 5 Non-controlling interests – – 50, 94 8 40, 52 5 Earnings per Share Basic Earnings per Share 10 13.4 0p 1 0. 26p Diluted Earnings per Share 10 13. 31p 10. 23p All results derive from continuing operations. The notes on pages125 to 186 are an integral part of these consolidated financial statements. ME Group plc Annual Report 2023 118 ## Group Statement of Financial Position As at 31October 2023 31 October | | 31October | | | 2022 | | --- | --- | --- | --- | --- | | | | 2023 | (Restated) | | | Notes | | £’000 | | £’000 | Assets Goodwill 11 18,888 1 6, 320 Other intangible assets 11 1 7, 8 2 2 20, 218 Property, plant & equipment 12 1 1 8 ,1 24 101,090 Investment property 13 – 592 Investment in associates 15 35 21 Financial instruments held at FVTPL 16 5,886 5 , 2 39 Other receivables 17 3 ,00 5 1, 973 Non-Current Assets 163,760 145, 453 Inventories 18 32, 501 25 ,49 1 Trade and other receivables 17 16,62 3 16 ,267 Current tax 7 ,962 2,99 0 Cash and cash equivalents 19 111,091 1 36 ,1 85 Current assets 168, 177 180,9 33 Non-Current Assets Classified as Held for Sale 14 5 85 – Total assets 332, 52 2 326 , 3 86 Equity Share capital 21 1, 891 1 ,889 Share premium 11,0 83 10,627 Treasury shares 21 (1,969) – Translation and other reserves 11,9 58 11 ,1 59 Retained earnings 136 ,025 1 0 8 , 9 74 Total Shareholders’ funds 158,988 132,6 49 Liabilities Financial liabilities 22 5 8 , 4 47 82 , 429 Post-employment benefit obligations 23 4,06 3 3, 850 Deferred tax liabilities 25 8,56 6 7,778 Non-current liabilities 7 1 ,076 94 ,057 Financial liabilities 22 32,063 35 ,657 Provisions 24 1,884 1, 567 Current tax 10,590 10, 20 8 Trade and other payables 26 5 7, 92 1 52 , 24 8 Current liabilities 102, 45 8 99,680 Total equity and liabilities 332, 52 2 326, 3 86 The notes on pages125 to 186 are an integral part of these consolidated financial statements. The accounts were approved by the Board on 27February 2024 and signed on its behalf by: Serge Crasnianski Sir John Lewis OBE Chief Executive Officer Non-executive Chairman Registration number: 00735438 ME Group plc Annual Report 2023 119 Financial Statements ## Company Statement of Financial Position As at 31October 2023 | | 31October | | 31 October | | | --- | --- | --- | --- | --- | | | | 2023 | | 2022 | | Notes | | £’000 | | £’000 | Assets Intangible assets 11 3 5 Property, plant & equipment 12 16,329 15,364 Investment in subsidiaries 15 44,616 44,468 Financial instruments held at FVTPL 16 1,145 789 Deferred tax assets 25 – 215 Other receivables 17 981 – Non-current assets 63,074 60,841 Inventories 18 1,793 1,830 Trade and other receivables 17 32,662 23,142 Current tax 1,806 1,205 Cash and cash equivalents 19 3,344 13,321 Current assets 39,605 39,498 Total assets 102,679 100,340 Equity Share capital 21 1,891 1,889 Share premium 11,083 10,627 Treasury shares 21 (1,969) – Translation and other reserves 3,073 2,728 Retained earnings 70,504 68,743 Total Shareholders’ funds 84,581 83,987 Liabilities Financial liabilities 22 1,026 741 Deferred tax liabilities 25 672 – Non-current liabilities 1,698 741 Financial liabilities 22 609 1,060 Trade and other payables 26 15,791 14,552 Current liabilities 16,400 15,612 Total equity and liabilities 102,679 100,340 The notes on pages125 to 186 are an integral part of these financial statements. The company recognised a profit after tax for the period of £25,196,000 (2022:£57,824,000). The accounts were approved by the Board on 27 February 2024 and signed on its behalf by: Serge Crasnianski Sir John Lewis OBE Chief Executive Officer Non-executive Chairman Registration number: 00735438 ME Group plc Annual Report 2023 120 ## Group Statement of Cash Flows For the period ended 31October 2023 31 October | | 31October | | | 2022 | | --- | --- | --- | --- | --- | | | | 2023 | (restated) | | | Notes | | £’000 | | £’000 | Cash flow from operating activities Profit before tax 67,067 53 , 354 Finance costs 1, 286 794 Interest of lease liabilities 1, 251 1, 357 Finance income (1,401) – Other net (gains)/losses (70 1) 1 ,17 6 Operating profit 67, 5 0 2 56 ,681 Amortisation and impairment of intangible assets 4 6, 58 6 6,7 72 Depreciation and impairments of property, plant and equipment 4 32, 552 28,7 91 Loss/(gain) on sale of property, plant and equipment and intangible assets 555 (7 ,4 90) Exchange differences (1 2 9) (5 9 4) Movements in provisions 362 (8 09) Other non cash items (33) (432) Changes in working capital: Inventories (7 ,010) (7, 0 3 3) Trade and other receivables (1, 387) 6,078 Trade and other payables 5,673 9,76 4 Cash generated from operations 104 ,67 1 91 ,7 28 Net interest paid (1 ,136) (2 ,1 51) Taxation paid (20,203) (10 , 89 5) Net cash generated from operating activities 83, 332 78 ,682 Cash flows from investing activities Acquisition of subsidiaries 30 (4 , 7 9 0) (73 9) Proceeds from disposal of subsidiaries 209 152 Purchase of intangible assets (3,798) (6 , 269) Proceeds from sale of intangible assets – 71 Purchase of property, plant and equipment (4 5 , 8 4 2) (32,670) Proceeds from sale of property, plant and equipment 1, 539 8 ,9 97 Investment in financial instruments – (4 ,4 50) Net cash utilised in investing activities (52,682) (34,908) Cash flows from financing activities Issue of ordinary shares to equity shareholders 458 28 Acquisition of minority interest – (2 ,9 85) Purchase of treasury shares (1,969) – Repayment of principal of leases (5, 8 57) (6 ,1 9 6) Repayment of borrowings 20 (30 ,960) (24,622) New borrowings drawn 20 4,817 61 ,7 73 Dividends paid to owners of the Parent 9 (23,443) (35 ,497) Net cash utilised in financing activities (56 ,95 4) (7, 4 9 9) Net (decrease)/increase in cash and cash equivalents (2 6 , 3 0 4) 36 , 275 Cash and cash equivalents at beginning of year 136, 185 9 9, 362 Exchange gain on cash and cash equivalents 1, 210 548 Cash and cash equivalents at end of year 111,091 136 ,1 8 5 The notes on pages125 to 186 are an integral part of these consolidated financial statements. ME Group plc Annual Report 2023 121 Financial Statements ## Company Statement of Cash Flows For the period ended 31October 2023 | | 31October | | 31October | | | --- | --- | --- | --- | --- | | | | 2023 | | 2022 | | Notes | | £’000 | | £’000 | Cash flow from operating activities Profit before tax 26,634 57,111 Interest of lease liabilities 167 209 Finance income (91) (15) Dividends received (25,000) (56,511) Other net (gains)/losses (356) 914 Operating profit 1,354 1,708 Amortisation and impairment of intangible assets 2 – Depreciation and impairments of property, plant and equipment 4,213 2,123 Loss/(gain) on sale of property, plant and equipment 182 (110) Non cash movement in investment of subsidary – 2,956 Other non cash items 204 (125) Changes in working capital: Inventories 38 (338) Trade and other receivables (10,501) (3,676) Trade and other payables 1,239 (6,448) Cash utilised in operations (3,269) (3,911) Interest paid 69 (194) Taxation paid (1,338) (125) Net cash utilised in operating activities (4,538) (4,230) Dividends received from investments in financial instruments 42 – Purchase of property, plant and equipment (5,024) (7,095) Purchase of intangible assets – (5) Proceeds from sale of property, plant and equipment 229 450 Dividends received from associates and subsidaries 25,000 56,511 Net cash generated from investing activities 20,247 49,862 Cash flows from financing activities Issue of ordinary shares to equity shareholders 458 28 Purchase of treasury shares (1,969) – Repayment of principal of leases (731) (844) Dividends paid to owners of the Parent 9 (23,443) (35,497) Net cash utilised in financing activities (25,685) (36,313) Net (decrease)/increase in cash and cash equivalents (9,977) 9,319 Cash and cash equivalents at beginning of year 13,321 4,002 Cash and cash equivalents at end of year 3,345 13,321 The notes on pages125 to 186 are an integral part of these consolidated financial statements. ME Group plc Annual Report 2023 122 ## Group Statement of Changes in Equity For the period ended 31October 2023 | | | | | | | | | Attributable | | | Non- | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Share | Share | Treasury | Other | Translation | | Retained | | to owners of | | controlling | | | | capital | premium | shares | reserves | | reserve | earnings | | the Parent | | interests | | Total | | £’000 | £’000 | £’000 | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | At 1November 2021 1,8 89 10, 599 – 1 ,781 7 ,654 106,051 1 2 7, 9 7 4 1 ,7 20 129,694 Profit for the period – – – – – 38 , 793 38 ,7 93 – 38 ,7 93 Other comprehensive income/(expense): Exchange differences – – – – 8 40 – 8 40 (11) 829 Remeasurement gains in defined benefit pension scheme and other post-employment benefitobligations – – – – – 1,1 5 1 1,1 5 1 – 1 ,1 5 1 Deferred tax on remeasurement gains – – – – – (248) (24 8) – (24 8) Total other comprehensive income/(expense) – – – – 8 40 903 1 , 74 3 (1 1) 1,7 32 Total comprehensive income/(expense) – – – – 8 40 39,696 40, 536 (11) 40, 52 5 Transactions with owners ofthe Parent: Shares issued in the period (note21) – 28 – – – – 28 28 Share options (note21) – – – 8 84 – – 88 4 – 88 4 Dividends (note9) – – – – – (35 ,497) (35 ,497) – (35 ,497) Acquisition of minority – – – – – (1 , 2 76) (1 , 2 76) (1 ,7 09) (2 ,9 8 5) Total transactions with owners of the Parent – 28 – 8 84 – (36 ,7 7 3) (35 , 86 1) (1 ,7 09) (3 7, 57 0) At 31October 2022 1, 889 10,627 – 2,66 5 8, 494 108,974 132 ,6 49 – 132 ,649 At 1November 2022 1 ,88 9 10,627 – 2 ,6 65 8, 494 108,974 1 32 ,649 – 132 ,6 49 Profit for the period – – – – – 50,666 50,666 – 50,666 Other comprehensive income/(expense): Exchange differences – – – – 454 – 454 – 45 4 Remeasurement losses in defined benefit pension scheme and other post-employment benefitobligations – – – – – (2 20) (2 2 0) – (2 2 0) Deferred tax on remeasurement losses – – – – – 4 8 48 – 48 Total other comprehensive income/(expense) – – – – 454 (17 2) 282 – 282 Total comprehensive income – – – – 454 5 0, 494 50,9 4 8 – 5 0,9 4 8 Transactions with owners ofthe Parent: Shares issued in the period (note21) 2 456 – – – – 45 8 – 458 Purchase of treasury shares (note21) – – (1,969) – – – (1,969) – (1,969) Share options (note21) – – – 345 – – 3 45 – 345 Dividends (note9) – – – – – (23,443) (23,443) – (23,443) Total transactions with owners of the Parent 2 456 (1,969) 3 45 – (23,443) (24,609) – (24, 609) At 31October 2023 1, 891 11,0 83 (1,969) 3,010 8 ,948 136 ,025 158,988 – 158,988 The notes on pages125 to 186 are an integral part of these consolidated financial statements ME Group plc Annual Report 2023 123 Financial Statements ## Company Statement of Changes in Equity For the period ended 31October 2023 | Share | | Share | Treasury | | Other | Retained | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | capital | premium | | | shares | reserves | earnings | | Total | | £’000 | | £’000 | | £’000 | £’000 | | £’000 | £’000 | At 1November 2021 1,889 10,599 – 2,207 46,405 61,100 Profit for the period – – – – 57,824 57,824 Other comprehensive income – – – – 11 11 Total comprehensive income – – – – 11 11 Total comprehensive income – – – – 57,835 57,835 Transactions with owners of theParent Shares issued in the period (note21) – 28 – – – 28 Capital contributions relating to share-based payments (net) – – – 521 – 521 Dividends (note9) – – – – (35,497) (35,497) Total transactions with the Parent – 28 – 521 (35,497) (34,948) At 31October 2022 1,889 10,627 – 2,728 68,743 83,987 At 1November 2022 1,889 10,627 – 2,728 68,743 83,987 Profit for period – – – – 25,196 25,196 Other comprehensive income – – – – 7 7 Total other comprehensive income – – – – 7 7 Total comprehensive income – – – – 25,203 25,203 Transactions with owners of theParent Shares issued in the period (note21) 2 456 – – – 458 Purchase of treasury shares (note21) – – (1 969) – – (1,969) Share options (note 21) – – – 345 – 345 Dividends (note9) – – – – (23,443) (23,443) Total transactions with the Parent 2 456 (1,969) 345 (23,443) (24,609) At 31October 2023 1,891 11,083 (1,969) 3,073 70,504 84,581 The notes on pages 125 to 186 are an integral part of these consolidated financial statements. ME Group plc Annual Report 2023 124 ## Notes to the Financial Statements For the 12 months ended 31 October 2023 General Information ME Group International plc (the “Company”) is a public limited company incorporated and registered in England and Wales and whose shares are quoted on the London Stock Exchange, under the symbol MEGP. The registered number of the Company is 735438 and its registered office is at Unit 3B, Blenheim Rd, Epsom, KT19 9AP. The principal activities of the Group continue to be the operation, sale, and servicing of a wide range of instant- service equipment . The Group operates coin-operated automatic photobooths for identification and fun purposes, and a diverse range of vending equipment, including digital photo kiosks, laundry machines, and business service equipment, and amusement machines. ME Group plc Annual Report 2023 125 Authorisation of the financial statements and statement of compliance with IFRSs The Group and the Company financial statements of ME Group International plc (the “Company”) for the period ended 31 October 2023 were authorised for issue by the directors on 21 February 2024 and the statements of financial position were signed by S. Crasnianski, Chief Executive Officer and J. Lewis, Non-executive Chairman. The financial statements have been prepared in accordance with UK-adopted international accounting standards and in conformity with the requirements of the Companies Act 2006. 1 Accounting policies The principal accounting policies adopted in the preparation of the Group’s consolidated financial statements and the Company’s individual financial statements are set out below. The policies have been consistently applied, unless otherwise stated, to all of the statements presented. New standards adopted for this financial period are shown in note 2 on page 135. 1.1 Basis of preparation The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards under the historical cost convention except for certain financial instruments held at FVTPL, share-based payments and defined benefit pension obligations that have been measured at fair value. The consolidated financial statements and the Company’s own financial statements are presented in Sterling being the functional and presentational currency of the Parent Company and of the Group and all values are shown in £’000 except where indicated. Further details are provided in note 1.3. Going concern The financial statements of the Group and the Parent Company have been prepared on the going concern basis. In reaching this conclusion, the Directors have reviewed detailed budgets, which reflect, where applicable, the current economic conditions, with regard to the level of demand for the Group’s and Parent Company’s manufactured products, the level of consumer confidence and cash flow forecasts for at least the next twelve months. Directors assessed the Group’s and Parent Company’s going concern by stress testing four scenarios and their projected financial impact over a five-year period. The Directors’ have used the five-year business plan in this assessment which covers a period of 12 months for the assessment of going concern and a period of five years for the assessment of viability. The following scenarios were tested: Scenario 1: The budget, elaborated with each country manager and validated by the top management, which we consider as the best scenario. Scenario 2: The “most likely scenario” is based on the budget, but with the following sensitivities added: ▪ A 5% decrease in machine installations due to supply chain issues ▪ A 5% price increase in spare parts and consumables ▪ A 1% increase in labour costs ▪ A 5% increase in paper costs ▪ A 1% drop in total revenue due to loss of key accounts ▪ A 1% drop in revenue due to the potential impact of a future pandemic or other global event. ▪ This scenario does not consider the potential impact of new regulations regarding photo identification or permission of selfies as official photos within the five year forecast. Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 1 Accounting policies continued Brexit impact was considered by management to have Scenario 3: no significant impact on the business of the Group, nor The “mild” scenario is based on the budget, but with the will the Ukrainian or Israeli conflicts, as the Group has no following sensitivities added: activity in these regions. ▪ A 10% decrease in machine installations due to supply Management does not consider interest rate risk to be a chain issues, threat to the Group’s going concern, as all current debt is at fixed rates and the forecasts indicate no requirement ▪ A 10% price increase in spare parts and consumables for new debt facilities. ▪ A 2% increase in labour costs As a result, the cash flow projections indicate that the ▪ A 10% increase in paper costs Group and the Parent Company will remain within their ▪ A 1% drop in total revenue due to loss of key accounts available banking facilities over the 12 months from signing these financial statements. Additional ▪ A 3% drop in revenue due to the potential impact of a information on these facilities is provided in note 16. future pandemic or other global event. ▪ Revenue is reduced by 3% each year due to the Critical accounting estimates and key judgements potential impact of new regulations regarding photo The following are the critical judgements, apart from identification or permission of selfies as official photos. those involving estimations (which are dealt with separately below), that the Directors have made in the | Scenario 4: | | process of applying the Group’s accounting policies and | | --- | --- | --- | | The “worst case” scenario is based on the budget, but | | that have the most significant effect on the amounts | | with the following sensitivities added: | | recognised in the financial statements. | | | ▪ A 30% decrease in machine installations due to supply | 1) Development costs – notes 1.4 and 11. | | | chain issues, | Judgement is required to determine whether | development expenditure meets the criteria for ▪ A 15% price increase in spare parts and consumables capitalization as an intangible asset, in accordance with ▪ A 3% increase in labour costs IAS38. Specifically, management must determine that it is probable that future economic benefits that are ▪ A 15% increase in paper costs attributable to the asset will flow to the Group, and that ▪ A 3% drop in total revenue due to loss of key accounts the cost of the asset can be reliably measured. Management assesses whether an asset under ▪ A 5% drop in revenue due to the potential impact of a development will be a commercial success, and therefore future pandemic or other global event. generate economic benefit, through the use of ▪ Revenue is reduced by 5% each year due to the discounted cashflow analysis. This judgement has been potential impact of new regulations regarding photo applied consistently year to year. identification or permission of selfies as official photos. 2) Application of IFRS16 to site agreements – note 1.7 In all four scenarios, exchange rate assumptions are as The Group operates vending units which are deployed per the budget. The forecasts assume payment of under a fee-paying agreement with the site owner. These dividends commensurate with results and the Group’s agreements vary widely in their terms and conditions. dividend policy. Due to the high volume of such agreements, the accounting impact is material to the Group. In all four scenarios tested, the group continues to comply Management assesses, on agreement-by-agreement with its bank covenants and loan repayment terms and is basis, whether the criteria for recognition as a lease in a strong financial position after five years . under IFRS 16 has been met. While the standard sets out the definition of a lease, judgement is required in assessing the degree to which those criteria are met, particularly with regard to the presence of an identified asset with no substitution rights. This judgement has been applied consistently year to year . ME Group plc Annual Report 2023 126 ## Group and Company The following are areas of estimation uncertainty: 1) Goodwill and other intangible assets – notes 1.4, 1.8 and 11. ### Impairment The recoverable amount of cash generating units (CGUs) has been determined by management on a value in use basis. These calculations require estimates by management, including management's expectations of future growth in revenue, costs and profit margins, cash flows and discount rates. The carrying value of goodwill and intangible assets at the period end were £18,888,000 and £17,822,000 respectively. For both goodwill and intangible assets, we have used for impairment tests the discounted cash flows method to evaluate the asset value. Value in use was determined by discounting the future cash flows of the CGU. Cash flows include a forecast period of five years, based on actual operating results, budgets and economic market research with a terminal value based on a long-term growth rate applied thereafter. The Growth rate assumption for all CGUs was 1% (2022: 1%). WACC discount rates were calculated for each territory and ranged between 9.7% and 15.2% (2022: 9.74%-14.24%). Further details of impairment testing, including assumptions and sensitivities, are disclosed in note 11. Goodwill impairments are not reversed or adjusted. ### Purchase price allocation (PPA) In accordance with IFRS, purchase price allocation is completed within one year of the acquisition date. Resulting adjustments to prior year balances are shown as an opening balance remeasurement in the current year. 2) Useful lives and impairment of property, plant and equipment – notes 1.5, 1.8, 12 and 13. Management make estimates of the useful life of property, plant and equipment as disclosed below in notes 1.4 and 1.5. Technological developments and regulatory changes can impact on the lives of the vending estate. Management consider these factors in assessing the useful lives of the assets. Each of the Group's vending machine units is considered a standalone cash generating unit. The COVID 19 pandemic negatively impacted the cash generation of vending units, indicating potential impairment at that point in time. Consequently, since 31 October 2020 each unit has been subject to annual impairment testing, based on each individual unit's projected EBITDA, as described in note 12. Impairment charges are recognised where value in use of a unit is lower than its carrying value. Where impairment tests indicated a reduced level of impairment, the impairment balance is reduced, with care taken to ensure that the closing net book value does not exceed what it would have been had the original impairment never occurred. Further details, including assumptions and sensitivities, are disclosed in note 12. The carrying value of property, plant and equipment at the period end was £118,124,000. 3) Valuation of pension obligations – note 1.13 and 2.9. The Group operates pension and other retirement and post-employment schemes including both funded defined benefit schemes, and defined contribution schemes. The schemes' assets and liabilities are valued annually by third party actuaries, in accordance with IAS19. Pension valuations are subject to estimation and uncertainty due to the complex nature of actuarial assumptions. Management reviews the appropriateness of the actuaries' assumptions each year as part of the valuation process. The carrying value of the Group's pension and retirement obligations at the period end was £4,063,000. 