Notes to the consolidated financial statements

For the year ended 31 December 2022

2. Summary of significant accounting policies (continued)

Fair value measurement

When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their best economic interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are u sed, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

● Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

● Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Issued capital

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

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

Dividends

Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.

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

Goods and Services Tax ("GST") and other similar taxes

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.

JT Group Limited

Notes to the consolidated financial statements

For the year ended 31 December 2022

2. Summary of significant accounting policies (continued)

Rounding of amounts

Amounts in this report have been rounded off to the nearest thousand currency units unless otherwise stated.

3. Critical accounting judgements, estimates and assumptions

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

Accounting estimates and assumptions

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

Measurement of fair values

A number of the Group's accounting policies and disclosures require the measurement of fair values.

When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as 'active' if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuations techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective.

The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models, which are usually based on valuation methods and techniques generally recognised as standard within the industry. The models used for private equity sec urities are based mainly on earnings multiples of comparable listed securities, adjusted as appropriate for liquidity and market risk factors.

Models use observable data, to the extent practicable. However, areas such as volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

The determination of what constitutes 'observable' required significant judgement by the Group. The Group considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

Impairment of intangible assets

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

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

3. Critical accounting judgements, estimates and assumptions (continued)

The key assumptions used to determine the recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and further explained in note 12.

Estimation of useful lives of assets

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

The carrying value of intangible assets and property, plant and equipment are disclosed in notes 10 and 12 and the useful liv es applied to the principal categories are disclosed in note 2 for property, plant and equipment and intangible assets respectively.

Provisions

Provision for expected credit losses ("ECLs") of trade receivables and contract assets

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

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

The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. The information about the ECLs on the Group’s trade receivables and contract assets is disclosed in notes 17 and 30.

Other provisions

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

In respect of claims, litigation, disputes and regulatory matters the Group provides for anticipated costs where the outflow of resources is considered probable, and a reasonable estimate can be made on the likely outcome. The ultimate liability may vary from the amounts provided and will be dependent upon the eventual outcome of any settlement. The carrying value of provisions is disclosed in note 23.

Current and deferred income tax

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

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

The value of the Group's income tax assets and liabilities is disclosed on the statement of financial position. The carrying value of the Group’s deferred tax assets and liabilities is disclosed in notes 13 and 21.

JT Group Limited

Notes to the consolidated financial statements

For the year ended 31 December 2022

3. Critical accounting judgements, estimates and assumptions (continued)

Revenue recognition – Estimating stand-alone selling price

Bundled products

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

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

Leases - Estimating the IBR

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

Key judgements

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

Determining the lease term of contracts with renewal and termination options

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

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

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

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

● If any leasehold improvements are expected to have a significant remaining value, the Group is typically reasonably certain to extend (or not terminate)

● Otherwise, the Group considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset.

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

Long-term multi-service agreements

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

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

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

3. Critical accounting judgements, estimates and assumptions (continued)

Gross versus net presentation

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

4. Revenue

Disaggregation of revenue from contracts with customers

The presentation of revenue is disaggregated by segment. The Group derives revenue from the transfer of goods and services in the following major product lines:

● Network services – fixed line, broadband, mobile and private circuit services to residential and corporate customers

● Equipment sales – sale, rental and support of equipment such as handsets, corporate phone systems and data network equipment

● Managed services – fixed line, broadband and private circuit services to wholesale customers

● On-island wholesale – roaming revenue from customers of other networks and from network sharing

● International wholesale - IoT services, FPS, bulk messaging and network sharing for international customers

● Other – other minor revenue streams, including digital advertising services

Management have considered the disclosure requirements of IFRS 15 and deems the below revenue segments appropriate:

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

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

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

4. Revenue (continued)

Assets

and

Liabilities Related To Contracts With Customers

The Group has recognised the following assets and liabilities related to contracts with customers:

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

Contract assets recognised from contracts with customers

The table below provides a breakdown of the Group’s contract assets at the end of each reporting period as well as the amortisation relating to these balances during the reporting periods respectively:

Assets recognised from costs to obtain and fulfil a contract

In addition to the contract balances disclosed above, the Group has also recognised assets in relation to costs to fulfil a long-term contract and costs to obtain contracts. This is presented as contract cost assets on the balance sheet.