4) Determination of discount rates for lease accounting – notes 1.7 and 12. To calculate the value of right of use assets and lease liabilities recognised in the Statement of Financial Position, management must determine an appropriate discount rate to apply to the cashflows of each lease agreement. Discount rates are subject to uncertainty and estimation as they are based on numerous external inputs and assumptions. PMI Group plc Annual Report 2023 127 Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 1 Accounting policies continued The Group uses the acquisition method to account for Management determines discount rates using the business combinations. Acquisition costs for business Group’s external cost of borrowing adjusted for timing of combinations are expensed as incurred. The borrowing, lease term, country and currency impacts. An consideration transferred for the acquisition of a asset specific adjustment is also applied to tailor the subsidiary is the fair value of the assets acquired, the discount rate to the specific characteristic of the leased liabilities incurred to the former owners of the acquiree asset. For the purpose of determining asset specific and the equity interests issued by the Group. The adjustments leases have been organised into pools of consideration transferred includes the fair value of any similar leased asset types. asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities Management obtained expert external advice on the and contingent liabilities assumed in a business determination of appropriate discount rates for the year combination are initially measured at their fair values on ended 31 October 2023. The discount rates used range acquisition date. The Group recognises any non- between 1.13% and 4.84%. controlling interest in the acquiree on an acquisition-by- acquisition basis, either at fair value or at the non- 1.2 Basis of consolidation controlling interest’s proportionate share of the The Group consolidates the financial statements of the recognised amounts of acquiree’s identifiable net assets. Company and all of its subsidiaries, and includes associates under the equity method, as at each year end. If the business combination is achieved in stages, the carrying value of the acquirer’s previously held interest in Subsidiaries the acquiree is re-measured to fair value at the Subsidiaries are all entities controlled by the Group. The acquisition date, with such gains or losses arising from Group controls an entity when it is exposed to, or has remeasurement recognised in profit and loss. rights to, variable returns from its involvement with the entity and has the ability to affect those returns through Transactions eliminated on consolidation its power over the entity. In assessing control, the Group Inter-company transactions, balances and unrealised takes into consideration potential voting rights that are gains and losses on transactions between Group currently exercisable. The acquisition date is the date on companies are eliminated. Unrealised gains arising from which control is transferred to the acquirer. The financial transactions with equity-accounted investees are statements of subsidiaries are included in the eliminated against the investment to the extent of the consolidated financial statements from the date that Group’s interest in the investee. Unrealised losses are control commences until the date on which control eliminated in the same way as unrealised gains, but ceases. Losses applicable to non-controlling interests in a only to the extent that there is no evidence of subsidiary are allocated to the non-controlling interests impairment Where necessary, subsidiaries’ accounting even if doing so causes the non-controlling interests to policies have been changed to ensure consistency with have a negative balance. the Group’s policies. The principal subsidiaries affecting the results and Associates financial position of the Group are shown in note 29. Associates are those entities in which the Group has significant influence, but not control, over the financial Changes in ownership of subsidiaries and loss of control and operating policies. Significant influence is presumed Changes in the Group’s interest in a subsidiary that to exist when the Group holds between 20% and 50% of do not result in loss of control are accounted for as the voting power of another entity . equity transactions. Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any related non controlling interest and other components of equity. Any resulting gain or loss is recognised in profit and loss. Any interest retained in a subsidiary is measured at fair value when control is lost . ME Group plc Annual Report 2023 128 ME Group plc Annual Report 2023 129 Application of the equity method to associates and joint ventures Associates are accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the total comprehensive income and equity movements of equity accounted investees, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an investee. The Group’s share of post-tax profits from associates is recognized within operating profit in the group statement of comprehensive income. This policy is employed as the Group’s only associate investment, Photomaton Maroc, is engaged in the same principal activity as the Group, so the investment is deemed to be part of the Group’s operating activities. The principal associates affecting the results and financial position of the Group are shown in note 29. 1.3 Foreign currency translation The consolidated financial statements and the Company’s own financial statements are presented in Sterling being the functional and presentational currency of the Parent Company and all values are shown in £’000 except where indicated. Transactions in foreign currencies are translated into the respective functional currencies of the Group’s subsidiaries at the exchange rate ruling on the date the transaction is recorded. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rates ruling at 31 October. Exchange gains and losses resulting from the above translation are reflected in the income statement, except where they qualify as cash flow hedges and are reflected in equity. There were no qualifying cash flow hedges in 2023 or 2022. Income statements of overseas entities are translated into Sterling, at weighted average rates of exchange, as a reasonable approximation to actual exchange rates at the date of the transaction and their statements of financial position are translated at the exchange rate ruling at 31 October. Exchange differences arising on the translation of opening net assets are taken to equity, as is the exchange difference on the translation of the income statement between average and closing exchange rates. For this purpose, net assets includes loans between group companies and any related foreign exchange contracts where settlement is neither planned nor likely to occur in the foreseeable future. Such cumulative exchange differences are released to the income statement on disposal of the subsidiary or associate. 1.4 Intangible assets Goodwill Goodwill represents the excess of cost of an acquisition of a subsidiary or associate over the fair value of the Group’s share of net identifiable assets at the date of acquisition. Goodwill on acquisition of associates is included in investment in associates and impairments thereof in administrative expenses in the income statement. Goodwill is not amortised but is tested annually for impairment or more frequently if events or changes in circumstances indicate that the carrying amounts may be impaired and is carried at cost less any impairment. On disposals, goodwill is included in the calculation of gains or losses on the sale of the previously acquired entity. For the purposes of impairment testing, goodwill is allocated to cash-generating units. Each of these units represents the Group’s investment in operating subsidiary. Research and development expenditure Research and Development costs are accounted for in line with all relevant criteria as mandated by IAS 38 Intangible Assets. Research expenditure is expensed as incurred. Costs incurred in developing projects are capitalised as intangible assets when it is considered that the commercial viability of the project will be a success based on discounted expected cash flows, and the costs can be reliably measured. Development costs that do not meet the capitalization requirements of IAS 38 are expensed and are not recognised as assets. Other intangible assets Intangible assets (including research and development) acquired as part of a business combination are capitalised at fair value at the date of acquisition. Other intangibles are capitalised at cost . Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 1 Accounting policies continued ME Group plc Annual Report 2023 130 The policies applied to the Group’s intangible assets are summarised as follows: Research and development costs Software Customer related Patents and licences Droit au Bail Useful lives Finite Finite Finite Finite Indefinite Amortisation Straight-line basis, with a maximum life of four years from commencement of commercial production, with no residual value Straight-line basis, with a maximum life of three years, with no residual value Customer related intangible assets are amortised over their useful lives of between three and ten years on a straight-line basis with no residual value Patents and licence assets are amortised over their useful lives of between seven and ten years on a straight-line basis with no residual value Not amortised regularly, but subject to impairment testing Internally generated or acquired Internally generated Acquired Acquired Acquired Acquired Droit au bail, which occur in France, are rights to occupy a space to site vending equipment. Amortisation of capitalised development costs are included in the cost of sales. Amortisation of other intangible assets categories is included in both the cost of sales and administration expenses in the income statement. 1.5 Property, plant and equipment Property, plant and equipment is shown at cost, less accumulated depreciation and any impairment. Subsequent expenditure on property, plant and equipment is capitalised, either as a separate asset, or included in the cost of the asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost can be measured reliably. The carrying amount of any parts of the assets that are replaced are derecognised. All other costs are recognised in the income statement as an expense as incurred. Freehold land is not depreciated. Other assets are depreciated on a straight-line basis, to reduce cost to the estimated residual value over the estimated useful life of the asset at the following rates: Freehold buildings 2% – 5% straight-line Photobooths and vending machines 10% – 33.33% straight-line Right of use assets Depreciated over the lease term Plant, machinery, furniture, fixtures and motor vehicles 12.5% – 33.33% straight-line. The assets’ residual values and useful lives are reviewed at each year end and adjusted, if appropriate. Operating equipment assets are reviewed at least annually for impairment testing. 1.6 Investment property Certain of the Group’s properties are classified as investment properties; being held for long-term investment and to earn rental income. Investment properties are stated at cost and the building element is depreciated at rates between 3.33% and 8.33% on a straight-line basis. 1.7 IFRS16 leases The Group has arrangements across three main categories that meet the definition of a lease under IFRS 16: site agreements, property and motor vehicles. The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognizes a right-of-use asset and corresponding lease liability at the lease commencement date, except for short term leases and leases of low value. For these leases, the lease payments are recognized as an operating expense on a straight-line basis over the term of the lease. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liabilities adjusted for any lease payments made at or before the commencement date, plus any initial costs incurred. The right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses. The right-of-use assets are from the commencement date depreciated over the shorter period of lease term and useful life of the underlying asset. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. If necessary, the carrying value is reduced by charging an impairment loss in the income statement. These impairments are shown under “Administrative expenses” on the Statement of Comprehensive income. Reversal of impairment Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that it does not exceed the carrying amount that would have been determined had no impairment loss been recognised. No impairment loss is reversed for goodwill or intangible assets with indefinite lives . ME Group plc Annual Report 2023 131 The lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the relevant country discount rate. Lease Liabilities are adjusted for certain re-measurement events, e.g. revised discount rate, change in the lease term or change in future lease payments resulting from a change in an index. Discount rates are determined using the Group’s external cost of borrowing adjusted for timing of borrowing, lease term, country and currency impacts. An asset specific adjustment is also applied to tailor the discount rate to the specific characteristic of the leased asset. For the purpose of determining asset specific adjustments leases have been organised into pools of similar leased asset types. Site agreements The Group operates vending units which are deployed under a fee-paying agreement with the site owner. These agreements vary widely in their terms and conditions. The Group examines, on an individual basis, the degree to which these agreements meet the definition of a lease under IFRS 16, with particular regard to the presence of an identified asset with no substitution rights. While the standard sets out the definition of a lease, judgement is required in assessing the degree to which those criteria are met, particularly with regard to the presence of an identified asset with no substitution rights. Non-IFRS16 leases Some of the Group’s lease arrangements do not meet the criteria for IFRS16 treatment (e.g. variable rent, site owners have the control on the machine location or ME Group can stop a contract with a short period notice at any time) and are de facto accounted for as operating costs 1.8 Impairment For goodwill and intangible assets with indefinite lives, the carrying value is reviewed annually for impairment or more frequently if events or changes in circumstances indicate that the carrying amounts may be impaired. Other intangible assets and property, plant and equipment are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of the asset is higher than the recoverable amount of the asset an impairment loss is recognised. In carrying out such impairment evaluations the recoverable amount is the higher of the asset’s value in use or its fair value less costs to sell. Assets that do not generate largely independent cash inflows are grouped at the lowest level for which separately identifiable cash inflows exist (cash-generating units) and the recoverable amount is determined for the cash-generating unit (CGU). 1.9 Financial instruments (i) Financial assets Classification of financial assets Financial instruments are classified based on the Group’s business model for managing financial assets and the contractual cash flow characteristics of the financial asset. (a) Trade receivables Trade receivables are initially measured at fair value, and subsequently at their amortised cost as reduced by appropriate allowances for estimated irrecoverable amounts. (b) Financial assets held at amortised cost Initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by any impairment losses. Interest income, foreign exchange gains and losses and impairments are recognised in the income statement. Any gain or loss on derecognition is recognised in the income statement. (c) Financial assets at fair value through profit or loss Financial assets in this category are initially recorded and subsequently valued at fair value, with changes in fair value recognised in the income statement. For investments designated as financial assets at fair value through profit or loss, the fair values of quoted investments are based on current bid prices. For unlisted investments the Group uses various valuation techniques to determine fair values. Investments in convertible bonds are valued on a discounted cashflow basis and by reference to the issuing company’s equity value, where necessary. Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 1 Accounting policies continued ME Group plc Annual Report 2023 132 (ii) Financial liabilities (a) Borrowings Borrowings are recorded initially at the fair value of the consideration received net of directly attributable transaction costs. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method. This method includes any initial issue costs and discounts or premiums on settlement. Finance costs on the borrowings are charged to the income statement under the effective interest rate method. Financial liabilities are derecognised when the obligation under the liability is cancelled, discharged or has expired. (b) Trade and other payables Trade payables are initially recorded at fair value and subsequently recorded at amortised cost using the effective interest rate method. 1.10 Inventories Inventories are stated at the lower of cost and net realisable value. Cost includes costs incurred in bringing inventories to their present location and condition. The cost of work-in-progress and finished goods includes an appropriate proportion of production overheads. Finished goods also include operating equipment not yet sited. Raw materials and consumables are valued on a first-in first-out basis or on an average cost basis where average cost is not significantly different to first-in first-out due to the fast turnaround of consumables. The Group uses standard costs to value inventory and these standard costs are regularly updated to reflect current prices. Inventories are stated net of provisions for slow moving and obsolete inventory based on expected future usage. 1.11 Cash and cash equivalents Cash and cash equivalents are carried in the statements of financial position at cost. Bank overdrafts are included within borrowings in current liabilities in the statements of financial position. For the purposes of the statements of cash flows, cash and cash equivalents comprises cash on hand, restricted and unrestricted deposits held at banks and other highly liquid investments with an original maturity of three months or less, less bank overdrafts. 1.12 Share capital and reserves Share capital Shares of the Company are classified as equity. Where the Company acquires its own equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of tax relief), is deducted from equity attributable to the Company’s equity shareholders until the shares are either cancelled or subsequently reissued. The amount is shown in equity as treasury shares. Where such shares (the treasury shares) are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders. Share premium Any excess received for shares issued over their nominal value is recorded in the share premium account. Translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and associates. In accordance with the options allowed under IFRS 1, only exchange rate differences arising on translation after the date of transition, 1 May 2004, are shown in this reserve. Other reserves Other reserves include the share options reserve, which is used to accrue the expected fair value of options issued, in accordance with IFRS 2. The other reserve accounts included mainly arise in subsidiaries, are generally not distributable, and arise as a result of local legislation regarding capital maintenance. 1.13 Employee benefits Pension obligations Group companies have various pension schemes in accordance with local conditions and practices in the countries in which they operate. The Company operates a defined benefit pension scheme, which is closed to new entrants, with contributions made by employees and the Company with defined benefits being based upon the employee’s length of service and final pensionable salary. The Company also operates a defined contribution pension scheme . vesting period, based on management’s estimate of the number of shares that will eventually vest. The Group does not have options with market conditions. On exercise of the option the proceeds received are allocated to share capital (nominal value of shares) and share premium. The grant by the Company of options over its equity instruments (shares) to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of the employee services received, measured by reference to the grant date fair value, is recognised over the investing period as an increase to the investment in subsidiary undertakings with a corresponding credit to other reserves in equity. Details of equity compensation benefits are included in note 21. Short-term employee benefits The Group recognises a liability and an expense for short-term employee benefits (such as holiday pay, bonuses and profit sharing) where these obligations contractually arise (for example, as a result of employment contracts) or where a constructive obligation has arisen from past practice. ME Group plc Annual Report 2023 133 Defined benefit scheme Details of the pension schemes are included in note 23. The net obligation for the Group’s defined benefit pension schemes is calculated for each scheme separately by estimating the future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value amount of plan assets. The calculation is performed by independent actuaries using the projected unit credit actuarial method. If this calculation results in a potential asset for the Group, this asset is only recognised to the present value of the economic benefits available in the form of a refund of contributions paid to the fund or reductions in future contributions. In calculating the present value of any economic benefit consideration is given to any minimum funding requirements. Re-measurement of the net liability, which comprises actuarial gains and losses, the return on plan assets (excluding interest) and the effects of any asset ceiling, are recognised in other comprehensive income. The Group determines the net interest expense (income) on the net liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the then net defined liability (asset), taking into account changes in the period as a result of contributions and pension benefits paid. Other expenses are charged to profit and loss. When plan benefits are changed or the plan curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised in profit and loss. Gains and losses on settlement of any plan are recognised when settlement occurs. Defined contribution scheme Contributions to defined contribution schemes are expensed as incurred. Other post-employment benefits In addition to the pension schemes noted above, contracts of employment in certain Group companies require provision to be made for employee retirements. These provisions are based on local circumstances, length of service and salaries of the employees concerned. They are included in post-employment benefit obligations and shown in note 23 as other retirement provisions. Equity compensation benefits The cost of equity-settled transactions with employees is measured by reference to the fair value at the date of grant, determined using the Black-Scholes model. The fair value is expensed on a straight-line basis over the Termination benefits Termination benefits are recognised in the income statement in the period when the Group is demonstrably committed to the termination of employment or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. 