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

In addition to the above capitalised costs, the Group also capitalised setup costs related to its JT IoT business as costs to fulfil its customer contracts. The costs relate directly to the customer contracts, generate resources that will be used in satisfying the contracts and are expected to be recovered and were therefore recognised as costs to fulfil a contract. All costs capitalised in 2021 relate to the JT IoT setup costs.

4.

Notes to the consolidated financial statements For the year ended 31 December 2022

as cost of providing services during the year

5.

(Loss)/profit before income tax from continuing operations includes the following specific expenses:

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

(Loss)/profit before income tax from continuing operations includes the following specific expenses:

JT Group Limited

Notes to the consolidated financial statements

For the year ended 31 December 2022

7.

Finance Cost (continued)

Capitalised borrowing costs

No borrowing costs were capitalised during 2022 and 2021.

8. Income tax

This note provides an analysis of the Group’s income tax expense, and shows what amounts are recognised directly in equity and how the tax expense is affected by non-assessable and non- deductible items.

The main uncertainty is whether the Group's intra-group trading model would be accepted by a particular tax authority. Management consider the probability of an outflow is low and as such no provision has been made.

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

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

9. Discontinued operations

During 2021 the Group sold its shareholding in JT IOT Limited and its associated subsidiaries (“JT IoT”). The entities were s old on 20 July 2021 and were reported as a discontinued operation in the 2021 financial statements.

9. Discontinued operations (continued)

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

* Depreciation expense includes £151,000 in respect of discontinued operations.

11. Right-of-use assets

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

11. Right-of-use assets (continued)

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

Amounts recognised in the statement of profit or loss

The statement of profit or loss includes the following amounts relating to leases:

The total cash outflow for leases in 2022 was £2,144,000 (2021: 2,303,000).

12. Intangible assets

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

* Amortisation expense includes £942,000 in respect of discontinued operations.

12. Intangible assets (continued)

Impairment tests for goodwill

Goodwill is monitored by management at the following CGU level:

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

Significant estimate: key assumptions used for value-in-use calculations

The Group tests whether goodwill has suffered any impairment on an annual basis. For the 2022 and 2021 reporting periods, the recoverable amount of the CGUs were determined based on calculations to assume an equity value which require the use of assumptions. The calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are determined through the use of a terminal multiple and discounted to their present value.

Assumption Approach to determining values

EBITDA

Annual capital expenditure

Terminal multiple

Pre-tax discount rate

Forecasted EBITDA takes into account expected growth/decline in revenues, cost of sales and operating expenses based on past performance and management's expectations for the future. Operating expenditures are forecasted based on the current structure of the business.

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

This is the terminal value used to extrapolate cash flows beyond the forecasted 5 year period. The multiples are consistent with a telecommunications industry.

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

Significant estimate: impact of possible changes in key assumptions

An impairment would occur if EBITDA were to fall by more than 13% over the forecasted period in the valuation of the CGU. No impairment has been recognised against the goodwill carried in 2022 or 2021.

13. Deferred tax asset

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

13. Deferred tax asset (continued)

A deferred tax asset of £41,000 (2021: £36,000) has been recognised in respect of losses arising in JT Australasia Pty Ltd (the “Australian Company”), as we conclude that it is probable that the Australian Company will generate taxable profits against which the losses can be utilised. The Australian Company’s income is derived from Australian Fraud Protection customers which commenced in November 2020 and from acting as a cost centre for services supplied by Australian employees on an arm’s length basis to other members of the Group.

A deferred tax asset of £135,000 (2021: £nil) has been recognised in respect of losses arising in Jersey Telecom (UK) Ltd (the “UK Company”), as we conclude that it is probable that the UK Company will generate taxable profits against which the losses can be utilised. The UK company's income is derived from acting as a cost centre for services supplied by UK employees on an arm's length basis to other members of the group.