1.14 Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made. Provisions are discounted where the effect of the time value of money is material. 1.15 Taxation Tax expense for the current period comprises current and deferred tax and is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or equity. The current tax charge is calculated on the basis of the laws enacted or substantively enacted at the statement of financial position date in the countries where the Group operates. Deferred tax is provided in full on temporary differences arising between the tax base of assets and liabilities and their carrying value in the accounts . Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 1 Accounting policies continued 1.17 Revenue recognition There are 3 types of revenue considered by the Group: 1.20 Non-current assets classified as held ▪ Vending revenue from the operating machines is for sale recognised when the services are provided which is The Group classifies a non-current asset (or disposal when payment is received. Vending revenue is total group) as held for sale if its carrying amount will be consideration received during the period including recovered principally through a sale transaction rather that held in machines at the statement of financial than through continuing use. position date. There are no vending transactions requiring unbundling of components. Revenue is the Non-current assets transferred to held for sale are fair value of consideration received or receivable and recognised at the lower of their carrying amount and fair is measured net of discounts, VAT and other sales- value less costs to sell and presented separately on the related taxes. Payment is received immediately before Statement of Financial Position. Non-current assets the service is delivered to the customer. classified as held for sale are not depreciated . ▪ Revenue from the sale of equipment, spare parts and consumables is recognised upon delivery of products and acceptance, if applicable, by the customer. Equipment, spare parts and consumables are sold on their own and no unbundling is required for accounting purposes. Revenue is the fair value of consideration received or receivable and is measured net of discounts, VAT and other sales-related taxes. Payment is typically due and received 30 days after the delivery of the product.The Group offers a two year warranty ME Group plc Annual Report 2023 134 Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in future periods in which the temporary difference will reverse, based on tax rates and laws enacted or substantively enacted at the year end. Deferred tax assets are recognised to the extent that it is probable that the future taxable profit, against which the deductible temporary differences can be utilised, will be available. Deferred tax is provided, or an asset recognised, on taxable temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Current tax assets and liabilities are measured at the amounts expected to be recovered from, or paid to, the taxation authorities, based on tax rates and laws that are enacted or substantively enacted at year end. 1.16 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker as required by IFRS 8 Operating Segments. Details of the segments are shown in note 3. on all machines sold and is responsible for any repairs required in that period ▪ Revenue from the provision of services, principally maintenance contracts, is recognised at the time the service is delivered to the customer. Services are sold on their own as stand-alone products with no unbundling required. Revenue is the fair value of consideration received or receivable and is measured net of discounts, VAT and other sales-related taxes. Revenue is recognised in a straight line manner over the maintenance contract term. Payment is typically due and received 30 days after the delivery of the service is complete. Contract terms do not exceed one year in length. 1.18 Dividend distributions Dividends to the Company’s shareholders are recognised as a liability and deducted from shareholders’ equity in the period in which the shareholders’ right to receive payment is established. 1.19 Company investments In the Company statement of financial position, investments in subsidiaries and associates are stated at cost less impairment. The Company reviews, at least annually, the carrying value of investments and performs an impairment exercise. An impairment charge is made where there is evidence that the carrying value exceeds the future cash flows of the investment or where its carrying amount will not be recovered from sale. ## 2 New standards, amendments and interpretations # New accounting standards # Adopted by the Group The Group has adopted the following new standards and amendments for the first time in these financial statements with no material impact: - • Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) - • Annual Improvements to IFRS Standards 2018-2020 - • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) - • Reference to the Conceptual Framework (Amendments to IFRS 3) # Not yet adopted by the Group Certain new accounting standards and interpretations have been published that are not mandatory for the current period and have not been early adopted by the Group. These new standards and interpretations, which are not expected to have a material effect on the Group, are set out below. | Description | Date required to be adopted by the Group | | --- | --- | | Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) | 1 January 2023 | | Definition of Accounting Estimate (Amendments to IAS 8) | 1 January 2023 | | IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising | 1 January 2023 | ## 3 Segmental analysis IFRS 8 requires operating segments to be identified, based on information presented to the Chief Operating Decision Maker (CODM) in order to allocate resources to the segments and monitor performance. The Group reports its segments on a geographical basis: Asia Pacific, Continental Europe and United Kingdom & Ireland. The Group's Continental European operations are predominately based in Western Europe and, with the exception of the Swiss operations, use the Euro as their domestic currency. The Board, being the CODM, believe that the economic characteristics of the European operations, together with the fact that they are similar in terms of operations, use common systems and the nature of the regulatory environment allow them to be aggregated into one reporting segment. Segmental results are reported before intra-group transfer pricing charges. | 31 October 2023 | Asia Pacific £'000 | Continental Europe £'000 | United Kingdom & Ireland £'000 | Corporate £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | | Total revenue | 44,332 | 211,432 | 48,183 | – | 303,947 | | Inter segment sales | – | (6,275) | (10) | – | (6,285) | | Revenue from external customers | 44,332 | 205,157 | 48,173 | – | 297,662 | | EBITDA | 9,475 | 90,109 | 18,545 | (11,490) | 106,639 | | Depreciation and amortisation | (5,126) | (26,079) | (6,785) | (355) | (38,345) | | (Impairment)/reversal of impairment | (37) | (1,395) | 639 | – | (793) | | Operating profit/(loss) | 4,312 | 62,635 | 12,399 | (11,844) | 67,502 | | Operating profit | – | – | – | – | 67,502 | | Other net gains | – | – | – | – | 701 | | Finance income | – | – | – | – | 1,401 | | Finance costs | – | – | – | – | (2,537) | | Profit before tax | – | – | – | – | 67,067 | | Tax | – | – | – | – | (16,401) | | Profit for the period | – | – | – | – | 50,666 | | Capital expenditure (excluding Right of Use assets) | 8,846 | 37,494 | 7,380 | 733 | 54,453 | | Non-current assets | 28,134 | 107,994 | 28,508 | 1,124 | 163,760 | PMI Group plc Annual Report 2023 135 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 ## 3 Segmental analysis continued | 31 October 2022 | Asia Pacific £'000 | Continental Europe £'000 | United Kingdom & Ireland £'000 | Corporate £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | | Total revenue | 39,945 | 187,897 | 41,996 | – | 269,838 | | Inter segment sales | – | (10,058) | – | – | (10,058) | | Revenue from external customers | 39,945 | 177,839 | 41,996 | – | 259,780 | | EBITDA | 9,094 | 75,497 | 15,388 | (7,738) | 92,241 | | Depreciation and amortisation | (5,421) | (26,153) | (6,954) | (322) | (38,850) | | (Impairment)/reversal of impairment | (1,715) | 1,919 | 5,086 | – | 5,290 | | Operating profit/(loss) | 1,958 | 51,263 | 11,520 | (8,060) | 56,681 | | Operating profit | – | – | – | – | 56,681 | | Other net losses | – | – | – | – | (1,176) | | Finance income | – | – | – | – | – | | Finance costs | – | – | – | – | (2,191) | | Profit before tax | – | – | – | – | 53,354 | | Tax | – | – | – | – | (14,561) | | Profit for the period | – | – | – | – | 58,793 | | Capital expenditure (excluding Right of Use assets) (restated – see note 11) | 4,218 | 23,839 | 9,522 | 1,559 | 38,939 | | Non-current assets (restated – see note 11) | 24,870 | 94,742 | 25,045 | 796 | 145,453 | Inter-segment revenue mainly relates to sales of equipment. The Parent Company is domiciled in the UK. Total revenue from external customers is as follows: | | Group | | | --- | --- | --- | | | 31 October 2023 £'000 | 31 October 2022 £'000 | | Total revenue from external customers | | | | Sales of equipment, spare parts & consumables | 18,724 | 20,459 | | Sales of services | 3,615 | 3,895 | | | 22,339 | 24,355 | | Vending revenue | 275,323 | 235,425 | | Total revenue | 297,662 | 259,780 | There were no key customers in the period ended 31 October 2023 (2022: none). Financial Statements 136 4 Profit for the period Costs and overhead items charged/(credited) in arriving at profit for the period, include the following: | 31 October | | 31 October | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | £’000 | | £’000 | Amortisation, depreciation and impairment Amortisation of previously capitalised research and development expenditure: – reflected in income statement in cost of sales 930 2,955 Amortisation of intangible assets other than research and development: – reflected in income statement in cost of sales 3,275 3,394 – reflected in income statement in administrative expenses 235 272 (Reversal of impairment of)/impairment of previously capitalised research and development expenditure – 153 Impairment of/(reversal of impairment of) intangible assets other than research and development 1,445 – Impairment of goodwill 701 – 6,586 6,772 Depreciation of property, plant and equipment and investment property Depreciation of owned assets 27,860 25,774 Depreciation of right of use assets 6,045 6,445 Impairment of/(reversal of impairment of) owned property, plant and equipment and investment property (1,353) (3,443) 32,552 28,776 Short term and low value leases – property 913 945 – plant and equipment 1,095 825 2,008 1,770 Inventory cost Cost of inventories recognised as an expense 4,098 6,580 Provisions charged against obsolete inventory 572 288 4,670 6,868 | 31 October | | 31 October | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | £’000 | | £’000 | Other items Research and development current period expenditure, not capitalized 1,725 1,724 Trade receivables impairment/(reduction of impairment) (note 17) 604 (126) Net foreign exchange losses 764 630 Loss/(Gain) on sale of property, plant and equipment 555 (175) ME Group plc Annual Report 2023 137 Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 Administrative expenses | | 31October | | 31October | | | --- | --- | --- | --- | --- | | | | 2023 | | 2022 | | Note | | £’000 | | £’000 | Employment costs 5 20,619 19,840 Depreciation of owned assets 12 836 834 Impairment of owned property, plant and equipment 12 2,146 – Foreign exchange loss 959 355 Legal, audit and professional fees 4,147 4,022 Travel and entertaining costs 1,146 959 Other administrative costs 5,498 6,628 35,351 32,638 ME Group plc Annual Report 2023 138 4 Profit for the period continued Audit and non-audit services The following fees for audit and non-audit services were paid or are payable to the Company’s auditor, Mazars (2022: Mazars) and its associates. 31 October 2023 £’000 31 October 2022 £’000 Fees for the audit of the company and the group – Mazars LLP 397 313 Fees for the audit of the subsidiaries – other Mazars 120 39 Fees for audit related services (interim review) – Mazars 50 50 Non audit related services – Mazars – – Fees for the audit of the subsidiaries – Other firms 50 84 617 486 In order to maintain the independence of the external auditors, the Board has determined policies as to what non-audit services can be provided by the Company’s external auditors and the approval processes related thereto. This function is performed by the Audit Committee. Such services will only be approved if there are clear efficiencies and added value benefits to the Company. In addition to the audit fees payable to the Group’s auditor and its associates, certain Group subsidiaries are audited by other firms. Other operating income 31 October 2023 £’000 31 October 2022 £’000 Gain on disposal of property – 7,315 Rental income from investment property (note 13) 79 365 Other small items of non-trading income 115 236 194 7,916 In the prior year, the Group generated a gain of £7,315,000 from the sale of an office property in France. #### Other net gains/(losses) Other gains and losses comprise of profits arising on financial instruments held at FVTPL and profit on disposal of subsidiaries. They have been disclosed separately in order to improve a reader's understanding of the financial statements and are not disclosed within operating profit as they are non-trading in nature. | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | **Other net gains/(losses)** | | | | Gain/(Loss) on disposal of subsidiary | 57 | (459) | | Fair value gain/(loss) on financial instrument held at FVTPL | 586 | (350) | | Other gain/(loss) | 58 | (367) | | | **701** | **(1,176)** | #### Period ended 31 October 2023 The Group generated a profit on disposal of £57,000 from the disposal of its Korean subsidiary Photo-ME Korea Company Limited, recognized in other net gains/(losses) in the income statement. #### Period ended 31 October 2022 The Group incurred a loss on disposal of £459,000 from the disposal of its Spanish subsidiary La Wash Group, recognized in other net gains/(losses) in the income statement. ### 5 Employees #### Employment costs | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | Wages and salaries | 45,723 | 41,394 | | Social security costs | 10,178 | 9,017 | | Share options granted to directors and employees | 345 | 884 | | **Post-employment benefit costs** | | | | – defined benefit schemes | 417 | 383 | | – defined contribution schemes | 201 | 265 | | | **56,864** | **51,943** | #### Number of employees The average number of employees during the period (including executive directors) comprised: | | 31 October 2023 | 31 October 2022 | | --- | --- | --- | | Full – time | 1,053 | 996 | | Part – time | 140 | 121 | | | **1,193** | **1,117** | | UK: Full – time | 154 | 159 | | UK: Part – time | 3 | 4 | | Continental Europe: Full – time | 730 | 688 | | Continental Europe: Part – time | 29 | 24 | | Asia and rest of the world: Full – time | 169 | 148 | | Asia and rest of the world: Part – time | 108 | 93 | | | **1,193** | **1,117** | ME Group plc Annual Report 2023 139 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # 5 Employees continuedEmployees by category | | As at 31 October 2023 | As at 31 October 2022 | | --- | --- | --- | | Senior managers in the Group (excluding directors of ME Group) | 21 | 27 | | Employees – Sales | 136 | 110 | | Employees – Administration | 194 | 191 | | Employees – Operating | 842 | 789 | | **Total** | **1,195** | **1,117** | The cost of sales employees and operating employees are recognised in the income statement in Cost of Sales. The cost of administration employees is recognised in the income statement in Administrative Expenses. The cost of senior managers is recognised in the income statement in either Cost of Sales or Administrative Expenses, dependent on the function they perform. # 6 Finance income and costs | | 31 October 2023 €'000 | 31 October 2022 €'000 | | --- | --- | --- | | **Finance income** | | | | Interest income | 1,401 | – | | | **1,401** | **–** | | **Finance costs** | | | | Bank loans and overdrafts at amortised cost | (1,168) | (714) | | Interest on lease liabilities | (1,251) | (1,437) | | Other finance costs | (119) | – | | | **(2,537)** | **(2,351)** | Interest income, interest cost on bank loans and overdrafts and interest on lease liabilities are all recognised on an effective interest rate basis. Interest income is earned on short term deposits. Group earned interest on deposits at rates between 2.90% and 2.93% in the year (2022: 1.14% to 1.80%). ME Group plc Annual Report 2023 146 ## 7 Taxation expense Tax charges/(credits) in the statement of comprehensive income | | 31 October 2023 €'000 | 31 October 2022 €'000 | | --- | --- | --- | | **Taxation** | | | | **Current taxation** | | | | UK Corporation tax | | | | – current period | 9,833 | 8,104 | | – prior periods | (1,068) | 2,253 | | | **8,765** | **8,557** | | **Overseas taxation** | | | | – current period | 6,916 | 7,200 | | – prior periods | (212) | 90 | | | **6,704** | **7,280** | | **Total current taxation** | **15,469** | **15,647** | | **Deferred taxation** | | | | Origination and reversal of temporary differences | | | | – current period – UK | 677 | (150) | | – current period – overseas | (683) | (981) | | Adjustments in respect of prior periods – UK | 843 | 27 | | Adjustments in respect of prior periods – Overseas | – | 45 | | Impact of change in rate | 75 | (47) | | **Total deferred tax** | **932** | **(1,086)** | | **Tax charge in the income statement** | **16,401** | **14,561** | | **Tax relating to items (credited)/charged to other components of comprehensive income** | | | | Corporation tax | – | – | | Deferred tax | (48) | 248 | | **Tax charge in other comprehensive income** | **(48)** | **248** | | **Total tax charge in the statement of comprehensive income** | **16,353** | **14,809** | ME Group plc Annual Report 2023 143 Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 7 Taxation expense continued Reconciliation of total tax charge The difference between the Group tax charge and the standard UK corporation tax rate of 22.5% (2022: 19%) is explained below: | 31 October | | 31 October | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | £’000 | | £’000 | Profit before tax 67,067 53,354 Tax using the weighted average UK corporation tax rate of 22.5% (2022: 19%) 15,090 10,137 Effect of: – non-taxable items 449 405 – overseas tax rates 580 1,983 – remeasurement of deferred tax for changes in tax rates 75 (47) – losses not recognised in deferred tax (relieved)/incurred – (1,053) – non-deductible expenses 8 (98) – adjustments to tax in respect of prior periods (436) 2,416 – foreign exchange movements – – – other adjustments 635 818 Total tax charge 16,401 14,561 Effective tax rate 24.5% 27.3% The Group tax charge of £16.4m (2022: £14.6m) corresponds to an effective tax rate of 24.5% (2022: 27.3%). The UK Corporation Tax rate increased from 19% to 25% with effect from 1 April 2023. The weighted average UK Corporation Tax rate for the year ended 31 October 2023 was 22.5%. The Group undertakes business in multiple tax jurisdictions. 8 Profits attributable to members of the parent company The profit for the period, after tax, dealt with in the financial statements of the Parent Company is £25,196,000 (2022: £57,824,000), including dividends received from subsidiaries. ME Group plc Annual Report 2023 142 ## 9 Dividends paid and proposed | | 31 October 2023 | | 31 October 2022 | | | --- | --- | --- | --- | --- | | | parcs per share | £'000 | parcs per share | £'000 | | **Dividends Paid** | | | | | | **Special dividend** | | | | | | Approved by the Board on 18 July 2022 | – | – | 6.50 | 24,572 | | **Final** | | | | | | 2021 approved at AGM held on 29 April 2022 | – | – | 2.89 | 10,925 | | **Interim Dividend** | | | | | | 2022 approved by the board on 18 July 2022 | 2.60 | 9,829 | – | – | | **Final** | | | | | | 2022 approved at AGM held on 28 April 2023 | 3.00 | 11,345 | – | – | | **Special dividend** | | | | | | 2022 approved by the board on 20 April 2023 | 0.60 | 2,269 | – | – | | | **6.20** | **23,443** | **9.39** | **35,497** | | **Dividends Proposed** | | | | | | **Interim Dividend** | | | | | | 2022 approved by the board on 18 July 2022 | – | – | 2.60 | 9,829 | | **Interim Dividend** | | | | | | 2023 approved by the board on 11 July 2023 | 2.97 | 11,240 | – | – | | | **2.97** | **11,240** | **2.60** | **9,829** | ### Period ended 31 October 2023 – Dividends paid in the period The Board approved an interim dividend of 2.60p per ordinary share for the six month period ended 30 April 2022, at its 18 July 2022 meeting. The interim dividend was paid on 3 November 2022. The Board proposed a final dividend of 3.00p per ordinary share in respect of the year ended 31 October 2022, which was approved by shareholders at the Annual General Meeting held on 28 April 2023 and paid on 12 May 2023. The Board also approved, at its 20 April 2023 meeting, a special dividend of 0.60p per ordinary share, which was paid on 19 May 2023. ### Period ended 31 October 2023 – Proposed dividends not yet paid in the period The Board approved an interim dividend of 2.97p per ordinary share for the six month period ended 30 April 2023, at its 11 July 2023 meeting. The interim dividend was paid on 23 November 2023. ### Period ended 31 October 2022 – Dividends paid in the period The Board proposed a final dividend of 2.89p per ordinary share in respect of the year ended 31 October 2021, which was approved by shareholders at the Annual General Meeting held on 29 April 2022 and paid on 13 May 2022. The Board also approved, at its 18 July meeting, a special dividend of 6.50p per ordinary share, which was paid on 1 September 2022. ### Period ended 31 October 2022 – Proposed dividends not yet paid in the period The Board approved an interim dividend of 2.60p per ordinary share for the six month period ended 30 April 2022, at its 18 July 2022 meeting. The interim dividend was paid on 3 November 2022. ME Group plc Annual Report 2023 143 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # 10 Earnings per share Basic earnings per share amounts are calculated by dividing net earnings attributable to shareholders of the Parent of £50,666,000 (2022: £38,793,000) by the weighted average number of shares in issue during the period. Diluted earnings per share amounts are calculated by dividing the net earnings attributable to shareholders of the Parent by the weighted average number of shares outstanding during the period plus the weighted average number of shares that would be issued on conversion of all the dilutive potential shares into shares. The Group has only one category of dilutive potential shares being share options granted to senior staff, including directors, as detailed in note 21. The earnings and weighted average number of shares used in the calculation are set out in the table below: | | 31 October 2023 | | | 31 October 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Earnings £'000 | Weighted average number of shares '000 | Earnings per share pence | Earnings £'000 | Weighted average number of shares '000 | Earnings per share pence | | Basic earnings per share | 50,666 | 378,110 | 13.40 | 38,793 | 378,052 | 10.26 | | Effect of dilutive share options | – | 2,480 | (0.09) | – | 1,048 | (0.03) | | Diluted earnings per share | 50,666 | 380,600 | 13.31 | 38,793 | 379,100 | 10.23 | Potential shares (for example, arising from exercising share options) are treated as dilutive only when their conversion to shares would decrease basic earnings per share or increase loss per share from continuing operations. # 11 Goodwill and other intangible assets # Goodwill # Group | | £'000 | | --- | --- | | **Cost:** | | | At 1 November 2021 | 18,398 | | Exchange differences | 204 | | Additions | 1,652 | | Disposals | (2,523) | | At 31 October 2022 | 17,731 | | IFRS remeasurement | (796) | | At 1 November 2022 (restated) | 16,933 | | Exchange differences | 5 | | Additions | 3,268 | | **At 31 October 2023** | **20,206** | | **Impairment charges:** | | | At 1 November 2021 | 3,093 | | Exchange differences | 45 | | Disposals | (2,523) | | At 31 October 2022 | 615 | | At 1 November 2022 | 615 | | Exchange differences | 2 | | Impairment charge in the period | 701 | | **At 31 October 2023** | **1,318** | | **Net book value:** | | | At 1 November 2021 | 15,305 | | At 1 November 2022 (restated) | 16,320 | | **At 31 October 2023** | **18,888** | The Group plc Annual Report 2023 IFRS remeasurements represent the finalisation of purchase price allocation on acquisitions. In the period the purchase price allocation was completed for Dreamakers. Brand and customer related intangible assets with a total value of £814,000 were identified and transferred from goodwill to intangible assets. A deferred tax liability of £18,000 was recognised in respect of these intangible assets and added to the value of goodwill. Further details of the purchase price allocation are provided in note 30. Additions to goodwill in the year are in relation to the following business combination: Additions: £’000 Fujifilm Imaging Systems Co. Ltd 3,268 The assessment of the purchase price adjustments in relation to Fujifilm Imaging Systems Co. Ltd was still in progress at the date of publishing these financial statements. Company The Company has no goodwill. Goodwill by segments The table below shows the allocation of goodwill acquired through business combinations between segments. The amount of impairment losses is recognised in Administrative costs. Goodwill has been allocated for impairment testing purposes to nine (2022: nine) cash-generating units (CGUs) 31 October | 31 October | | | 2022 | | --- | --- | --- | --- | | | 2023 | (Restated) | | | | £’000 | | £’000 | Carrying amount UK & Ireland CGU 1 – ME Group Ireland Supplies Limited 154 154 CGU 2 – Photo-ME Northern Ireland 14 14 Total UK & Ireland 168 168 Continental Europe CGU 1 – ME Group France SAS 312 308 CGU 2 – ME Group Germany GmbH 2,005 1,976 CGU 3 – Sempa SARL 3,423 3,374 CGU 4 – Pizza vending division (formerly SGER) – 693 CGU 5 – Dreamakers 925 896 Total Continental Europe 6,665 7,247 Asia 1 CGU 1 – ME Group Japan 11,016 7,801 CGU 2 – Now Retail Group 1,039 1,104 Total Asia 12,055 8,905 Total 18,888 16,320 1 Asia CGU 1 includes goodwill from the acquisition of Photo Plaza Co Ltd, which was merged into ME Group Japan on 15th March 2021. Asia CGU 1 also includes goodwill generated by the acquisition of the photobooth division of Fujifilm Imaging Systems Co. Ltd on 30 September 2023. This is because Asia CGU1 acquired the trade, assets and liabilities of the business, as opposed to acquiring the share capital of a new subsidiary. The Group tests annually, for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amount of all CGUs has been determined on a value in use basis. ME Group plc Annual Report 2023 145 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 ### 11 Goodwill and other intangible assets continued Value in use was determined by discounting the future cash flows of the CGU. Cash flows include a forecast period of five years, based on actual operating results, budgets and economic market research with a terminal value based on a long-term growth rate applied thereafter. As a result of the impairment tests, the goodwill relating to the pizza vending division (formerly SGER) was fully impaired (£701,000). This is due to a reduction in forecast cash generation. #### Key assumptions for impairment tests of goodwill and other intangible assets ##### Growth rate 1% (2022: 1%) The Growth rate assumption for all Group CGUs was 1%. The growth rate has been determined based on a conservative basis for expected annual growth in EBITDA for each CGU and takes into account revenue, volumes, selling prices and operating costs. It is based on past experience and expected future developments in markets, operations and economic conditions. ##### Discount rate 9.7%-15.2% (2022: 9.74%-14.24%) The post-tax discount rates applied to the cash flow forecasts for the CGUs are derived from the pre-tax weighted average cost of capital for the Group adjusted for country specific risks, local risk free borrowing rates and local tax rates for the specific country concerned. The changes in discount rate assumptions from the prior year reflect the change in economic conditions, in each territory, over the period. The rates used are: United Kingdom 14.1%, (2022: 13.3%), Ireland 13.0% (2022: 10.4%), France 12.8% (2022: 12.4%), Germany 11.6% (2022: 11.2%), Spain 14.8% (2022: 14.2%), Japan 11.0% (2022: 10.7%), Portugal 15.2% (2022: 12.3%), Belgium 13.2% (2022: 10.1%), Netherlands 11.7% (2022: 11.3%), Switzerland 9.7% (2022: 10.0%), Austria 12.7% (2022: 9.7%) and Australia 13.5% (2022: n/a). The Board is confident, overall, that these discount rates reflect the circumstances in each region, and are in accordance with IAS 36. ##### Sensitivity to key assumptions As at the measurement date, the recoverable amount of all cash-generating units, based on their value in use, is significantly higher than the carrying amount relevant for the impairment test. After considering all key assumptions, management considers that a reasonably pessimistic revision of key assumptions which can rationally be expected would still cause the carrying amount of the cash-generating units to exceed their recoverable amount. The headroom of recoverable amount over carrying value, across all CGUs is £704,443,000. ##### Discount rate A 1% increase in the discount rate assumption for each territory would not generate any additional impairments. Headroom across all CGUs would be reduced by £66,110,000. ##### Growth rate A 1% decrease in the growth rate assumption for each territory would not generate any additional impairments. Headroom across all CGUs would be reduced by £45,769,000. ##### Future growth in revenue, costs and profit margins CGUs were subjected to an impairment test under a worst case scenario, with decreased revenue and increased costs. The details of the sensitivity assumptions used are disclosed in the going concern section of the accounting policies (note 1.1 Basis of preparation). In this worst case scenario, two further CGUs would be impaired: Asia CGU 1 £1,331,000 and Asia CGU 2 £243,000. Headroom across the remaining unimpaired CGUs would be reduced by £263,703,000. 16 Group (all) Annual Report 2023 146 Other intangible assets – Group Capitalised | development | | | | | Customer | | | Droit | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | costs | Software | | Brands | | related | Patents | au Bail | Total | | | £’000 | | £’000 | £’000 | | £’000 | £’000 | £’000 | £’000 | Cost: At 1 November 2021 13,011 3,079 2,233 22,842 1,656 3,372 46,193 Exchange differences (16) 4 (122) (262) 13 61 (322) Additions 1,418 908 – 40 – 120 2,486 Additions new subsidiary – – – 98 – – 98 Transfers (26) (1,256) 1,282 – – – Disposals (6,374) (110) – (4,027) (169) – (10,680) At 31 October 2022 8,039 3,855 855 19,973 1,500 3,553 37,775 IFRS remeasurement – – 425 389 – – 814 Correction of error - reclassification 3,783 – – – – – 3,783 At 1 November 2022 (restated) 11,822 3,855 1,280 20,362 1,500 3,553 42,372 Exchange differences (95) (17) 11 (274) 27 52 (296) Additions 2,337 437 – – – 39 2,813 Additions work in progress 985 – – – – – 985 Additions new subsidiary – 49 – – – – 49 Transferred to property, plant and equipment (note 12) – – – (120) – (24) (144) Disposals – (163) – (6) – (37) (206) At 31 October 2023 15,049 4,161 1,291 19,962 1,527 3,583 45,573 Amortisation: At 1 November 2021 10,128 2,531 – 10,063 111 3,372 26,205 Exchange differences (31) – 2 (256) 11 61 (213) Provided during the period 2,955 248 188 2,918 309 – 6,618 Impairment charge 153 – – – – – 153 Transfers – (26) – 26 – – – Disposals (6,341) (288) – (3,960) (20) – (10,609) At 31 October 2022 6,864 2,465 190 8,791 411 3,433 22,154 At 1 November 2022 6,864 2,465 190 8,791 411 3,433 22,154 Exchange differences (105) 4 6 (88) 13 50 (120) Provided during the period 930 473 190 2,673 174 – 4,440 Impairment charge – – 577 57 811 – 1,445 Transferred to property, plant and equipment (note 12) – – – (23) – – (23) Disposals – (104) – (4) – (37) (145) At 31 October 2023 7,689 2,838 963 11,406 1,409 3,446 27,751 Net book value: At 1 November 2021 2,883 548 2,233 12,779 1,545 – 19,988 At 31 October 2022 (restated) 4,958 1,390 1,090 11,571 1,089 120 20,218 At 31 October 2023 7,360 1,323 328 8,556 118 137 17,822 The opening balance of capitalised development costs at 1 November 2022 has been restated by £3,783,000 to correct an error in the prior year financial statements. The adjustment represents the value of work in progress which had previously been reported in prepayments under trade and other receivables. A corresponding adjustment has been made to reduce the opening balance of prepayments (note 17) by the same value . ME Group plc Annual Report 2023 147 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 ### 11 Goodwill and other intangible assets continued The restatement is reflected in the group statement of financial position at 31 October 2022 as an increase in intangible assets and a decrease in trade and other receivables. The group statement of cashflows for the year ended 31 October 2022 has been restated by increasing cash generated from operations by £3,783,000 (movement in trade and other receivables) and increasing net cash utilised in investing activities by the same amount (purchase of intangible assets). This restatement had no impact on the group's total assets, total Shareholders' funds, statement of comprehensive income and earnings per share for the current or prior year. There was no impact on the consolidated statement of financial position at 1 November 2021. Capitalised research and development expenditure is amortised over a maximum of four years, with no residual value. #### Impairment charges Impairment charges were recognised in the year against the following categories of intangibles assets: brands (£577,000); customer related (£57,000); and patents (£811,000) All impairments charges were made against the intangible assets of KIS SAS and related to the pizza vending division (formerly SGIER) CGU. The impairment charges were recognised in the line "Administrative expenses". Impairment charges were due to a reduction in forecast cash generation of the pizza vending division. In 2022 a £153,000 impairment charge was recognised against capitalised development costs, in the line "Costs of sales". #### Company | | Customer related £'000 | | --- | --- | | Cost: | | | At 1 November 2021 | 776 | | Addition | 5 | | **At 31 October 2022** | **781** | | **At 31 October 2023** | **781** | | Amortisation: | | | At 1 November 2021 | 776 | | **At 31 October 2022** | **776** | | Amortisation | 2 | | **At 31 October 2023** | **778** | | Net book value: | | | At 1 November 2021 | 0 | | At 31 October 2022 | 5 | | **At 31 October 2023** | **3** | 14 Group (continued) pages 2/2/2 348 ## 12 Property, plant and equipment | | Land & Buildings £'000 | Photobooth & vending machines £'000 | Plant, machinery, furniture, fixtures & motor vehicles £'000 | Right of Use Land & Buildings £'000 | Right of Use Plant, machinery, furniture, fixtures £'000 | Right of Use Motor vehicles £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | --- | | **Cost:** | | | | | | | | | At 31 October 2021 | 18,061 | 264,832 | 28,130 | 4,400 | 13,575 | 5,450 | 334,448 | | Exchange difference | 206 | (644) | 295 | 59 | 155 | 102 | 173 | | Additions | 683 | 27,205 | 4,782 | 2,878 | 1,803 | 2,617 | 39,968 | | Additions – new subsidiary | 5 | 8 | – | – | – | – | 11 | | Disposals | (3,650) | (14,477) | (3,042) | (2,328) | (1,047) | (1,707) | (26,251) | | **At 31 October 2022** | **15,303** | **276,924** | **30,165** | **5,009** | **14,486** | **6,462** | **348,349** | | Exchange difference | (63) | (891) | 381 | 123 | 352 | 157 | 59 | | Additions | 400 | 39,122 | 6,320 | 639 | 421 | 2,456 | 49,358 | | Additions – new subsidiary | – | 1,496 | – | – | – | – | 1,496 | | Transfer from intangible assets | – | 16 | 128 | – | – | – | 144 | | Transfers | 8 | 481 | (489) | – | – | – | (0) | | Disposals | (116) | (17,355) | (3,158) | – | (2,419) | (1,348) | (24,396) | | **At 31 October 2023** | **15,532** | **299,793** | **33,347** | **5,771** | **12,840** | **7,727** | **375,010** | | **Depreciation:** | | | | | | | | | At 31 October 2021 | 9,261 | 201,018 | 23,107 | 1,520 | 5,285 | 2,284 | 242,475 | | Exchange difference | 7 | (1,439) | 357 | 93 | 23 | 40 | (919) | | Provided during the period | 322 | 22,849 | 2,603 | 2,015 | 2,619 | 1,811 | 32,219 | | Impairments/(reversal of impairments) | (86) | (2,650) | (707) | – | – | – | (3,443) | | Disposals | (2,510) | (14,477) | (1,862) | (1,470) | (1,047) | (1,707) | (23,073) | | **At 31 October 2022** | **6,994** | **205,301** | **23,498** | **2,158** | **6,880** | **2,428** | **247,259** | | Exchange difference | (66) | (1,268) | 297 | 88 | 281 | 99 | (569) | | Provided during the period | 348 | 24,556 | 2,940 | 1,454 | 2,384 | 2,207 | 33,889 | | Impairments/(reversal of impairments) | 6 | (304) | (1,055) | – | – | – | (1,353) | | Transfer from intangible assets | – | 1 | 22 | – | – | – | 23 | | Disposals | (47) | (16,576) | (1,973) | – | (2,419) | (1,348) | (22,363) | | **At 31 October 2023** | **7,235** | **211,710** | **23,729** | **3,700** | **7,126** | **3,386** | **256,886** | | **Net book value:** | | | | | | | | | At 1 November 2021 | 8,800 | 63,814 | 5,023 | 2,880 | 8,290 | 3,166 | 91,973 | | At 31 October 2022 | 8,309 | 71,623 | 6,667 | 2,851 | 7,606 | 4,034 | 101,090 | | **At 31 October 2023** | **8,298** | **88,082** | **9,617** | **2,071** | **5,714** | **4,341** | **118,124** | To improve presentation and understandability, additions previously presented as internal additions have now been included in the additions external line. The comparative figures have been reclassified to aid comparability. Additions with a value of £21,496,000 which were presented as additions internal in the photobooth & vending machines category in the prior year audited financial statements, are now presented as additions external. THE Group plc Annual Report 2023 149 Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 12 Property, plant and equipment continued Impairment The Group and the Company test all significant operating equipment asset classes for impairment annually, or more frequently if there are indications of impairment. Impairment reviews on operating equipment are all conducted on a value in use basis. Value in use is determined by discounting the expected cashflows of an asset over the remainder of its useful economic life. At the current year end all photobooth and vending machine units were subject to an updated impairment test and impairments updated accordingly. Where impairment tests indicated a reduced level of impairment, the impairment held was reduced, with care taken to ensure that the closing net book value did not exceed what it would have been had the original impairment never occurred. Impairments or reversals of impairment to photobooths and vending machines were recognised in the following operating segments: Asia Pacific – impairment charge of £37,000; Continental Europe – impairment reversal of (£44,000); and United Kingdom – impairment reversal of (£297,000). An impairment charge to land and buildings of £6,000 was recognised in the United Kingdom operating segment. This relates to the impairment of vending machines whereby the site that the machine is located is impaired as well as the equipment. The impairment was due to a reduction in forecast cash generation of the vending machine. Reversals of impairment to plant, machinery, furniture, fixtures and motor vehicles were recognised in the following operating segments: Continental Europe (£706,000) and United Kingdom (£349,000). Significant impairment charges were made against the Group’s property, plant and equipment during the pandemic affected period, when the uncertain outlook and reduced trading indicated impairment. In the current and prior years, as the pandemic restrictions has eased in most of our territories, the value in use of assets has increased and provisions have been reversed where appropriate. Key assumptions The key assumptions for the value in use calculation are discount rates and growth rates during the forecast period. Growth rate 0% (2022: 1%) The Growth rate assumption used for all territories was 0%. This assumption is based on past experience and expected future developments in markets, operations and economic conditions. Discount rate 9.7%-15.2% (2022: 9.74%-14.24%) The post-tax discount rates applied to the cash flow forecasts of each asset are derived from the pre-tax weighted average cost of capital for the Group adjusted for country specific risks, local risk free borrowing rates and local tax rates for the specific country concerned. The changes in discount rate assumptions from the prior year reflect the change in economic conditions, in each territory, over the period. The rates used are: United Kingdom 14.1%, (2022: 13.3%), Ireland 13.0% (2022: 10.4%), France 12.8% (2022: 12.4%), Germany 11.6% (2022: 11.2%), Spain 14.8% (2022: 14.2%), Japan 11.0% (2022: 10.7%), Portugal 15.2% (2022: 12.3%), Belgium 13.2% (2022: 10.1%), Netherlands 11.7% (2022: 11.3%), Switzerland 9.7% (2022: 10.0%), Austria 12.7% (2022: 9.7%) and Australia 13.5% (2022 n/a). The Board is confident, overall, that these discount rates reflect the circumstances in each region, and are in accordance with IAS 36. Sensitivity to key assumptions Discount rate A 1% increase in the discount rate assumption for each territory would increase the impairment charge by £177,000. Growth rate A 1% reduction in the growth rate assumption (negative growth rate of -1%), would increase the impairment charge by £154,000 . ME Group plc Annual Report 2023 150 ## Company | | Land & Buildings £'000 | Photobooth & vending machines £'000 | Plant, machinery, furniture, fixtures & motor vehicles £'000 | Right of Use Land & Buildings £'000 | Right of Use Plant, machinery, furniture, fixtures £'000 | Right of Use Motor vehicles £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | --- | | **Cost:** | | | | | | | | | At 1 November 2021 | – | 38,432 | 2,281 | 1,011 | 1,898 | 1,415 | 45,057 | | Additions | – | 5,493 | 1,030 | – | 28 | 60 | 6,611 | | Transferred from subsidiary | 572 | – | – | – | – | – | 572 | | Disposals external | – | (3,603) | (150) | – | (427) | (361) | (4,541) | | At 31 October 2022 | 572 | 40,323 | 3,161 | 1,011 | 1,499 | 1,114 | 47,679 | | Additions | – | 3,769 | 1,255 | – | – | 570 | 5,594 | | Disposals external | – | (1,748) | (366) | – | (787) | (258) | (3,159) | | **At 31 October 2023** | **572** | **42,343** | **4,050** | **1,011** | **712** | **1,426** | **50,114** | | **Depreciation:** | | | | | | | | | At 1 November 2021 | – | 31,008 | 1,187 | 269 | 1,142 | 498 | 34,104 | | Provided during the period | 18 | 1,107 | 147 | 107 | 408 | 336 | 2,123 | | Transferred from subsidiary | 289 | – | – | – | – | – | 289 | | Disposals external | – | (3,347) | (66) | – | (427) | (361) | (4,201) | | At 31 October 2022 | 307 | 28,768 | 1,268 | 376 | 1,123 | 473 | 32,315 | | Provided during the period | 17 | 3,462 | 14 | 106 | 289 | 325 | 4,215 | | Disposals external | – | (1,620) | (83) | – | (782) | (258) | (2,744) | | **At 31 October 2023** | **324** | **30,610** | **1,198** | **482** | **630** | **540** | **33,785** | | **Net book value:** | | | | | | | | | At 1 November 2021 | – | 7,424 | 1,094 | 742 | 756 | 917 | 10,953 | | At 31 October 2022 | 265 | 11,554 | 1,892 | 635 | 376 | 641 | 15,364 | | **At 31 October 2023** | **248** | **11,733** | **2,851** | **529** | **82** | **886** | **16,329** | To improve presentation and understandability, additions previously presented as internal additions have now been included in the additions external line. The comparative figures have been reclassified to aid comparability. Additions with a value of £5,063,000 which were presented as additions internal in the photobooth & vending machines category in the prior year audited financial statements, are now presented as additions external. PMI Group plc Annual Report 2023 151 Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 14 Non-current assets classified as held for sale | 31 October | | 31 October | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | £’000 | | £’000 | Property classified as held for sale 585 – The non-current asset classified as held for sale is an office building located in Grenoble, France. The Group previously rented out the office building but now intends to dispose of the property. Management are fully committed to the sale of the property, have been actively marketing it for sale and expect to complete the disposal within 12 months of the reporting date. The non-current asset classified as held for sale is included in the Continental Europe operating segment. ME Group plc Annual Report 2023 152 13 Investment property Group £’000 Cost: At 1 November 2021 12,822 Exchange differences 230 At 31 October 2022 13,052 Exchange differences 190 Transfer to non current assets held for sale (13,242) At 31 October 2023 – Depreciation: At 1 November 2021 12,225 Exchange differences 220 Provided during the period 15 At 31 October 2022 12,460 Exchange differences 181 Provided during the period 16 Transfer to non current assets held for sale (12,657) At 31 October 2023 – Net book value: At 1 November 2021 597 At 31 October 2022 592 At 31 October 2023 – The investment property is freehold and is stated at cost less depreciation and any impairment charges. The directors are satisfied that the fair value of the Investment property is not less than its net book value. Rental income from the investment property was £79,000 (2022: £365,000) (note 4). In the year, management committed to selling the investment property, with the sale expected to complete in the first half of financial year 2024. Accordingly, the