14. Financial assets at FVTOCI

Reconciliation of the fair values at the beginning and end of the current and previous financial year are set out below:

Financial assets at FVTOCI

Financial assets at FVTOCI represent an investment in Jaguar Topco Limited, comprising both equity and preference shares. The Directors do not consider that the Group is able to exercise significant influence over Jaguar Topco Limited. The investment is not held for trading. Instead, it is held for medium to long-term strategic purposes. Accordingly, the Directors have elected to designate the investment as at FVTOCI as they believe that recognising short-term fluctuations in the investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding the investment for long-term purposes and realising the potential in the long run. Accordingly, the Group made the irrevocable election to account for it at FVOCI.

The fair value of the unlisted investment is determined applying the market comparison technique using comparable trading multiples for EBITDA. The valuation model is based on market multiples derived from quoted prices of companies comparable to the investee and the expected EBITDA of the investee.

15. Financial assets at amortised cost

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

15. Financial assets at amortised cost (continued)

Financial assets at amortised cost represents unsecured loan notes which earns fixed interest rate of 8% with a maturity date in July 2028. These loan notes are held by the Group within a business model whose objective is to collect their contractual cash flows which are solely payments of principal and interest on the principal amount outstanding. Hence, these financial assets are classified as at amortised cost. During the year, the interest accrued was converted into loan notes. In the opinion of the Directors, there is no material difference between the carrying value of this investment and its fair value.

16. Inventories

Inventories have been reduced by £167,000 (2021: £139,000) as a result of a write-down to net realisable value. This write-down was recognised as an expense during the year and included in cost of sales in the consolidated statement of profit or loss.

Amounts recognised in profit or loss

Inventories recognised as cost of sales and expenses during the year ended 31 December 2022 amounted to £10,049,000 (2021: £9,935,000).

17. Trade and other receivables

Classification as trade receivables

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

Details about the Group’s impairment policies and the calculation of the loss allowance are provided in note 30.

Notes to the consolidated financial statements

For the year ended 31 December 2022

17.

Trade and other receivables (continued)

Fair values of trade receivables

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

Impairment and risk exposure

Information about the impairment of trade receivables and the Group’s exposure to credit risk and foreign currency risk can be found in note 30.

18. Financial assets at fair value through profit or loss

Reconciliation of the fair values at the beginning and end of the current and previous financial year are set out below:

Financial assets at FVTPL represents the investment portfolio held with UBS in Jersey, and invested in quoted equities, bond funds and cash. The Group has designated this investment portfolio as held at FVTPL, and fair value movements are recognised in pro fit or loss. Certain amounts are held as cash by UBS as part of its mandate. All financial instruments in the portfolio are level one financial instruments, and as such, the investment portfolio is classified as level one.

Amounts recognised in the statement of profit or loss

The statement of profit or loss includes the following amounts relating to the investment portfolio:

* Included in the investment manager expenses is an accrual of £83k (2021: £nil), which has not been included in the valuation of the investment at year-end, as it had not been paid.

Refer to note 30 for further information on risk assessment in relation to the investment portfolio.

19. Cash and cash equivalents

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

The cash on deposit as at 31 December 2021 was placed with a financial institution on 22 February 2022 (see note 18) to manage it long-term, with the objective of protecting capital and hedging against inflation.

20. Borrowings

Total secured liabilities

The total secured liabilities (current and non-current) are as follows:

Refer to note 30 for further information on financial instruments.

Assets pledged as security

The loans were secured by first mortgages over the Group's land and buildings.

(i) Private placement

JT Group Limited received £51m under a private placement facility during August of 2012, of which £31m was repaid during 2019 , and £20m was repaid during 2022. The facility accrued interest at a rate of 4.48%.

(ii) Revolving Credit Facility

On 06 December 2018, the Group entered into a multicurrency Revolving Credit Facility (“RCF”) with HSBC Bank Plc, Jersey Branch (“HSBC”) and The Royal Bank of Scotland International Limited (“RBSI”) with both providing access to a facility of £15m each.

Additional funding through the accordion clause within the RCF, was secured in May 2020, which provides access to an additional £20m from RBSI. The now £50m facility is interest-bearing and is redeemable 5 years from the facility agreement date or, earlier in the event of default or non-compliance with specific terms and conditions as prescribed in the facility agreement. The Group repaid the RCF during 2022. There is no balance outstanding at 31 December 2022.