property was transferred from investment property to non-current assets held for sale. See note 14 for more details. Company The Company has no investment property. ## 15 Investments in associates and subsidiaries ### Investment in associates #### Group In the current and prior year, the Group held investments in only one associate, Photomaton Maroc. This associate company is incorporated in Morocco and its registered address is 131 Bd D'Anfares Azur Sidi Belyout, Casablanca. | | £'000 | | --- | --- | | **Cost:** | | | At 1 November 2021 | 21 | | Exchange differences | (1) | | At 31 October 2022 | 20 | | Exchange differences | 1 | | Share of profit | 14 | | **At 31 October 2023** | **35** | | Name | Assets £'000 | Liabilities £'000 | Revenue £'000 | Profit £'000 | Dividends received | Share of Interest % | | --- | --- | --- | --- | --- | --- | --- | | **At 31 October 2022** | 90 | 70 | – | – | – | 50 | | | 90 | 70 | – | – | – | 50 | | **At 31 October 2023** | **141** | **106** | **–** | **14** | **–** | **50** | | | **141** | **106** | **–** | **14** | **–** | **50** | #### Company | | Associated undertakings £'000 | Subsidiary undertakings £'000 | Total £'000 | | --- | --- | --- | --- | | **Costs:** | | | | | At 1 November 2021 | 6 | 48,821 | 48,827 | | Capital increase relating to share-based payment (net) | – | 521 | 521 | | Disposal | – | (2,956) | (2,956) | | At 31 October 2022 | 6 | 46,386 | 46,392 | | At 1 November 2022 | 6 | 46,386 | 46,392 | | Capital increase relating to share-based payment (net) | – | 148 | 148 | | **At 31 October 2023** | **6** | **46,534** | **46,540** | | **Provision:** | | | | | At 1 November 2021 | 6 | 1,920 | 1,926 | | Disposal | – | (2) | (2) | | At 31 October 2022 | 6 | 1,918 | 1,924 | | At 1 November 2022 | 6 | 1,918 | 1,924 | | **At 31 October 2023** | **6** | **1,918** | **1,924** | | **Net book value:** | | | | | At 1 November 2021 | – | 46,901 | 46,901 | | At 31 October 2022 | – | 44,468 | 44,468 | | **At 31 October 2023** | **–** | **44,616** | **44,616** | The net capital increase relating to share-based payments relates to share options in the parent company, ME Group International plc, granted to employees of subsidiary undertakings of the Group. Refer to note 21 for further details on the Group's share option schemes. The details of all the Group's subsidiaries and associates are given in note 29. ME Group plc Annual Report 2023 153 Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 ME Group plc Annual Report 2023 154 16 Financial instruments Group Treasury The Group has a centralised treasury function. The primary aim for this function is to manage liquidity and funding arrangements and the Group’s exposure to associated financial and market risks, including credit risk, interest rate risk and foreign currency risk. The general approach for Group Treasury is one of risk reduction within a framework of delivering total shareholder return. Treasury operations Overview and policy Treasury policy is set by the Board. Group treasury activities are subject to a set of controls appropriate for the magnitude of the borrowing, investments and group-wide exposures. To date the treasury function has limited itself to obtaining surplus cash from the subsidiaries and depositing this in bank accounts owned by the Group’s Treasury Company. The Board has defined an investment strategy, amounts and types of products to which the surplus cash may be invested. The Board monitors the performance of the Treasury function and is responsible for making changes to the personnel and limits of authority of Treasury personnel. The Board has provided written principles for overall risk management of the Treasury Function. It has also defined policies and procedures covering such areas as foreign exchange risk, interest rate risk, credit risk, the use of derivative instruments and investment of excess liquidity (surplus funds above the immediate and short–term operational funding needs, such as working capital requirements). The key objectives for Group Treasury are to protect the principal value of cash and cash equivalents, to concentrate cash at the centre to minimise external borrowings, and to maximise the return on cash. Liquidity risk Liquidity risk is the risk that the Group will face in meeting its obligations in settling its financial liabilities. The Group’s approach to managing liquidity risk is to ensure that it has sufficient funds to meet its liabilities when due without incurring unacceptable losses. A material and sustained shortfall in the Group’s cash flow could undermine the Group’s credit rating, impair major investor confidence and restrict the ability of the Group to raise new funds. The Group maintained a satisfactory net cash position throughout the period and preceding periods as a result of cash generation from the business. During the current period and prior period surplus cash held by the operating subsidiaries, over and above balances required for working capital management was transferred to Group Treasury. These funds were kept in their local currency, or converted into sterling and kept in the Treasury Company bank accounts which are interest bearing. The strong cash generation and retention from the business together with available credit resources, help mitigate liquidity risk. The Group may hold financial instruments (such as bank and other loans) to finance its day to day working capital requirements, for capital expenditure, for corporate transactions (such as dividend payments to shareholders, share buybacks, acquisitions), for the management of currency and interest rate exposure arising from its operations (which may involve the use of derivatives and swaps) and for the temporary investment of short-term funds. No derivatives or swaps have been used in the period ending 31 October 2023 (31 October 2022: none). With a satisfactory net cash position, the Group largely finances its working capital and capital expenditure programmes from its own resources. In addition, financial instruments such as trade receivables (amounts due from customers as a result of a sale) and trade payables (arising from purchases of materials and services) arise from day-to-day trading. The following notes describe the Group’s financial risk management policy and details on financial instruments. ## 16(a) Fair values of financial instruments by class Generally, there is no material difference between the fair values and the carrying values of financial assets and financial liabilities held in the Group's or the Company's statement of financial position. However, given the sharp increase in market interest rates since the Group last financed its fixed rate debt, the fair value of the groups loans liabilities could differ from its carrying value. The estimated fair value of the Groups fixed rate debt at the reporting date is £77,423,000, which is £249,000 higher than its carrying value. ### Financial instruments held at fair value – Level 1 The Group holds an investment in Max Sight Group Holdings Ltd, which as a listed company. This investment is valued at level 1. The Group owns 109,972,500 Max Sight Group Holdings Ltd's shares valued at 0,099 HKD per share as at 31 October 2023, giving a value at that date of £1,145,118. This financial instrument is valued at the reporting date by reference to quoted market prices. ### Financial instruments held at fair value – Level 2 There are no material Level 2 investments held by the Group or Company. ### Financial instruments held at fair value – Level 3 The Group holds 500,000 convertible bonds in Energy Observer Developments SAS, a privately held company. This investment is valued at level 3 as its value is linked to the equity value of Energy Observer Developments SAS, which is not observable market data. At 31 October 2023 the investment is valued at £4,741,310. This financial instrument is valued at the reporting date using discounted cashflow analysis, for the bond cashflows, and by reference to the latest equity valuation of the issuing company. The key unobservable inputs to the valuation calculation are the discount rate of 5% and the equity valuation of Energy Observer Developments SAS. The equity valuation used was based on a recent fund raising by the issuing company. This, in effect, gave an external, arms-length valuation as new investors were purchasing equity based on their valuation of the company. ### Sensitivity to key unobservable inputs #### Discount rate A 7% increase in the discount rate used to value the convertible bond would result in a decrease in valuation of £33,000. #### Equity valuation A 20% decrease in the equity value of Energy Observer Developments SAS would result in a decrease in valuation of £205,000. #### Movement in level 3 financial instruments value The following table presents the changes in level 3 financial instruments for the years ended 31 October 2022 and 31 October 2023. | | Convertible Bond £'000 | | --- | --- | | At 31 October 2021 | – | | Addition | 4,450 | | At 31 October 2022 | 4,450 | | Fair value gain recognised in other gains/(losses) | 228 | | Foreign exchange movement recognised in other comprehensive income | 65 | | **At 31 October 2023** | **4,741** | No assets or liabilities were transferred between levels 1, 2 and 3 in the year. ME Group plc Annual Report 2023 155 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # **16(a) Fair values of financial instruments by class continued** **Financial instruments by category** The tables below show financial instruments by category for the Group | At 31 October 2022 | Amortised Cost £'000 | Fair Value Through Profit & Loss £'000 | Total £'000 | | --- | --- | --- | --- | | **Assets per statement of financial position** | | | | | Financial instruments held at FVTPL | – | 5,886 | 5,886 | | Financial assets – held at amortised cost: | | | | | Trade and other receivables | 11,286 | – | 11,286 | | Cash and cash equivalents | 111,091 | – | 111,091 | | | **122,377** | **5,886** | **128,263** | | | Other financial liabilities at amortised cost £'000 | Total £'000 | | --- | --- | --- | | **Liabilities per statement of financial position** | | | | Borrowings | 77,174 | 77,174 | | Leases | 13,336 | 13,336 | | Trade and other payables | 57,921 | 57,921 | | | **148,431** | **148,431** | | At 31 October 2022 | Amortised Cost £'000 | Fair Value Through Profit & Loss £'000 | Total £'000 | | --- | --- | --- | --- | | **Assets per statement of financial position** | | | | | Financial instruments held at FVTPL | – | 5,239 | 5,239 | | Financial assets – held at amortised cost: | | | | | Trade and other receivables | 10,475 | – | 10,475 | | Cash and cash equivalents | 136,185 | – | 136,185 | | | **146,660** | **5,239** | **151,899** | | | Other financial liabilities at amortised cost £'000 | Total £'000 | | --- | --- | --- | | **Liabilities per statement of financial position** | | | | Borrowings | 102,163 | 102,163 | | Leases | 15,923 | 15,923 | | Trade and other payables | 52,248 | 52,248 | | | **170,334** | **170,334** | 16 (Group) Annual Report 2023 186 ## Company | At 31 October 2023 | Amortised Cost £'000 | Fair Value Through Profit & Loss £'000 | Total £'000 | | --- | --- | --- | --- | | **Assets per statement of financial position** | | | | | Financial assets held at FVTPL | – | 1,145 | 1,145 | | Financial assets – held at amortised cost | | | | | Trade and other receivables | 33,001 | – | 33,001 | | Cash and cash equivalents | 3,344 | – | 3,344 | | | **36,346** | **1,145** | **37,491** | | | Other financial liabilities at amortised cost £'000 | Total £'000 | | --- | --- | --- | | **Liabilities per statement of financial position** | | | | Leases | 1,635 | 1,635 | | Trade and other payables | 15,791 | 15,791 | | | **17,426** | **17,426** | | At 31 October 2022 | Amortised Cost £'000 | Fair Value Through Profit & Loss £'000 | Total £'000 | | --- | --- | --- | --- | | **Assets per statement of financial position** | | | | | Financial assets held at FVTPL | – | 789 | 789 | | Financial assets – held at amortised cost | | | | | Trade and other receivables | 23,142 | – | 23,142 | | Cash and cash equivalents | 13,321 | – | 13,321 | | | **36,463** | **789** | **37,252** | | | Other financial liabilities at amortised cost £'000 | Total £'000 | | --- | --- | --- | | **Liabilities per statement of financial position** | | | | Leases | 1,801 | 1,801 | | Trade and other payables | 14,552 | 14,552 | | | **16,353** | **16,353** | P/E Group plc Annual Report 2023 157 Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 16(b) Financial statement risk management Financial risk factors and financial risk management Overview The Group and the Company are exposed to the following risks arising from financial instruments: (i) Credit risk (ii) Liquidity risk (iii) Market risk Credit risk is the risk of financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It mainly arises on trade and other receivables and bank balances. Liquidity risk arises from the Group and the Company having insufficient cash resources to meet its obligations as and when they fall due for payment. Market risk arises from changes in market prices, such as exchange rates, interest rates and equity prices that will impact on the Group’s and the Company’s statement of comprehensive income or the value of its holding of financial instruments. Listed below are details of these risks, the Group’s objectives, policies and processes for measuring and monitoring risks and the Group’s management of capital. Risk Management Framework The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential risks for the Group. Information has been disclosed relating to the Parent Company only where material risk exists. There is a continuous process for identifying, evaluating and managing the key financial risks faced by the Group in line with changing market conditions and the Group’s strategy. If necessary, the Group’s internal audit function may assist in monitoring and assessing the effectiveness of controls and procedures. The Board retains responsibility for ensuring the adequacy of systems for identifying and assessing significant risks, that appropriate control systems and other mitigating actions are in place and that residual exposures are consistent with the Group’s strategy and objectives. Assessments are conducted for all material entities. The Group may use derivatives to manage exchange or interest rate risk. Approval for their use is given by the Board and the position is monitored constantly. With regard to management of interest rate risk, the objectives are to lessen the impact of adverse interest rate movements on earnings and shareholders’ funds and to ensure no breach of covenants. This is mainly achieved by reviewing the mix of fixed and floating rate borrowings. The Group’s liquidity risk management involves maintaining sufficient cash and cash equivalents and the availability of funding through an adequate amount of committed credit facilities. (i) Credit risk The Group has no significant concentrations of credit risk. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, and on outstanding trade and other receivables. Cash deposits are limited to high credit quality financial institutions. The Group has policies in place to ensure that sales of products and services are made to customers with an approved credit history . ME Group plc Annual Report 2023 158 ME Group plc Annual Report 2023 159 Credit quality of financial assets Individual Group companies have banking relationships with leading banks in the country in which the Group company operates. Surplus cash is placed with Group Treasury bank accounts, as described above. The Group has procedures in place to ensure that cash is placed with sound financial institutions. The Group and the Company trade with a large number of customers, ranging from quoted companies and state organisations to individual traders. Individual Group companies have credit control procedures in place before making sales to new customers and levels of credit are reviewed in light of trading experience. The normal terms of trade are in the range 30–90 days. The collection of outstanding receivables is monitored at both the Group and subsidiary level. The Group and the Company make provisions against trade and other receivables, such provisions being based on the previous credit history of the debtor and if the debtor is in receivership or liquidation. The maximum credit risk for financial assets is the carrying value. Trade receivables are normally interest free. The normal terms of settlement are between 30 and 90 days. Trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group, and a failure to make contractual payments for a period of greater than 120 days past due or an impairment amount being required under the ECL model mandated by IFRS 9. The Group applies the simplified ECL model to its impairments of trade receivables and contract assets. Under the Group’s operating model, most revenue is collected at the point of sale. Where credit terms are offered, the Group has a strong record of debtor recovery. Any balances that are more than 90 days past due date are provided for in their entirety. The only exceptions to this policy are accounts where the Group has open work in progress or where technical issues are preventing the proper operation of the vending unit in question. Impairment losses on trade receivables and contract assets are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. The Group does not require collateral in respect of trade and other receivables. The Group does not have trade receivable and contract assets for which no loss allowance is recognised because of collateral. The Directors have concluded that the credit risk of trade and other receivables has not increased significantly since initial recognition. The Directors have come to this conclusion having considered micro and macro-economic factors including Brexit, the Group’s knowledge of its customers, payment history of the customers and industry trends. Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 16(b) Financial statement risk management continued The ageing of net current trade receivables is as follows: Group 31 October 2023 31 October 2022 | | Gross | Provision | | | Net | | Gross | Provision | | | Net | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | trade | for trade | | | Trade | | trade | for trade | | | Trade | | receivables | | receivables | | Receivables | | receivables | | receivables | | Receivables | | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | Current 3,847 – 3,847 4,209 – 4,209 Past due – overdue 1-30 days – – – – – – – overdue 31-60 days 289 – 289 39 – 39 – overdue 61 days 2,378 (1,326) 1,052 2,617 (987) 1,630 Total past due 2,667 (1,326) 1,341 2,656 (987) 1,669 Total trade receivables 6,514 (1,326) 5,188 6,865 (987) 5,878 Company 31 October 2023 31 October 2022 | | Gross | Provision | | | Net | | Gross | Provision | | | Net | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | trade | for trade | | | Trade | | trade | for trade | | | Trade | | receivables | | receivables | | Receivables | | receivables | | receivables | | Receivables | | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | Current 24 – 24 12 – 12 Past due – overdue 1-30 days – – – – – – – overdue 31-60 days 1 – 1 5 – 5 – overdue 61 days 22 (22) – 83 (76) 8 Total past due 23 (22) 1 89 (76) 13 Total trade receivables 47 (22) 25 101 (76) 25 The credit quality of trade receivables that are neither past due nor impaired is assessed on an individual basis, based on credit ratings and experience. Management believes adequate provision has been made for trade receivables. Company – expected credit losses on intercompany balances Intercompany balances with subsidiaries are repayable on demand. At the reporting date, each intercompany counterparty is assessed to determine whether it has sufficient accessible highly liquid assets to cover the intercompany debtor owed to the parent company. If this analysis determines that intercompany balance is not fully recoverable at the reporting date, management will set a recovery strategy and estimate the expected credit loss on the debtor. No provision was recognised against the Company’s intercompany receivables in the year (2022: nil). (ii) Liquidity risk The Group’s liquidity risk management involves maintaining sufficient cash and cash equivalents and the availability of funding through an adequate amount of committed credit facilities. Trading forecasts indicate that the current facilities provide more than sufficient liquidity headroom to support the business for the foreseeable future. The net cash position at 31 October 2023 and 31 October 2022 has reduced liquidity risk for the Group. The Group has undrawn facilities totalling 2 million euros and having regard to the Group’s cash flow, it is considered that the facilities provide adequate headroom for the Group’s needs. The facilities are generally reaffirmed by the banks annually. These undrawn facilities, if used, will be subject to floating rates of interest and may be subject to the normal covenant conditions attached to such borrowings . ME Group plc Annual Report 2023 160 Some of the groups loans are subject to covenants and, during the years to 31 October 2023 and 31 October 2022, the Group and the Company have comfortably complied with such requirements. The nature of the covenants are ratio of EBITDA to debt, ratio of debt to equity, ratio of net interest to EBITDA, free cashflow and profit requirements. The table below summarises the maturity profile of the Group's and Company's financial liabilities (including trade and other payables) at 31 October 2023 and 31 October 2022 based on contractual undiscounted payments. #### Group contractual cash flows | | Within one year £'000 | Year 2 £'000 | Year 3 £'000 | Year 4 £'000 | Year 5 £'000 | Over 5 years £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | --- | | **At 31 October 2023** | | | | | | | | | Interest bearing loans and borrowings and interest free loans | 27,676 | 20,663 | 17,655 | 10,819 | 771 | 976 | 78,560 | | Finance leases | 6,243 | 4,061 | 2,376 | 1,462 | 1,026 | 1,331 | 16,499 | | Trade and other payables | 57,921 | – | – | – | – | – | 57,921 | | | **91,840** | **24,724** | **20,031** | **12,281** | **1,797** | **2,307** | **152,980** | | **At 30 October 2022** | | | | | | | | | Interest bearing loans and borrowings and interest free loans | 30,412 | 26,272 | 19,904 | 16,939 | 10,211 | 271 | 104,009 | | Finance leases | 6,235 | 4,610 | 2,643 | 1,552 | 1,116 | 1,411 | 17,568 | | Trade and other payables | 52,248 | – | – | – | – | – | 52,248 | | | **87,905** | **28,246** | **22,036** | **19,238** | **12,639** | **271** | **170,334** | #### Company contractual cash flows | | Within one year £'000 | Year 2 £'000 | Year 3 £'000 | Year 4 £'000 | Year 5 £'000 | Over 5 years £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | --- | | **At 31 October 2023** | | | | | | | | | Finance leases | 709 | 597 | 355 | 162 | 149 | – | 1,971 | | Trade and other payables | 15,791 | – | – | – | – | – | 15,791 | | | **16,500** | **597** | **355** | **162** | **149** | **–** | **17,762** | | **At 30 October 2022** | | | | | | | | | Finance leases | 320 | 489 | 377 | 169 | 162 | 149 | 1,665 | | Trade and other payables | 14,552 | – | – | – | – | – | 14,552 | | | **15,612** | **185** | **185** | **185** | **185** | **–** | **16,353** | #### Financial instruments held at amortised cost These largely comprise of restricted bank deposit accounts where the cash acts as security against possible shortfalls in Group's UK pension fund obligation. #### (iii) Market risk ##### Foreign exchange risk The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the local functional currency. In addition, the Group faces currency risks arising from monetary financial instruments held in non-functional currencies. The income statement reflects the impact of realised and unrealised exchange differences on trading items and monetary financial instruments (note 4). The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The main currency translation risk relates to foreign operations whose functional currency is the Euro, Swiss Franc or Japanese Yen. The investments are not hedged. The translation reserve reflects the exchange differences arising on translation of the opening net assets and results of the foreign operation (note 21). ME Group plc Annual Report 2023 161 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # **16(b) Financial statement risk management continued***Operational foreign exchange exposure** Where possible, the Group tries to invoice in the local currency of the respective entity. If this is not possible, to mitigate exposure, the Group endeavours to buy from suppliers and sell to customers in the same currency. The exposure relating to receivables and payables denominated in the non-functional currency is normally less than 3 months as this is the normal settlement period for these items. Subject to the requirements of Group Treasury, as noted above, where possible, the Group tries to hold the majority of its cash and cash equivalent balances in the local currency of the respective entity. # **Monetary assets/liabilities** The Group continues to monitor exchange rates and buy or sell currencies in order to minimise the open exposure to foreign exchange risk. The Group may use derivative financial instruments mainly to reduce the risk of foreign exchange exposure on trading items (sales or purchases in currencies other than the domestic currency of the company concerned) and interest rate movements. The Group does not hold or issue derivative financial instruments for financial trading purposes. # **Borrowings** At 31 October 2023 and 31 October 2022 the majority of the Group's borrowings were denominated in Euros and held by subsidiaries whose functional currency is the Euro # **Analysis of monetary assets and liabilities by currency – Group** | At 31 October 2023 | Sterling £'000 | Euro £'000 | Swiss Franc £'000 | Japanese Yes £'000 | Other Currencies £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | **Assets per statement of financial position** | | | | | | | | Financial instruments held at FVTPL | 1,145 | 4,741 | – | – | – | 5,886 | | Trade and other receivables | 1,406 | 6,968 | 173 | 2,210 | 529 | 11,286 | | Cash and cash equivalents | 17,769 | 77,828 | 6,198 | 8,200 | 1,096 | 111,091 | | | 20,320 | 89,537 | 6,371 | 10,410 | 1,625 | 128,263 | | **Liabilities per statement of financial position** | | | | | | | | Borrowings and Leases | 1,635 | 80,351 | 296 | 8,194 | 34 | 90,510 | | Trade and other payables | 8,426 | 42,437 | 2,415 | 3,995 | 648 | 57,921 | | | 10,061 | 122,788 | 2,711 | 12,189 | 682 | 148,431 | | At 31 October 2022 | Sterling £'000 | Euro £'000 | Swiss Franc £'000 | Japanese Yes £'000 | Other Currencies £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | **Assets per statement of financial position** | | | | | | | | Financial instruments held at FVTPL | 789 | 4,450 | – | – | – | 5,239 | | Trade and other receivables | 2,152 | 11,925 | 139 | 3,002 | 1,023 | 18,241 | | Cash and cash equivalents | 15,781 | 105,910 | 5,236 | 7,694 | 1,564 | 136,185 | | | 18,722 | 122,285 | 5,375 | 10,696 | 2,587 | 159,665 | | **Liabilities per statement of financial position** | | | | | | | | Borrowings and Leases | 1,802 | 110,801 | 435 | 4,944 | 104 | 118,086 | | Trade and other payables | 9,109 | 37,149 | 2,300 | 3,170 | 520 | 52,248 | | | 10,911 | 147,950 | 2,735 | 8,174 | 624 | 170,334 | 16 (Group) Annual Report 2023 742 IFRS 7 sensitivity analysis Sensitivity analysis has been performed on the Group’s Euro foreign exchange risk, as its most material foreign currency. A 10% strengthening of Euro against Sterling, at the Statement of Financial Position date, would have caused a £2,906,000 decrease in the Group’s net assets at that date (2022: £2,432,000 decrease in net assets). A 10% weakening of Euro against Sterling would have had the equal and opposite effect on the Group’s net assets. Interest rate risk | | 2023 | | 2022 | | --- | --- | --- | --- | | Carrying | | Carrying | | | amount | | amount | | | | £’000 | | £’000 | Net cash Mainly non-interest bearing current accounts: Cash at bank and in hand 70,669 81,219 Deposit accounts – generally interest bearing: Bank deposit accounts 40,422 53,981 Restricted bank deposit accounts – 985 Other items Interest free and interest bearing loans (77,174) (102,164) 33,917 34,021 The above table shows which components of net debt are subject to interest. The Group has no exposure to floating rate interest bearing debt and a change in interest rates will not have a material change on interest expense. IFRS 7 sensitivity analysis All of the Group’s debt is subject to fixed rates of interest, so interest payable charges would not be materially impacted by a change in interest rates. Consequently, no sensitivity tables have been presented. Details of the Group’s borrowings are shown in the table below. All loans are subject to fixed rates of interest. A theoretical increase of 1% in the fixed rate of interest would result in an extra £772,000 (31 October 2022: £1,022,000) of interest expense. This sensitivity is purely illustrative as the Groups debt is not subject to an interest rate risk. Terms and debt repayment schedule The table below shows the maturity profile and interest rates of the Groups borrowings at 31 October 2023 and 31 October 2022. | | | | | | 2023 | | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Carrying | | Carrying | | | | Interest | | Year of | amount | | amount | | | Group Status Currency | | Rate | maturity | | £’000 | | £’000 | Loans Fixed rate Euro 0,28% – 1,57% 2023-2027 69,975 97,978 Loans Fixed rate Japanese Yen 0,54% – 1,15% 2024-2030 7,199 4,186 Lease liabilities Fixed rate Various 6,1% – 18.6% 2023-2033 13,336 15,922 90,510 118,086 Price risk The Group and the Company are exposed to changes in prices on raw materials, consumables and finished goods purchased from suppliers. Wherever possible, price rises are passed on to customers via sales price increases to help manage this risk. The Group’s investment in listed equity securities is not material thus the Group does not have any significant exposure to price risk on these equity investments. The Group’s investment in convertible bonds, which is linked to the equity of a privately held company, does not expose it to a material price risk . ME Group plc Annual Report 2023 163 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # 16(c) Capital risk management The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to enhance long-term shareholder value, by investing in the business so as to improve the return on investment (by increasing profits available for dividends) and by managing the capital gearing ratio (mixture of equity and debt). The Group manages, and makes adjustments to, its capital structure in light of the prevailing risks and economic conditions affecting its business activities. This may involve adjusting the rate of dividends, purchasing the Company's own shares, the issue of new shares and reviewing the level and type of debt. The Group manages its borrowings by appraising the mix of fixed and floating rate borrowings and the mix of long-term and short-term borrowings. Details of how the Group and subsidiaries are funded are shown below. There were no changes to the Group's approach to capital management during the period. # Group The Group is funded by share capital and retained earnings, supplemented by external borrowing as required. The Group has had a strong net cash position throughout the current and comparative period. # Subsidiary companies Subsidiary companies are funded by share capital and retained earnings, and where applicable local borrowings by the subsidiaries in appropriate currencies. The capital structure of the Group is presented below: | | 31 October 2023 €'000 | 31 October 2022 €'000 | | --- | --- | --- | | Cash and cash equivalents | 111,091 | 156,185 | | Borrowings | (77,174) | (102,164) | | Net cash (excluding restricted deposits) | 33,917 | 34,021 | | Equity | 158,988 | 132,649 | The Group has various borrowings and available facilities that contain certain external capital requirements (covenants) that are considered normal for these types of arrangements. The Group remains comfortably within all such covenants. # 17 Trade and other receivables | | Group | | Company | | | --- | --- | --- | --- | --- | | | 31 October 2023 €'000 | 31 October 2022 (retained) €'000 | 31 October 2023 €'000 | 31 October 2022 €'000 | | **Non-current assets** | | | | | | Other receivables | 3,005 | 1,974 | 981 | – | | | 3,005 | 1,974 | 981 | – | | **Current assets** | | | | | | Gross trade receivables | 6,514 | 6,865 | 47 | 101 | | Provision for trade receivables | (1,326) | (987) | (22) | (76) | | Trade receivables | 3,188 | 5,878 | 25 | 25 | | Amounts due from subsidiaries | – | – | 31,947 | 21,525 | | Other receivables | 3,093 | 2,623 | 49 | 354 | | Prepayments | 8,342 | 7,766 | 642 | 1,238 | | | 16,623 | 16,267 | 32,662 | 23,142 | The balance of prepayments at 1 November 2022 has been restated by a reduction of £3,783,000 to correct an error in the prior year financial statements. The adjustment represents the value of capitalised development work in progress which had previously been reported in prepayments but has now been reclassified to other intangible assets. A corresponding adjustment has been made to increase the opening balance of capitalised development costs in other intangible assets (note 1) by the same value. 16 (Group) Annual Report 2023 16A 19 Cash and cash equivalents Group Company | 31 October | | 31 October | | 31 October | | 31 October | | | --- | --- | --- | --- | --- | --- | --- | --- | | | 2023 | | 2022 | | 2023 | | 2022 | | | £’000 | | £’000 | | £’000 | | £’000 | Cash at bank and in hand 70,669 81,220 3,344 2,516 Deposit accounts (excluding restricted deposits) 40,422 53,980 – 9,829 Restricted deposit accounts – 985 – 976 Cash and cash equivalents per statement of financial position 111,091 136,185 3,344 13,321 Cash and cash equivalents per cash flow comprise cash at bank and in hand and short-term deposit accounts with an original maturity of less than three months, less bank overdrafts. The amounts placed in short-term deposit accounts depend on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rate. The Group earned interest on deposits at rates between 2.90% and 2.93% in the year (2022: 1.14% to 1.80%). Cash at bank is generally interest free but may earn interest at the applicable daily bank floating deposit rate. ME Group plc Annual Report 2023 165 Non-current other receivables include restricted deposits related to pension schemes, which in previous years were included in cash and cash equivalents. Following a change in accounting policy, the respective deposits are now classified as non-current receivables. The value of restricted deposits at the reporting date was £990,000 for the Group and £981,000 for the Company. All trade receivables arise from contracts with customers. Current other receivables include deposits relating to operating sites and properties, indirect and other taxation and other receivables. 18 Inventories Group Company 31 October 2023 £’000 31 October 2022 £’000 31 October 2023 £’000 31 October 2022 £’000 Raw materials and consumables 25,484 18,774 1,249 1,066 Finished goods 7,017 6,717 543 764 32,501 25,491 1,793 1,830 The replacement value of inventories is not materially different from that stated above. 20 Net cash Group Company Notes 31 October 2023 £’000 31 October 2022 £’000 31 October 2023 £’000 31 October 2022 £’000 Cash and cash equivalents per statement of financial position 19 111,091 136,185 3,344 13,321 Non-current borrowings 22 (50,137) (72,365) – – Current borrowings 22 (27,037) (29,799) – – Net Cash 33,917 34,021 3,344 13,321 Net cash is a non-GAAP measure since it is not defined in accordance with IFRS but is a key indicator used by management in assessing operational performance and financial position strength. The inclusion of items in net cash as defined by the Group may not be comparable with other companies’ measurement of net cash/debt. The Group includes in net cash, cash and cash equivalents and certain financial assets, mainly deposits, less current and non-current borrowings outstanding excluding lease liabilities of £13,336,000 (2022: £15,922,000) . Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 20 Net cash continued Reconciliation of movement in liabilities arising from financing activities Group Non cash movements Cash movements | | | Exchange | | New lease | | | Other | Repayment | | New | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 1 November | | differences | | liabilities | | movements | | of liabilities | | loans | 31 October | | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | | £’000 | 31 October 2023 Non-current loans 72,365 778 – (25,243) (744) 2 981 50,137 Non-current lease liabilities 10,064 157 657 (2,568) – – 8,310 Non-current liabilities arising from financing activities 82,429 935 657 (27,811) (744) 2,981 58,447 Current loans 29,799 375 – 25,243 (30,216) 1,836 27,037 Current lease liabilities 5,858 (4) 2,462 2,568 (5,858) – 5,026 Current liabilities arising from financing activities 35,657 371 2,462 27,811 (36,074) 1,836 32,063 Total liabilities arising from financing activities 118,086 1,306 3,119 – (36,818) 4,817 90,510 31 October 2022 Non-current loans 44,323 309 – (27,740) (1,270) 56,743 72,365 Non-current lease liabilities 10,735 135 2,189 (2,556) (439) – 10,064 Non-current liabilities arising from financing activities 55,058 444 2,189 (30,296) (1,709) 56,743 82,429 Current loans 20,120 261 – 27,740 (23,352) 5,030 29,799 Current lease liabilities 5,757 (41) 3,343 2,556 (5,757) – 5,858 Current liabilities arising from financing activities 25,877 220 3,343 30,296 (29,109) 5,030 35,657 Total liabilities arising from financing activities 80,935 664 5,532 – (30,818) 61,773 118,086 Company | | | New lease | | Repayment | | | Other | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 1 November | | liabilities | | of liabilities | | movements | | 31 October | | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | 31 October 2023 Non-current lease liabilities 741 358 - (73) 1,026 Current lease liabilities 1,060 212 (731) 68 609 Total liabilities arising from financing activities 1,801 570 (731) (5) 1,635 31 October 2022 Non-current lease liabilities 1,727 36 (14) (1,008) 741 Current lease liabilities 830 52 (830) 1,009 1,060 Total liabilities arising from financing activities 2,557 88 (844) – 1,801 ME Group plc Annual Report 2023 166 ## 21 Share capital and reserves | Share Capital | 31 October 2023 Number | 31 October 2022 Number | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | --- | --- | | **Allotted, issued and fully paid:** | | | | | | Ordinary shares of 0.5p each | | | | | | At the beginning of the period | 378,051,637 | 378,051,637 | 1,889 | 1,889 | | Issued in year – share options exercised | 403,242 | 40,000 | 2 | – | | At the end of the period | 378,454,879 | 378,051,637 | 1,891 | 1,889 | The holders of Ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. Share options, which have been granted to senior staff, including directors, to purchase Ordinary shares of 0.5p each, are as follows: | Date options granted | At 31 October 2022 | Exercise price | Granted during year | Lapsed or forfeited during year | Exercised during year | At 31 October 2023 | Date from which exercisable | Last date on which exercisable | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 13-Jul-16 | 499,300 | 141.50p | – | (309,694) | (189,606) | – | 13-Jul-19 | 12-Jul-23 | | 27-Aug-19 | 946,509 | 101.40p | – | (251,757) | (100,000) | 594,752 | 27-Aug-22 | 26-Aug-26 | | 4-Oct-19 | 1,000,000 | 93.30p | – | (1,000,000) | – | – | 4-Oct-22 | 4-Oct-26 | | 5-Oct-20 | 1,000,000 | 51.05p | – | (1,000,000) | – | – | 5-Oct-23 | 5-Oct-27 | | 19-Apr-21 | 1,245,000 | 61.40p | – | (320,000) | – | 925,000 | 19-Apr-24 | 19-Apr-28 | | 05-Aug-21 | 2,164,774 | 77.50p | – | (251,564) | (113,656) | 1,799,774 | 05-Aug-24 | 05-Aug-28 | | 5-Oct-21 | 1,000,000 | 61.10p | – | (1,000,000) | – | – | 5-Oct-24 | 5-Oct-28 | | 12-May-22 | 2,225,000 | 68.75p | – | (475,000) | – | 1,750,000 | 12-May-25 | 12-May-29 | | 04-Apr-23 | – | 126.70p | 2,039,947 | (100,000) | – | 1,939,947 | 04-Apr-26 | 04-Apr-30 | | | **10,080,583** | | **2,039,947** | **(4,707,815)** | **(403,242)** | **7,009,473** | | | All options can be exercised, in normal circumstances, within a period of four years from the exercise of option date, providing that the performance criterion or performance condition has been achieved. The subscription price for all options is based upon the average market price on the three days prior to the date of grant. Options are restricted, or may lapse, if the grantee leaves the employment of the Group before the first exercise date. All options are equity settled options. Options granted after 2005 are covered by the new ME Group Executive Share Option Scheme. The vesting of options is subject to an EPS-based performance condition relating to the extent to which the Company's basic EPS for the third financial year, following the date of grant, reaches a sliding scale of challenging EPS targets. Options are normally granted over shares worth up to 150% of a participant's salary each year. In exceptional cases as part of the terms of attracting senior management, options in excess of that number may be granted. The weighted average exercise price of all options outstanding at 31 October 2023 is 88.83p (2022: 75.98p) and the weighted average exercise price of options exercisable at 31 October 2023 is 101.40p (2022: 105.54p). The weighted average share price for options exercised during the period ended 31 October 2023 was 154.43p (31 October 2022: 96.35p). The weighted average remaining years for options outstanding at the period-end date is 5.2 years (2022: 5.2 years). ME Group plc Annual Report 2023 167 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 ## 21 Share capital and reserves continued In accordance with IFRS 2 Share-based Payments, share options granted to senior management including directors after November 2002 have been fair-valued and the Company has used the Black-Scholes option pricing model. This model takes into account the terms and conditions under which the options were granted. The following table lists the inputs to the model used for the years ended 31 October 2023 and 31 October 2022: | Date of grant | 27 August 2019 | 4 October 2019 | 5 October 2020 | | --- | --- | --- | --- | | Vesting period | 3 years | 3 years | 3 years | | Share price volatility | 32.5% | 32.59% | 31.64% | | Share price on date of grant | 101.40p | 92.80p | 42.30p | | Option price | 103.00p | 93.30p | 93.30p | | Expected term | 3.25 years | 3.25 years | 3.25 years | | Dividend yield | 0.00% | 3.88% | 0.00% | | Risk free interest rate | 0.00% | 0.00% | 0.00% | | Fair value | 45.51p | 41.99p | 22.93p | | Date of grant | 19 April 2021 | 5 August 2021 | 5 October 2021 | | --- | --- | --- | --- | | Vesting period | 3 years | 3 years | 3 years | | Share price volatility | 51.40% | 77.50% | 49.48% | | Share price on date of grant | 63.20p | 77.50p | 65.30p | | Option price | 61.40p | 77.50p | 61.10p | | Expected term | 3.25 years | 3.25 years | 3.25 years | | Dividend yield | 0.00% | 0.00% | 0.00% | | Risk free interest rate | 0.17% | 0.15% | 0.56% | | Fair value | 34.89p | 28.18p | 24.47p | | Date of grant | 12 May 2022 | 4 April 2023 | | --- | --- | --- | | Vesting period | 3 years | 3 years | | Share price volatility | 49.91% | 52.91% | | Share price on date of grant | 65.20p | 127.40p | | Option price | 68.73p | 126.70p | | Expected term | 3.25 years | 3.25 years | | Dividend yield | 4.43% | 4.40% | | Risk free interest rate | 1.24% | 3.35% | | Fair value | 25.17p | 59.25p | The charge for share-based payments is £345,000 (2022: £884,000) and for the Company the charge is £197,000 (2022: £321,000). Share price volatility is based on historical data. 16 Group plc Annual Report 2023 ## Reserves ### Group #### Treasury shares (Group and Company) In accordance with shareholders' resolutions passed at the Annual General Meeting on 18 August 2023, the Company may purchase its own shares up to a maximum of 10% of the Ordinary shares in issue. In the year ended 31 October 2023 the Company purchased, on various dates and at various prices, 1,260,534 shares at a combined cost of £1,969,000 including £23,000 transaction costs and is holding these shares as treasury shares (2022: no shares purchased or held in treasury). At 31 October 2023 the number of shares held in treasury was 1,260,534, representing 0.1% of the Ordinary issued share capital (2022: nil). The treasury shares have no voting or dividend rights. #### Share premium Share premium reserve is the cumulative value of the excess received for shares above their nominal value. #### Other reserves Other reserves mainly arise in subsidiaries, are generally not distributable, and arise as a result of local legislation regarding capital maintenance. #### Translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries and associates. In accordance with the options allowed under IFRS 1, only exchange rate differences arising on translation after the date of transition, 1 May 2004, are shown in this reserve. When an overseas subsidiary or associate is disposed, the cumulative exchange difference relating to the entity disposed is recycled through the statement of comprehensive income as part of the profit or loss on sale in other net gains/(losses) and is shown as a movement in other comprehensive income. ### Company #### Other reserves The Company's other reserves £2,673,000 (2022: £2,007,000) relating to the fair value of options granted to employees of Group undertakings. ## 22 Financial liabilities | | Group | | Company | | | --- | --- | --- | --- | --- | | | 31 October 2023 £'000 | 31 October 2022 £'000 | 31 October 2023 £'000 | 31 October 2022 £'000 | | **Non-current liabilities** | | | | | | Non-current instalments due on bank loans | 50,137 | 72,365 | – | – | | **Current liabilities** | | | | | | Current instalments due on loans | 27,037 | 29,799 | – | – | Bank loans bear fixed rates of interest. Margins are generally between 0.4% and 1.0%. Further details are provided in note 16. ME Group plc Annual Report 2023 169 Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 22 Financial liabilities continued ME Group plc Annual Report 2023 170 Lease Liabilities In addition to bank loans, the Group has lease liabilities of £13,336,000 (2022: £15,922,000). The Company has lease liabilities of £1,971,000 (2022 £1,665,000). The Group has lease arrangements across three main categories: site agreements, property and motor vehicles. The key quantitative information regarding the lease portfolio is shown