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

20. Borrowings (continued)

Fair value

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

Risk exposures

Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 30.

21. Deferred tax liabilities

Deferred tax liability comprises temporary differences attributable to:

22. Employee benefit obligations

Defined contribution pension plans

Most employees are members of the JT Group Limited Pension Plan, a defined contribution scheme administered by Alexander Forbes. The plan receives fixed contributions from Group companies up to 10% of members’ salaries. The Group’s legal or constructive obligation for these plans is limited to the contributions. The expense recognised in the current period in relation to these contributions was £1,059,000 (2021: £1,090,000).

Defined benefit pension plans

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

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

PECRS and PEPS

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

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

JT Group Limited

Notes to the consolidated financial statements

For the year ended 31 December 2022

22. Employee benefit obligations (continued)

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

From 1st January 2019 most employees on the PECRS scheme moved to the Public Employees’ Pension Scheme ("PEPS") which is a defined benefit pension plan, providing retirement benefits based on career average salary. There is insufficient information available to use defined benefit accounting and the Group has accounted for the Scheme as if it was a defined contribution scheme

TBPS

TBPS is an unfunded plan where the Group meets the benefit payment obligation as it falls due. The scheme holds a small cash reserve but is otherwise unfunded with pensions payable on a pay as you go basis.

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

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

The IFRS disclosure of the TBPS has been based on a valuation of the liabilities of the scheme as at 31 December 2022 and 31 December 2021 using the membership data at the accounting date. The present values of the defined benefit obligation and the related current service cost were measured using the projected unit method. Employer contributions in 2023 are expected to be nil to provide for the payment of benefits to pensioners.

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

The principal assumptions used by the independent qualified actuaries to calculate the liabilities under IFRS are set out below:

The amounts recognised in the balance sheet are determined as follows:

22. Employee benefit obligations (continued)

of the present value of the defined benefit obligation, which is partly funded: in the statement of profit or loss and other comprehensive income statement of profit or loss and other comprehensive income are as follows:

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

22. Employee benefit obligations (continued)

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:

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

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

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

Risk exposure

Through its defined benefit pension plans the Group is exposed to a number of risks, the most significant of which are detailed below:

Changes in bond yields

Inflation risks

Life expectancy

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

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

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

Notes to the consolidated financial statements For the year ended 31 December 2022

22. Employee benefit obligations (continued)

LTIP

The Group operates an LTIP scheme for its members of the Executive Committee and certain key employees, where the benefits are subject to (among other things) employees’ continued service. Rewards are based on achieving certain financial and non-financial goals over a period of three years and are calculated using the average annualised salary of each participant over relevant cycle. Each cycle runs over a three year period and is assessed by the Remuneration Committee at the end of the period. Any payments are subsequently made in tranches. Movement during the year, in accrual for LTIP scheme is disclosed in the table below:

The charge for the year is included in payroll benefits disclosed in note 5. The amounts relating to the Directors and key management personnel are disclosed in note 31.

The long-term portion of LTIP obligation has been discounted using a discount rate of 4.9%, which has been derived on the basis as defined in note 3.

23. Provisions

Asset retirement obligations and dilapidations

Asset retirement obligations involve an estimate of the cost to dismantle equipment and restore network sites upon vacation and the timing of the event.

Dilapidations involves an estimate of the cost to restore leased premises to their original condition at the end of the lease under terms of the lease.

Other provisions

Other provisions consist of the Group’s best estimate of the cost to settle litigation, disputes and regulatory matters across a range of issues, including price, service, regulatory and contractual issues. When estimating the likely value of the provision, management make key judgements, including in regard to interpreting local and UK regulations and past and current claims. The charge/credit for the year represents the outcome of management’s reassessment of the estimates.

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

23. Provisions (continued)

Movements in provisions

Movements in each class of provision, other than employee benefits, are set out below:

On 17 August 2018, the Group completed the acquisition of NeoConsult ApS and Nomad IP ApS ("Denmark operations"). The consideration for Denmark operations was made up of a cash and a guaranteed and performance related deferred consideration component, payable over 3 years. The Group sold the Denmark operations during 2021, as part of JT-IoT business. However, as part of the deal, the Group continued to be liable for deferred consideration. Included in the other non-current liabilities in 2021 is an amount of deferred consideration for Denmark operations, and is now included in current liabilities, as it will be settled in 2023.

During 2018, the Group sold the supply of its directory services business line to a third party through a licensing arrangeme nt and continues to support this business through billing and other related services. The proceeds from this transaction and its ongoing support services are recognised as deferred income and a portion was included in other non-current liabilities. The balance is now included in current liabilities, as it will be recognised during 2023.

25. Trade and other payables

Notes to the consolidated financial statements For the year ended 31 December 2022

Refer to note 30 for further information on financial instruments.

26. Issued capital

Ordinary shares

Ordinary shares have a par value of £1. They entitle the holder to participate in dividends, and to share in the proceeds of winding up the Company in proportion to the number of and amounts paid on the shares held. The Company does not have a limited amount of authorised capital.

Capital risk management

The Group's objectives when managing capital is to maintain sufficient equity to ensure stability and provide a return for our shareholder, the Government of Jersey, while allowing access to necessary funding when required.

Under the terms of the borrowing facilities of the Group’s RCF and private placements as described in note 20, the Group is required to meet certain financial covenants which impose capital requirements. The Group has complied with these requirements throughout the year, and continues to meet its requirements on all covenants.

27. Reserves

Foreign

Currency Translation Reserve

Exchange differences arising on translation of the long-term foreign intercompany balances, including the results and financial position of foreign operations, are recognised in other comprehensive income and accumulated in a separate component of equity. The cumulative amount is reclassified to profit or loss when the net investment in the subsidiary is disposed.

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

Since year end the Directors have proposed the payment of a final dividend of £0.25 per fully paid ordinary share. The aggregate amount of the proposed dividend expected to be paid by 31 July 2023 out of retained earnings at 31 December 2022, is £5m.

30. Financial instruments

Financial risk management objectives

The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, and ageing analysis for credit risk.

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

Market risk

Foreign currency risk

The Group operates internationally and is exposed to foreign exchange risk, the US dollar, Euro, and Australian dollar.

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

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

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

30. Financial instruments (continued)

The carrying amount of the Group's foreign currency denominated financial assets and financial liabilities at the reporting date were as follows:

Based on this exposure, had the Pounds sterling weakened by 10%/strengthened by 10% (2021: weakened by 10%/strengthened by 10%) against these foreign currencies with all other variables held constant, the Group's profit before tax for the year would have been £440,000 lower/£538,000 higher (2021: £299,000 lower/£366,000 higher) and equity would have been £440,000 lower/£538,000 higher ( 2021 : £299,000 lower/£366,000 higher). The percentage change is the expected overall volatility of the significant currencies, which is based on management's assessment of reasonable possible fluctuations.

Price risk

Price risk is the risk that changes in market prices of quoted equities and bond funds will affect the Group's income, expenses, and financial assets designated at fair value through profit or loss. The Group's assets are exposed to the market prices of the quoted equities and bond funds.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements.

The main exposure to credit risk is represented by the carrying amounts of cash, investments at FVTPL, contracting assets and outstanding receivables.

The credit risk from cash is managed by transacting only with large reputable companies. As at 31 December 2022, HSBC Bank Plc holds the majority of the Group's cash. UBS A G Wealth Management holds the Group's investment portfolio, including cash.

The credit risk is considered low, since UBS A.G. as parent to the custodian is a reputable bank with a Fitch rating of AA- (2021: Fitch rating of AA-), and HSBC Bank plc is a reputable banking with a Fitch rating of AA- (2021: Fitch rating of AA-).

The vast majority of our retail customers pay through direct debit. Credit risk for enterprise and non-retail customers is managed for the Group through a ‘Know Your Customer’ (“KYC”) process which includes a credit check performed using independent 3rd parties to ensure customer risks are understood and appropriate action taken before the customer is on-boarded. Credit limits are applied in accordance with the assessed risk and where necessary deposits held on account until such time as considered necessary to reduce an assumed assessed risk e.g. businesses with little or no payment or credit history.