below: Group Site agreements Property Motor vehicles As at 31 October 2023 Number of lease agreements 618 9 507 Average lease term (months) 80 74 41 Average remaining term (months) 50 41 22 Group Site agreements Property Motor vehicles As at 31 October 2022 Number of lease agreements 545 9 423 Average lease term (months) 74 66 43 Average remaining term (months) 34 28 10 Company Site agreements Property Motor vehicles As at 31 October 2023 Number of lease agreements 44 1 124 Average lease term (months) 52 113 45 Average remaining term (months) 6 60 21 Company Site agreements Property Motor vehicles As at 31 October 2022 Number of lease agreements 65 1 99 Average lease term (months) 47 113 47 Average remaining term (months) 6 72 17 The maturity profile of lease liabilities is shown below: | Group | Within one year £'000 | Year 2 £'000 | Year 3 £'000 | Year 4 £'000 | Year 5 £'000 | Over 5 years £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | --- | | **At 31 October 2023** | | | | | | | | | Leases | 5,026 | 2,107 | 2,092 | 2,071 | 2,038 | 1 | 13,336 | | At 31 October 2022 | | | | | | | | | Leases | 5,858 | 2,568 | 2,513 | 2,503 | 2,480 | – | 15,922 | | **Company** | | | | | | | | | | Within one year £'000 | Year 2 £'000 | Year 3 £'000 | Year 4 £'000 | Year 5 £'000 | Over 5 years £'000 | Total £'000 | | **At 31 October 2023** | | | | | | | | | Leases | 609 | 256 | 256 | 256 | 256 | – | 1,635 | | At 31 October 2022 | | | | | | | | | Leases | 1,060 | 185 | 185 | 185 | 186 | – | 1,801 | ## 23 Post-employment benefit obligations The Company and its principal subsidiaries operate pension and other retirement and post-employment schemes including both funded defined benefit schemes, and defined contribution schemes. ### Defined benefit plans A defined benefit plan is a pension arrangement under which participating members receive a benefit at retirement. The amount is determined by the plan rules and is dependent on such factors as age, years of service and pensionable pay and is not dependent on contributions made by the Company or members. The income statement service cost, in respect of defined benefit plans represents the increase in the defined benefit liability arising from pension benefits accrued by members in the current period. The Company having such plans is exposed to investment and other experience risks and may need to make additional contributions where it is estimated that the benefits will not be covered by the assets of the plan. The Group's and the Company's policy is to recognise actuarial gains and losses immediately each year in the statement of changes in equity, under other comprehensive income. These comprise the impact on the defined benefit liability of changes in demographic and financial assumptions compared with the start of the year, actual experience being different to those assumptions and the return on plan assets above the amount included in net pension interest. Defined contribution plans are arrangements in which the benefits paid to participants are linked to the amount of contributions paid and the performance of the scheme. Such plans are independent of the Company and the Group and the Company and the Group have no exposure to investment and experience risks. The income statement charge for these plans represents the contributions paid by the Group based on a percentage of employees' pay. The Group's and the Company's defined benefit pension schemes are included in the statement of financial position under employment benefit obligations, as are other overseas retirement provisions. The amounts charged to profit and loss for all post-employment benefits are shown in note 5. THE Group plc Annual Report 2023 171 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 ## 23 Post-employment benefit obligations continued The amount shown in the statement of financial position is detailed as follows: | | Group | | Company | | | --- | --- | --- | --- | --- | | | 31 October 2023 €'000 | 31 October 2022 €'000 | 31 October 2023 €'000 | 31 October 2022 €'000 | | Overseas employment benefit obligations | 3,847 | 3,692 | – | – | | Defined benefit schemes | 216 | 158 | – | – | | | 4,065 | 3,850 | – | – | ### ME Group International plc defined benefit pension scheme The Company runs a defined benefit pension scheme, the Photo-ME International Plc Pension and Life Assurance Fund (the "Fund"). This note covers the pension obligations provided from the Fund. The Fund is administered by a corporate Trustee, with Trustee Directors, which is legally separate from the Company. The Trustee Directors include representatives of both the Company and Fund members. The Trustee Directors are required by law to act in the interest of all relevant beneficiaries and are responsible for the investment policy with regard to the assets plus the day to day administration of the benefits. The level of benefits provided by the Fund depends on a member's length of service and salary at date of leaving or retiring from the Fund. Annual pension increases between leaving the Fund and retirement are linked to increases in the Retail Prices Index (RPI). After retirement, annual pension increases are at 3.0% pa for pension accrued before April 1997 and in line with increases in the Retail Prices Index (RPI), up to a maximum of 5.0% pa, for pension accrued from April 1997. The benefit payments are from a trustee administered fund containing assets held in trust and governed by UK regulations and practice. The amount of Company contributions is decided jointly by the Trustee Directors and the Company. The Fund's investment strategy is decided by the Trustee Directors, in consultation with the Company. The Trustee Directors exercise their powers of investment (or delegation where these powers have been delegated to a fund manager) in a manner calculated to ensure the security, quality, liquidity and profitability of the portfolio as a whole. In order to avoid an undue concentration of risk a spread of assets is held. The diversification is both within and across asset classes. The assets are invested in a manner appropriate to the nature and duration of the expected future retirement benefits payable under the Fund. Day to day selection of stocks is delegated to fund managers appointed by the Trustee Directors. As regards the review and selection of their fund managers, the Trustee Directors take expert advice. The actuarial valuation of the UK Pension scheme has revealed a surplus at 31 October 2023 and at each financial statement date since 30 April 2017. This surplus has not been recognised as an asset, in accordance with IFRIC 14, as in the future the surplus will not be recovered by a reduction in future contributions to the scheme. The scheme has been closed to new members for over 30 years. ### Profile of the Fund The defined benefit obligation includes benefits for deferred pensioners and current pensioners. The defined benefit obligation is broadly split 99%/7% between pensioners and deferred members. The defined benefit obligation for certain current pensioners is backed by insurance policies. A corresponding asset equal to the defined benefit obligation is included in this note in respect of these members. The Fund duration is an indicator of the weighted-average time until benefit payments are made. For the Fund as a whole, the duration is around 8 years. ME Group plc Annual Report 2023 172 #### Funding requirements UK legislation requires that pension schemes are funded prudently. The most recent triennial funding valuation of the Fund was carried out by a qualified actuary with an effective date of 1 June 2021. At this date the Fund had a funding level of 102% and a surplus of approximately £0.2 million on a technical provisions basis. This basis uses actuarial assumptions adopted by the Trustee Directors of the Fund that are consistent with the Fund continuing on an ongoing basis with support from the Company. The last active member ceased employment with the Company in 2020 so contributions are no longer required in respect of the accrual of benefits in the Fund. #### Risks associated with the Fund The Fund exposes the Company to a number of risks, the most significant of which are described below. | Asset volatility | The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, this will create a deficit. | | --- | --- | | Changes in bond yields | A decrease in corporate bond yields will increase the value placed on the Fund's liabilities for IAS 19, although this will be partially offset by an increase in the value of the Fund's bond holdings and insurance policies backing pensions in payment. | | Inflation risk | Some of the Fund's benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). In addition, increases in expected inflation will be offset by an increase in the value of the Fund's index-linked bond holdings and insurance policies backing pensions in payment. | | Life expectancy | The majority of the Fund's obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the liabilities. Increases in life expectancy will be partially offset by an increase in the value of the insurance policies backing pensions in payment. | #### Reconciliation of the movement in the present value of the defined benefit obligation | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | Present value of defined benefit obligation at beginning of the period | 4,364 | 5,788 | | Current service cost | – | – | | Interest cost | 206 | 107 | | Actuarial (gains)/losses on fund liabilities arising in demographic assumptions | (70) | 67 | | Actuarial (gains) from changes in financial assumptions | (225) | (1,332) | | Actuarial (gains)/losses on liabilities from experience | (268) | 84 | | Benefits paid | (322) | (350) | | Present value of defined benefit obligation at end of the period | 3,685 | 4,564 | #### Reconciliation of the movement in the fair value of plan assets | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | Fair value of plan assets at beginning of the period | 4,769 | 6,641 | | Interest income on fund assets | 226 | 123 | | Remeasurement (losses) on assets | (672) | (1,645) | | Benefits paid | (322) | (350) | | Fair value of plan assets at end of the period | 4,001 | 4,769 | P/E Group plc Annual Report 2023 173 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # **23 Post-employment benefit obligations continued** Amount to be recognised in the statement of financial position | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | Present value of funded obligations | 3,685 | 4,364 | | Fair value of scheme assets | 4,001 | 4,769 | | Net surplus | (316) | (405) | | Effect of limit of recognition of an asset | 316 | 405 | | Amount recognised in statement of financial position | – | – | # **Amount recognised in profit and loss** | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | **Amount recognised in profit and loss** | | | | Current service cost | – | – | | Interest on net defined liability/(asset) | – | – | | Total charge | – | – | | Pension expense recognised in profit and loss | – | – | | **Remeasurement in Other Comprehensive Income** | | | | Return on Scheme assets in excess of that recognised in net interest | 672 | 1,645 | | Actuarial (gains) due to changes in financial assumptions | (225) | (1,352) | | Actuarial (gains)/losses due to changes in demographic assumptions | (70) | 67 | | Actuarial (gains)/losses on liabilities arising from experience | (268) | 84 | | Adjustment due to the asset ceiling | (109) | (464) | | Total expense/(income) amount recognised in Other Comprehensive Income | – | – | | Total expense amount recognised in Comprehensive Income | – | – | The amounts shown above are included in staff costs (note 5) and in administrative expenses. An analysis of the assets of the plan is as follows: | | 31 October 2023 | | 31 October 2022 | | | --- | --- | --- | --- | --- | | | £'000 | % | £'000 | % | | Bonds and insurance policies | 3,892 | 97 | 4,704 | 99 | | Other | 109 | 3 | 65 | 1 | | | 4,001 | 100 | 4,769 | 100 | There were no financial instruments of the Company included in the plan assets (2023: none) and there were no property assets occupied by the Company (2022: none). # **Principal actuarial assumptions** | | 31 October 2023 % | 31 October 2022 % | | --- | --- | --- | | Discount rate for scheme liabilities | 5.6 | 4.9 | | Rate for increase in salaries | n/a | n/a | | Price inflation | 3.2 | 3.1 | | Pension increases | 3.0 | 3.0 | The Group plc Annual Report 2023 174 The mortality tables used for 2023 are S3NXA Light tables for males and S3NXA All lives for females, with CMI 2022 projections and a long-term rate of improvement of 1.25% pa. The mortality tables used for 2022 were also S3NXA Light tables, but with CMI 2021 projections and a long term rate of improvement of 1.25% pa. The mortality assumptions allow for expected future improvements in mortality rates. | | 31 October 2023 | 31 October 2022 | | --- | --- | --- | | Male currently aged 65 | 23.3 years (age 88.3) | 23.8 years (age 88.8) | | Female currently aged 65 | 24.7 years (age 89.7) | 25.1 years (age 90.1) | | Male currently aged 45 | 24.5 years (age 89.5) | 25.0 years (age 90.0) | | Female current aged 45 | 26.1 years (age 91.1) | 26.5 years (age 91.5) | #### History of asset values, defined benefit obligation and surplus/deficit in fund | | 2023 £'000 | 2022 £'000 | 2021 £'000 | 2020 £'000 | 2019 £'000 | | --- | --- | --- | --- | --- | --- | | Fair value of defined benefit obligation | 3,685 | 4,364 | 5,788 | 6,267 | 5,940 | | Fair value of assets | 4,001 | 4,769 | 6,641 | 7,040 | 6,675 | | Surplus/(deficit) | 316 | 405 | 853 | 773 | 735 | #### History of experience gains and losses | | 2023 £'000 | 2022 £'000 | 2021 £'000 | 2020 £'000 | 2019 £'000 | | --- | --- | --- | --- | --- | --- | | Experience gains/(losses) on fund assets | (672) | (1,645) | (170) | 622 | 160 | | Experience (losses)/gains on plan liabilities | 268 | (84) | 79 | (67) | 9 | Liabilities for 2023, 2022, 2021, 2020 and 2019 relate to gains/(losses) in respect of liability experience only, and excludes any change in liabilities in respect of changes to the actuarial assumptions used. #### Sensitivity to key assumptions The key assumptions used for the IAS 19 valuation are: discount rate, inflation rate and mortality. If different assumptions were used, this could have a material effect on the results disclosed. The table below shows the sensitivity to the key assumptions noted above. | Period ended 31 October 2023 | Plan assets £'000 | Defined benefit obligation £'000 | Surplus £'000 | | --- | --- | --- | --- | | As reported | 4,001 | 3,685 | 316 | | Following a 0.1% decrease in the discount rate | 4,009 | 3,714 | 295 | | Following a 0.1% increase in the inflation assumption | 4,002 | 3,694 | 308 | | Following an increase in the life expectancy of one year | 4,120 | 3,918 | 202 | The sensitivity information shown above has been prepared using the same method as adopted when adjusting the results of the latest valuation to the statement of financial position data. This is the same approach as has been adopted in previous years. #### Overseas pension schemes The Group's Swiss subsidiary, ME Group Switzerland AG participates in funded multi-employer pension schemes. A guaranteed return for such employees' schemes is mandated by the Swiss state. An actuarial valuation was performed at 31 October 2023 and 31 October 2022 by independent actuaries. ME Group plc Annual Report 2023 175 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # **23 Post-employment benefit obligations continued** Reconciliation of the movement in the present value of the defined benefit obligation | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | Present value of defined benefit obligation at start of the period | 2,898 | 3,621 | | Exchange difference | 136 | 275 | | Contribution by members | 33 | 56 | | Current service cost | 126 | 172 | | Past service cost | (18) | (29) | | Interest cost | 71 | 8 | | Remeasurement gains on plan liabilities | (56) | (658) | | Prepaid risk premiums | (36) | (38) | | Benefits paid | (225) | (491) | | Administration costs | 1 | 2 | | Present value of defined benefit obligation at end of the period | 2,930 | 2,898 | | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | Fair value of plan assets at start of the period | 2,740 | 3,113 | | Exchange difference | 127 | 245 | | Contributions by company and members | 166 | 178 | | Expected return on plan assets | 67 | 9 | | Remeasurement losses on plan assets | (125) | (276) | | Benefits paid | (225) | (491) | | Prepaid risk premiums | (36) | (38) | | Fair value of plan assets at end of the period | 2,714 | 2,740 | | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | Net liability at start of the period | 158 | 508 | | Exchange difference | 8 | 30 | | Increase/(decrease) in liability | 49 | (380) | | Net liability at end of the period | 216 | 158 | The Group plc Annual Report 2023 176 ### Amounts recognised in comprehensive income | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | **Amount recognised in profit and loss:** | | | | Amounts recognised in comprehensive income: | | | | Current service cost | 127 | 172 | | Post service cost | (18) | (29) | | Administrative expenses | 1 | 2 | | Net pension interest | 4 | (1) | | Total charge | 114 | 144 | | Amount recognised in other comprehensive income: | | | | Loss on scheme assets | 125 | 276 | | Actuarial gains on defined benefit obligation | (56) | (658) | | Total amount recognised in other comprehensive income | 68 | (382) | | Total amount recognised in profit and loss and other comprehensive income | 182 | (238) | | | 31 October 2023 | | 30 October 2022 | | | --- | --- | --- | --- | --- | | | £'000 | % | £'000 | % | | Cash | 27 | 1 | 27 | 1 | | Equities & debt instruments | 1,954 | 68 | 1,865 | 68 | | Other | 733 | 31 | 849 | 31 | | Total plan assets | 2,714 | 100 | 2,740 | 100 | ### Principal actuarial assumptions | | 31 October 2023 % | 31 October 2022 % | | --- | --- | --- | | Discount rate | 2.00 | 2.40 | | Expected return on plan assets at end of year | n/a | n/a | | Rate of increase in salaries | 1.20 | 1.20 | | Price inflation | 1.00 | 1.00 | The normal retirement age for males is between 60 – 65 years and for females between 59 – 64 years for both 2023 and 2022. The mortality tables used in 2023, 2022 and 2021 were the BVG 2020 GT tables The mortality tables used in 2020, 2019 and 2018 were the BVG 2015 GT tables. PMI Group plc Annual Report 2023 177 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # **23 Post-employment benefit obligations continued** History of assets, liabilities and actuarial gains and losses | | 2023 £'000 | 2022 £'000 | 2021 £'000 | 2020 £'000 | 2019 £'000 | | --- | --- | --- | --- | --- | --- | | Present value of defined benefit obligation | 2,930 | 2,898 | 3,621 | 4,792 | 4,144 | | Fair value of assets | 2,714 | 2,740 | 3,113 | 3,615 | 3,087 | | Deficit | (216) | (158) | (508) | (1,177) | (1,057) | | | 2023 £'000 | 2022 £'000 | 2021 £'000 | 2020 £'000 | 2019 £'000 | | --- | --- | --- | --- | --- | --- | | Experience (losses)/gains on plan liabilities | 56 | 658 | 456 | (93) | (144) | | – as a percentage of the present value of plan liabilities | (2%) | (23%) | (12%) | 2% | 3% | | Remeasurement gains/(losses) on plan assets | (125) | (276) | 166 | (69) | 96 | | – as a percentage of the present value of plan assets | (5%) | (10%) | 5% | (2%) | 3% | # **Sensitivity to key assumptions** The key assumptions used for the IAS 19 valuation are: discount rate, inflation rate and mortality. If different assumptions were used, this could have a material effect on the results disclosed. The table below shows the sensitivity to the key assumptions noted above. | | | Defined benefit obligation £'000 | Increase/ (decrease) in defined benefit obligation £'000 | | --- | --- | --- | --- | | Defined benefit obligation as reported | | 2,930 | – | | Defined benefit obligation | – with discount rate – 0.25% | 3,019 | 89 | | | – with discount rate 0.25% | 2,846 | (84) | | | – with salary decrease – 0.25% | 3,002 | 72 | | | – with salary increase 0.25% | 2,863 | (67) | | | – with life expectancy 1 year | 2,964 | 54 | | | – with life expectancy – 1 year | 2,894 | (36) | The Group's best estimate for contributions to be paid by the company next year to the scheme is £140,000 (2022: £133,000). The amount recognised in the income statement for this scheme was £114,000 (2022: £144,000). 16 Group plc Annual Report 2023 178 ### Overseas post-employment benefit obligations Provisions for obligations to make termination payments on retirement, to employees who are not members of the pension and retirement schemes, are as follows: - The Group's Japanese subsidiary undertaking, ME Group Japan, has an unfunded post-employment retirement provision based on an employee's length of service with the company and their current salary. The allowance is paid to an employee when they leave the company. This has been provided for in full within the accounts. ME Group Japan, agreed with the employees that 50 % of the liability for the retirement provision will be paid in cash to an independently controlled defined contribution scheme, with the balance to be met by the company when the employee leaves. The provision were valued by an independent actuary using the Projected Unit Credit Method at 31 October 2023 and 31 October 2022. This actuarial valuation incorporated the following principal assumptions in arriving at the present value of the obligations: | | 31 October 2023 | 31 October 2022 | | --- | --- | --- | | Discount rate | 0.95% | 0.49% | | Rate of increase in salaries | 0% | 0% | | Retirement age | 60 years | 60 years | | Mortality table | Standard mortality rates under defined benefit corporation pension plan (the 22nd Life Table for male & female) | Standard mortality rates under defined benefit corporation pension plan (the 22nd Life Table for male & female) | Expenses relating to the Japanese post-employment benefit obligation were recognised in following sections of the statement of comprehensive income: - Administration expenses £65,000 (2022: £55,000) - Remeasurement gains in other comprehensive income £1,000 (2022: £7,000) To meet the legal obligations within France, the Group's subsidiary undertakings have unfunded retirement provisions, which were valued by an independent actuary using the Projected Unit Credit Method at 31 October 2023 and 31 October 2022. This actuarial valuation incorporated the following principal assumptions in arriving at the present value of the obligations: | | 31 October 2023 | 31 October 2022 | | --- | --- | --- | | Discount rate | 3.80% | 4.00% | | Rate of increase in salaries | 2.00% | 2.00% | | Retirement age | 62-67 years | 62-67 years | | Inflation rate | 2.00% | 2.00% | | Mortality table | TGH/TGF OS | TGH/TGF OS | Expenses relating to the French post-employment benefit obligation were recognised in following sections of the statement of comprehensive income: - Administration expenses £16,000 (2022: £1,000) - Finance cost £102,000 (2022: £21,000) - Remeasurement losses in other comprehensive income £151,000 (2022: remeasurement gain of £748,000) ME Group plc Annual Report 2023 179 Financial Statements ### Notes to the Financial Statements continued For the 12 months ended 31 October 2023 24 Provisions Group Employee | related | | Product | | | | --- | --- | --- | --- | --- | | claims | warranties | | Other | Total | | £’000 | | £’000 | £’000 | £’000 | At 31 October 2021 688 764 714 2,166 Exchange differences 3 7 18 28 Utilised and other movements (453) (338) (760) (1,551) Charged to income statement – 202 722 924 At 31 October 2022 238 635 694 1,567 Amount shown as current liability 238 635 694 1,567 Amount shown as non-current liability – – – – At 31 October 2022 238 635 694 1,567 Exchange differences 5 4 (1) 8 Utilised and other movements (49) (52) (522) (623) Reclassifications – 314 (314) – Charged to income statement 78 – 854 932 At 31 October 2023 272 901 711 1,884 Amount shown as current liability 272 901 711 1,884 Amount shown as non-current liability – – – – Other provisions include amounts for unresolved claims made against the Group by suppliers. ME Group plc Annual Report 2023 180 25 Deferred taxation Deferred tax comprises: Group Company 31 October 2023 £’000 31 October 2022 (restated) £’000 31 October 2023 £’000 31 October 2022 £’000 Temporary differences relating to property, plant and equipment 2,089 187 702 (907) Other temporary differences in recognising revenue and expense items in other periods for taxation purposes: – capitalised development costs 1,030 1,015 – – – post-employment benefit provisions (1,254) (1,243) – – – acquisition related intangibles 4,407 5,038 – – – other short-term temporary differences 2,294 2,781 (30) (41) 8,566 7,778 672 (948) The closing balance comprises: Deferred tax assets (1,020) (1,982) (30) (948) Deferred tax liabilities 9,586 9,760 702 – 8,566 7,778 672 (948) The movements on deferred taxation during the period were as follows: | | Group | | Company | | | --- | --- | --- | --- | --- | | | 31 October 2023 €'000 | 31 October 2022 (restated) €'000 | 31 October 2023 €'000 | 31 October 2022 €'000 | | Opening balance | 7,778 | 9,562 | (948) | (752) | | Exchange differences | (92) | (137) | – | – | | Adjustments for prior periods | – | 82 | – | – | | Post-employment benefit provisions | (52) | 248 | – | – | | Charge/(credit) for the period in income statement | 952 | (1,169) | 1,620 | (216) | | Other | – | (626) | – | – | | **Closing balance** | **8,566** | **7,760** | **672** | **(948)** | | IFRS remeasurement | – | 18 | – | – | | **Closing balance** | **8,566** | **7,778** | **672** | **(948)** | The IFRS remeasurement relates to deferred tax on intangible assets identified by purchase price allocation. Refer to note 11 for details of the IFRS remeasurement. #### Temporary differences associated with Group investments ##### Unremitted earnings of overseas affiliates No deferred tax liability has been recognised on the unremitted earnings of overseas subsidiaries as no tax is expected to be payable on them in the foreseeable future based on current legislation or where the Group is able to control remittance of earnings and it is possible that such earnings will not be remitted in the foreseeable future. ##### Unrecognised deferred tax assets The Group has no unrecognised deferred tax assets. ##### Factors that may affect future tax charges The UK Corporation Tax rate increased from 19% to 25% with effect from 1 April 2023. The deferred tax assets and liabilities have been recognised based on the respective corporation tax rates at which they are anticipated to unwind in each jurisdiction. #### 26 Trade and other payables | | Group | | Company | | | --- | --- | --- | --- | --- | | | 31 October 2023 €'000 | 31 October 2022 €'000 | 31 October 2023 €'000 | 31 October 2022 €'000 | | **Amounts shown as current liabilities** | | | | | | Trade payables | 33,393 | 29,364 | 2,246 | 5,207 | | Amounts owed to subsidiaries | – | – | 9,448 | 8,736 | | Other taxes and social security costs | 2,631 | 4,176 | 814 | 736 | | Other payables | 11,185 | 11,081 | – | 64 | | Accruals and deferred income | 10,713 | 7,627 | 3,284 | 1,808 | | | **57,921** | **52,248** | **15,791** | **14,552** | #### 27 Capital commitments and contingent liabilities ##### Contingent liabilities The Company has given guarantees in the normal course of business to the Group's bankers. No losses are expected from guarantees given by the Company. In the opinion of the Directors, adequate provision has been made for claims and legal disputes and the Directors therefore consider that no contingent liability for litigation exists. The Group has no contingent liabilities with regard to its interest in the associated undertakings (2022 none). P/E Group/ph Annual Report 2023 181 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # 28 Related parties The Group's related parties are its associated undertakings, subsidiary undertakings and its key management personnel, which comprises the Board of Directors. The following transactions were carried out with related parties: # Directors' compensation | | Group | | Company | | | --- | --- | --- | --- | --- | | | 31 October 2023 £'000 | 31 October 2022 Represented £'000 | 31 October 2023 £'000 | 31 October 2022 £'000 | | Salaries, director fees, short term benefits and short term bonuses | 2,318 | 2,485 | – | – | | Share-based payment charge | 136 | 246 | – | – | | | **2,484** | **2,731** | **–** | **–** | $^{1}$ 2022 figure for directors' salaries, fees, short term benefits and bonuses was incorrectly presented as £1,310,000 in the prior year financial statements, due to error. The comparative figure has been represented to show the correct figure. The remuneration of the directors, both executive and non-executive, of the Company, who are the key management personnel of the Group, is set out in the table above. These figures include amounts payable to third party companies for services of the directors. The figures exclude pension related costs and any long-term incentive costs. Directors of the Company control 36.54% of the Ordinary shares of the Company. # Company | | 31 October 2023 £'000 | 31 October 2022 £'000 | | --- | --- | --- | | Transactions with subsidiaries: | | | | Purchases | 74 | 36 | | Amounts owed by subsidiaries | 31,947 | 22,371 | | Amounts owed to subsidiaries | 9,448 | 8,736 | | Other items: | | | | Intercompany fees charged by/(received from) subsidiaries | 5,255 | 6,388 | | Property, plant and equipment acquired from subsidiaries | 3,189 | 5,635 | | Dividend income | | | | – from subsidiaries | 25,000 | 56,511 | # 29 Group undertakings This disclosure is made in accordance with Section 409 of the Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended by the Companies, Partnerships and Groups (accounts and reports) Regulations 2015. A full list of subsidiary undertakings and associated undertakings (showing country of incorporation, which is also the main trading location of the company, and the effective percentage of equity shares held) at 31 October 2023 is shown below. Unless indicated otherwise the equity shares held are in the form of ordinary shares or common stock. Principal group undertakings which affect the financial statements of the Group are highlighted in bold. Together with the parent company, ME Group International plc, these companies contributed over 90% of the Group's revenue and operating profit. ME Group plc Annual Report 2023 182 Company name ME Group plc Annual Report 2023 183 Principal Activity Group interest Registered office address Country of incorporation UK & Ireland Jolly Roger (Amusement Rides) Limited In liquidation 100% Unit 3B, Blenheim Road, Epsom, KT19 9AP UK MgInvest Investments Limited In liquidation 100% 1 Unit 3B, Blenheim Road, Epsom, KT19 9AP UK ME Group International Limited Dormant 100% Unit 3B, Blenheim Road, Epsom, KT19 9AP UK Photo-ME (Retail) Limited In liquidation 100% Unit 3B, Blenheim Road, Epsom, KT19 9AP UK Photo-ME Limited Corporate 100% Unit 3B, Blenheim Road, Epsom, KT19 9AP UK Photo-ME Trustee Company Limited Dormant 100% Unit 3B, Blenheim Road, Epsom, KT19 9AP UK Xpand Investments Limited In liquidation 100% Unit 3B, Blenheim Road, Epsom, KT19 9AP UK ME Group Ireland Supplies Limited Operations 100% Unit A4, Alexander House, Tallaght Cross East, Tallaght, Dublin 24 Republic of Ireland Continental Europe ME Group Austria G.m.b.H. Operations 100% Industriestraße 7/K01 L/10, 2100 Korneuburg Austria Prontophot Belgium NV Operations 100% Boulevard Paepsem 8a, 1070 Anderlecht Belgium Photo-ME Czech Republic s.p.o.l. s.r.o. Dormant 100% 1 Husova 2117, 256 01 Benešov Czech Republic Me-Group SPC Finland Oy Operations 100% Unit 3B Blenheim Road, Epsom, UNITED KINGDOM. KT19 9AP Finland KIS SAS Production 100% 1 7 Rue Jean-Pierre Timbaud, 38130 Echirolles France ME Group France Operations 100% 1 8 rue Auber 75009, Paris France Sempa SARL Operations 100% 1 73 D rue du Général Mangin, 38000 Grenoble France ME Group GSS Corporate 100% 8 rue Auber 75009, Paris France SCI Immobilière du 21 Property 100% 1 7 Rue Jean-Pierre Timbaud, 38130 Echirolles France Dreamaker Operations 100% 80 route des Lucioles 06560 Valbourne France ME Group Germany G.m.b.H. Operations 100% Gervinusstraße 15-17, 60322 Frankfurt am Main Germany Me-Group Italia Srl Operations 100% Roma (RM) Via Lovanio 1, CAP 00198 Italy Kis Italia Srl Dormant 100% Milano, Via Tiziano 32, CAP 20145 Italy Prontophot Holland B.V Operations 100% Loonseweg 14, 5527 AC Hapert Netherlands KIS Poland s.p.z.o.o. Operations 100% ul. Targowa 46/5, 03-733 Warszawa Poland ME Group Portugal LDA Operations 100% Industrial do Carvalhinho – Fracção K 2860-579 MOITA Portugal ME Group Spain Solutions Operations 100% 28224 – Pozuelo de Alarcón (Madrid), Calle de las Dos Castillas, 33, Ático 7 Spain ME Group Switzerland AG Operations 100% Sonnentalstrasse 5, 8600Dübendorf Switzerland Asia & ROW ME Group Australia Pty Ltd Operations 100% 4/24 Philip Street, Hawthorne, Queensland 4171 Australia Now Retail Group Pty Ltd Operations 100% Level 9, 123 Albert Street, Brisbane, Queensland 4000 Australia Photo-ME (Shanghai) Co Limited Operations 100% 1 Room 1102 Tongyong Tower, No. 1346 Gong he Xin Road, Zha bei District, Shanghai 200070 China Photo-ME Beijing Co Limited Operations 100% 1 Room 1124, Ocean Natural Xintiandi, No.106 East Majiapu Road, Fengtai District, Beijing 100000 China Photo-ME Chengdu Co Limited Dormant 100% 1 Room 1124, Ocean Natural Xintiandi, No.106 East Majiapu Road, Fengtai District, Beijing 100000 China ME Group Japan Operations 100% Room 1302, Atlas Tower Roppongi, Roppongi 7-7-13,Minato-Ku, 106 0032 Japan Photomatico (Singapore) Pte Limited Operations 100% 26 Sin Ming Lane, Singapore 573971 Singapore KIS Technology Company Limited Dormant 100% P.1003, Ford Thang Long Building, 105 Lang Ha, Lang Ha Street, Ba Dinh district, Hanoi Vietnam Photomaton Maroc SARL Operations 50% 131 Bd D’Anfares Azur Sidi Belyout,/Casablanca Morocco 1 Investments in subsidiaries not owned directly by ME Group International plc. Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # 29 Group undertakings continued The following companies were in liquidation at 31 October 2023 - Jolly Roger (Amusement Rides) Limited; - Photo-ME (Retail) Limited; - Xpand Investments Limited; and - Mginvest Investments Limited. Photo-ME CR.s.p.a.l.s.r.o. is owned 20% by ME Group International plc and 80% by ME Group Austria G.m.b.H. The results of the Group's subsidiaries and associates are consolidated for the period ended 31 October 2023. Certain subsidiaries and associates have a different statutory year end, sometimes due to legal requirements in the country concerned. The following companies are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts for the year ended 31 October 2023 by virtue of Section 479A of the Companies Act 2006: - Photo-ME Limited. # 30 Business combinations # Acquisition of the photobooths business of Fujifilm Imaging Systems Co. Ltd. On 30 September 2023 the Group completed the acquisition of 100% of the photobooths business of Fujifilm Imaging Systems Co. Ltd (Fujifilm) for an initial consideration of JPY 905,961,000 (£4,971,000), obtaining control of the business on that date. Fujifilm is a Japanese photobooth owner and operator and the acquisition of its photobooths division adds a further 3,548 photobooth units to the Group's existing operations in Asia Pacific. This acquisition is in line with the Group's strategy to expand the number of units in operation. The acquisition was funded by a new loan facility taken by the Group's Japanese subsidiary, ME Group Japan. In accordance with IFRS 3, this transaction meets the definition of a business combination so has been accounted for using the acquisition method. Acquisition-related expenses of £146,000 have been recognised in the Group's statement of comprehensive income. # Deferred consideration A portion of the total consideration is deferred and is contingent on the total number of photobooth units that are acquired. Post-closing there follows a six month period during which further units may be transferred to the Group, in addition to the 3,548 units transferred at the closing date, and subject to a maximum number of 3,806. The total consideration increases in proportion with the number of photobooths acquired, up to a maximum value of JPY 996,000,000 (£5,466,000). As at the reporting date, management's best estimate of the deferred consideration to be paid is JPY 40,039,000 (£220,000). This amount has been accrued and included in the total estimated consideration value of JPY 946,000,000 (£8,191,000). # Acquired assets and liabilities Due to the proximity of the transaction to the reporting date, the purchase price allocation, including determination of the fair value of intangible assets recognised on consolidation has not been finalised. Goodwill has been calculated using the provisional fair values of the assets and liabilities acquired, with a value of £3,268,000 recognised in the Group's Statement of Financial Position. ME Group plc Annual Report 2023 184 Pending receipt of the final valuations of the assets acquired, in accordance with IFRS 3, the accounts will be adjusted retrospectively within the measurement period of no more than one year from the acquisition date. The provisional fair values of the assets and liabilities acquired, cash outlay on acquisition and results of the acquired business included in Group results in the year ended 31 October 2023 are shown in the table below. | | €'000 | | --- | --- | | Property, plant and equipment | 1,505 | | Intangible assets | 49 | | **Total non-current assets** | **1,552** | | Inventory | 305 | | Trade and other receivables | 301 | | Cash and cash equivalents | 181 | | **Total current assets** | **787** | | Trade and other payables | 416 | | **Total current liabilities** | **416** | | **Total liabilities** | **416** | | **Total identifiable net assets excluding goodwill** | **1,923** | | Goodwill | 3,268 | | **Total identifiable net assets acquired** | **5,191** | | Satisfied by: | | | Cash | 4,971 | | Deferred consideration | 220 | | **Total consideration** | **5,191** | | Cash consideration per cashflow: | | | Cash consideration | 4,971 | | Net cash acquired | (181) | | **Initial cash outlay on purchase of subsidiaries** | **4,790** | | Revenue | 1,176 | | Profit before tax | 507 | #### Dreamakers On 31 March 2022 the Group acquired 100% of the issued share capital of Dreamakers for a consideration of €3,900,000 (€3,274,000), obtaining control of the company on that date. Dreamakers, which operates under the trading name 'VIP BOX', is a France based, market leader in the rental and sale of selfie stations for private and professional events. This acquisition supports the Group's strategic aim of product diversification. The acquisition was funded from the Group's cash resources. Acquisition-related expenses of £14,000 were recognised in the Group's statement of comprehensive income. Acquisition-related expenses of £14,000 were recognised in the Group's statement of comprehensive income. Due to the proximity of the transaction to the prior period reporting date, the purchase price allocation, including determination of the fair value of intangible assets recognised on consolidation, had not been finalised when the prior period financial statements were approved. With the purchase price allocation now complete, the Group has during the period adjusted the provisional amounts that were recorded in the prior period financial statements by increasing intangible assets by €929,000 (€814,000) and reducing goodwill by the same amount (see note 11). As part of the purchase price allocation, the Group has recognised separately identifiable acquired intangible assets in accordance with IASSB and had their fair values assessed by an independent expert. ME Group plc Annual Report 2023 185 Financial Statements # Notes to the Financial Statements continued For the 12 months ended 31 October 2023 # 30 Business combinations continued The fair value adjustments in respect of acquired intangible assets are due to the recognition of €255,000 (£223,000) in respect of Dreamakers' marketing database, €190,000 (£166,000) in respect of contractual customer relationships and order backlog, and €484,000 (£425,000) in respect of brand related assets. The balance of residual goodwill is €1,060,000 (£929,000). A deferred tax liability of €21,000 (£18,000), in respect of the order backlog intangible asset, has been recognised and reflected in the adjusted goodwill value. # Other changes to the composition of the Group Disposal of Photo-ME Korea On 30 November 2022 the group disposed of its South Korean subsidiary, Photo-ME Korea Company Limited. This was for consideration of £209,000. The group generated a profit of £57,000 which has been recognised in other gains in the income statement. # 31 Events after the statement of financial position date On 23 November 2023 the Group paid its interim dividend in respect of the six month period ended 30 April 2023 of 2.97 pence per ordinary share, totalling £11,240,000. On 14 November 2023, the Group converted 100,000 of the 500,000 convertible bonds held in Energy Observer Developments SAS to 125 ordinary shares of the same company. The remaining 400,000 convertible bonds held by the Group will not be converted to shares. # 32 Period summary Income statement (unaudited) | | 2023 €'000 | 2022 €'000 | 2021 €'000 | 2020 €'000 | 2019 €'000 | | --- | --- | --- | --- | --- | --- | | Revenue | | | | | | | UK & Ireland | 48,173 | 41,996 | 29,644 | 54,623 | 52,919 | | Continental Europe | 205,157 | 177,839 | 145,009 | 195,230 | 130,661 | | Asia | 44,332 | 39,945 | 39,731 | 60,392 | 44,538 | | Total revenue | 297,662 | 259,780 | 214,404 | 310,245 | 228,118 | | Operating profit | 67,502 | 56,681 | 29,335 | 3,317 | 42,739 | | Net finance (cost)/income & Other gains | (435) | (3,327) | (780) | (2,825) | (146) | | Profit before taxation | 67,067 | 53,354 | 28,355 | 492 | 42,393 | | Taxation | (16,401) | (14,561) | (6,703) | (2,844) | (11,314) | | Profit after taxation | 50,666 | 38,793 | 21,852 | (2,352) | 31,279 | | Attributable to: | | | | | | | - Equity owners of the Parent | 50,666 | 38,793 | 21,713 | (2,305) | 31,226 | | - Non-controlling interests | - | - | 139 | (47) | 53 | | | 50,666 | 38,793 | 21,852 | (2,352) | 31,279 | | Earnings per share - Basic | 13.40p | 10.26p | 5.78p | (0.62)p | 8.27p | | Earnings per share - Diluted | 13.31p | 10.23p | 5.72p | (0.62)p | 8.26p | | Dividends - interim | 2.97p | 2.60p | 0.00p | 0.00p | 3.71p | | Dividends - final | 4.42p | 3.00p | 2.89p | 0.00p | 4.73p | | Dividends - special | 0.00p | 7.10p | 0.00p | 0.00p | 0.00p | | Total dividends | 7.59p | 12.70p | 2.89p | 0.00p | 8.44p | 16 Group plc Annual Report 2023 186 ### Statements of financial position | | 2023 £'000 | 2022 £'000 | 2021 £'000 | 2020 £'000 | 2019 £'000 | | --- | --- | --- | --- | --- | --- | | Intangible assets | 36,710 | 32,736 | 34,502 | 32,739 | 41,816 | | Property, plant and equipment | 118,124 | 101,090 | 91,973 | 90,937 | 95,353 | | Other non-current investments | 35 | 21 | 21 | 57 | 415 | | Other non-current assets | 8,891 | 7,805 | 3,966 | 3,743 | 5,693 | | Current assets | 168,177 | 184,716 | 141,688 | 139,760 | 128,723 | | Assets held for sale | 585 | - | - | - | - | | Total assets | 332,522 | 326,368 | 272,150 | 267,237 | 272,000 | | Share capital | 1,891 | 1,889 | 1,889 | 1,889 | 1,889 | | Share premium | 11,063 | 10,627 | 10,599 | 10,599 | 10,588 | | Treasury shares | (1,969) | - | - | - | - | | Reserves | 147,983 | 120,133 | 115,486 | 99,693 | 129,500 | | Equity of the Parent | 158,988 | 132,649 | 127,974 | 112,181 | 141,977 | | Non-controlling interests | - | - | 1,720 | 1,689 | 1,870 | | Total equity | 158,988 | 132,649 | 129,694 | 113,870 | 143,847 | | Total non-current liabilities | 71,076 | 94,039 | 68,900 | 52,968 | 64,450 | | Total current liabilities | 102,458 | 99,680 | 73,556 | 100,399 | 63,703 | | Total equity and liabilities | 332,522 | 326,368 | 272,150 | 267,237 | 272,000 | | Net cash | 33,917 | 34,021 | 34,919 | 21,877 | 16,338 | Note: This figures above have been extracted from the accounts for the relevant period and have not been adjusted for changes in accounting policies as a result of adoption of new accounting standards. ### Financial & operating statistics | | 2023 | 2022 | 2021 | 2020 | 2019 | | --- | --- | --- | --- | --- | --- | | Capital expenditure – photobooth & vending machines £'000 | 39,122 | 27,205 | 22,563 | 38,435 | 24,938 | | Capital expenditure – research & development £'000 | 2,337 | 1,418 | 1,802 | 2,296 | 1,631 | | EBITDA £'000 | 106,639 | 92,241 | 65,077 | 87,313 | 69,705 | | EBITDA % of revenue | 35.8% | 35.5% | 30.4% | 28.1% | 30.6% | | Number of vending sites | 47,600 | 43,900 | 43,800 | 44,500 | 47,000 | P/E Group plc Annual Report 2023 187 Financial Statements ## Company Information & Advisers Registered in England and Wales Bankers Number 735438 Lloyds Bank plc 25 Gresham Street Registered Office London Unit 3B EC2V 7HN Blenhiem Road Santander UK plc Epsom 2 Triton Square KT19 9AP Regent’s Place Tel: + 44 (0)1372 453399 London Web: https://me-group.com/ NW1 3AN e-mail: ir@me-group.com Financial Public Relations | Auditor | Hudson Sandler LLP | | --- | --- | | Mazars LLP | 25 Charterhouse Square | | 30 Old Bailey | Barbican | | London | London | | EC4M 7AU | EC1M 6AE | | Brokers | Registrars | | Berenberg | Link Group | | 60 Threadneedle Street | 10th floor | | London | Central Square | | EC2R 8HP | 29 Wellington Street | Leeds Peel Hunt LLP LS1 4DL 100 Liverpool Street London EC2M 2AT ME Group plc Annual Report 2023 188 # Shareholder Information Investor relations website Investor relations information, including share price, is available through the Company's website https://me-group.com/ Transfer office and registration services Link Group act on behalf of the Company. All shareholder enquiries, notifications of change of address, dividend mandates, etc. should be referred to them at: Link Group 10th floor Central Square 29 Wellington Street Leeds LS1 4DL Tel: 0371 664 0300 Overseas Tel: 00 44 371 664 0391 Link Group also offer a range of shareholder information online at www.capitashareportal.com The Register of directors' interests is maintained at the Registered Office at Epsom. Copies of the Annual Report should be requested from: ME Group International plc Unit 3B Blenheim Road Epsom KT19 9AP Tel: 44 (0)1372 453399 e-mail: ir@me-group.com Financial Calendar Annual General Meeting 26 April 2024 Half year results (to 30 April 2024) Announcement in July 2024 Full year results (to 31 October 2024) Announcement in February 2025 ME Group International plc Unit 3B Blenheim Road Epsom KT19 9AP Tel: +44 (0)1372 453399 Fax: +44 (0)1372 451044 Web: https://me-group.com/ ME Group plc Annual Report 2023 189 ME Group plc Annual Report 2023 190