Impairment of financial assets

The Group has two types of financial assets that are subject to the expected credit loss model:

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

30. Financial instruments (continued)

● Trade receivables for sales of inventory and from the provision of telecommunication services

● Contract assets relating to contracts with customers

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, any potential impairment losses are deemed immaterial.

Trade receivables and contract assets

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

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

The expected loss rates are based on the payment profiles of sales over a period of 24 months before 31 December 2021 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle their receivables. The Group ha s identified the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. In addition, reviews are performed with the Group’s debt collection team and management to ensure a reasonable loss rate is applied.

On that basis, the loss allowance was determined as follows for both trade receivables and contract assets:

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

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

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

30. Financial instruments (continued)

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

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

Liquidity risk

Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.

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

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

Financing arrangements

The Group had access to the following undrawn borrowing facilities at the end of the reporting period:

Refer to note 20 for more information relating to the above financial liabilities.

Remaining contractual maturities

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

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

30. Financial instruments (continued)

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

Fair value of financial instruments

The Group has classified fair value measurements using a hierarchy that reflects the significance of the inputs used in makin g the measurements. The fair value hierarchy has the following levels:

● Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

● Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (level 2).

● Inputs for assets or liabilities that are not based on observable market data (that is, unobservable inputs) (level 3).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes ‘observable’ requires significant judgement by the Group, which considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market.

The following table analyses within the fair value hierarchy the Group's financial assets that are measured at fair value (by class):

Investments whose values are based simply on quoted market prices in active markets would be classified within level 1. Details of these investments are disclosed in note 18.

JT Group Limited

Notes to the consolidated financial statements For the year ended 31 December 2022

30. Financial instruments (continued)

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. As level 2 investments include positions that are not traded in active markets and / or are subject to transfer restrictions, valuations are discounted to reflect illiquidity and / or non-transferability, which are generally based on available market information. The Group does not classify any investments as level 2.

Investments classified within level 3 have significant unobservable inputs as they trade infrequently. As observable prices are not available for these securities the Group has used valuation techniques to derive the fair value, as disclosed in note 14.

Due to the fact that there is significant estimation uncertainty in determining the fair value of these assets, a relatively small increase/decrease in the unobservable inputs may result in a significant variance in the fair value of the investment and consequently impact the financial statements as a whole. As a result, the amounts recorded in the financial statements may therefore differ significantly to their future realised amounts and such a difference could be material.

Net debt reconciliation

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

JT Group Limited

Notes to the consolidated financial statements

For the year ended 31 December 2022

30. Financial instruments (continued)

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

31. Key management personnel disclosures

Compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the ac tivities of the Group, directly or indirectly. Key management includes the Directors and members of the Executive Committee. The compensation paid or payable to key management for employee services is shown below:

31. Key management personnel disclosures (continued)

Notes to the consolidated financial statements

For the year ended 31 December 2022

The amounts disclosed reflect emoluments paid for period individuals were directors of the Group.

32. Contingent liabilities

The Group has no contingent liabilities as at 31 December 2022 and 31 December 2021.

33. Related party transactions

Subsidiaries

Interests in subsidiaries are set out in note 34.

Key management personnel

Disclosures relating to key management personnel are set out in note 31.

Transactions with related parties

The following transactions and balances relating to the Government of Jersey departments are reflected in the financial statements.

Receivable from and payable to related parties

The following balances are outstanding at the end of the reporting period in relation to transactions with the States of Jersey departments:

JT Group Limited

Notes to the consolidated financial statements

For the year ended 31 December 2022

33. Related party transactions (continued)

Loans to/from related parties

Loans to related parties was comprised of the preference shares issued by the  Group’s shareholder. Refer to note 20 for more information on the terms and conditions relating to the preference shares.

34. Interests in subsidiaries

The Group’s subsidiaries at 31 December 2022 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business.

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2:

As at 31 December 2022 and 31 December 2021, the Group held no interest in associates or joint ventures.

35. Events after the reporting period

A dividend for the year was approved for recommendation to the shareholders, refer to note 29.

Other than as disclosed above, no matter or circumstance has arisen since 31 December 2022 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.