Esken plc Annual Report and Accounts 2022

We go further.

Annual Report and Accounts 2022

Our ongoing

strategy for the

Group is clear.

We will focus

on our two core

operating divisions

and drive value in

these businesses

in a sustainable

way over the

medium term.

Esken’s core operating divisions

generated a combined adjusted

EBITDA

of £19.5m compared with

£3.9m in the prior year. Esken’s

reported loss before tax of £34.9m

represents an improvement compared

to the £44.2m reported in the prior

year. The loss before tax is after

£19.0m of financing costs, £20.5m of

deprecation and £12.1m of net central

costs (including £5.6m of legal costs).

Esken expects these central costs to

reduce in FY23.

The improvement in adjusted EBITDA

is a result of a strong performance in

Esken Renewables (formerly Stobart

Energy), which slightly exceeded

expectations to report an adjusted

EBITDA of £20.3m. The continued

financial discipline within London

Southend Airport, alongside positive

contributions from Star Handling,

our check-in and handling business;

the airport’s hotel and solar farm;

meant the Aviation division as a whole

reported an adjusted EBITDA loss of

£0.8m, after £3.5m of one-off receipts

in connection with Connect Airways

and Teesside International Airport.

Our ongoing strategy for the Group is

clear. We will focus on the two core

operating divisions and drive value in

these businesses in a sustainable way

over the medium term. All remaining

non-core assets will be realised,

with the funds being used to reduce

residual liabilities and invest in the

core businesses.

We have simplified the business into two primary

divisions and the benefits of this streamlining

can be seen in our full year results.

Esken Renewables offers a resilient

base given the increasing demands for

clean energy. Our aviation business

starts from a low base, and, given

the steps we have taken to minimise

costs, can grow its operations in

line with passenger demand. The

inherent desire amongst the public

to travel, now that restrictions have

been removed, is likely to offer a

demand-pull in the aviation sector

which will benefit the airport over the

medium term.

We will continue to apply strict financial

discipline in the year ahead ensuring

that we take the right decisions for the

medium term. While there is economic

and market uncertainty, we look

ahead with a degree of confidence

as we navigate the recovery phase

of the Group.

David Shearer

Executive Chairman

1 Adjusted EBITDA represents profit/(loss) before

interest, tax, depreciation and impairments.

Refer to note 3 for reconciliation to statutory loss

before tax.

Introduction

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report

02 Highlights

04 Our story

05 Our strategy

06 Esken at a glance

07 Investment case

08 Market review

09 Esken Renewables

10 Business model

11 What we do

12 Our strategy

20 Chairman’s Statement

26 Key Performance Indicators

28 Financial review

32 Operational review

36 Sustainability report

59 Non-financial information statement

60 Stakeholder engagement

69 Risk management and principal risks

77 Viability statement

Corporate Governance

78 Board of Directors

80 Corporate Governance

88 Nomination Committee Report

91 Audit Committee Report

95 Directors’ Remuneration Report

109 Directors’ Report

110 Directors’ Responsibility Statements

Financial Statements

112 Independent Auditor’s Report

119 Consolidated income statement

120 Consolidated statement of

comprehensive income

121 Consolidated statement of

financial position

122 Consolidated statement of

changes in equity

123 Consolidated statement of cash flows

124 Notes to the consolidated

financial statements

172 Directors, officers and advisers

01-77 78-111 112-172

p14-18

Strategy in action

This has been

a year of transition

as we navigated the

pandemic to focus

on Renewables

and Aviation.

p20-25

Chairman’s Statement

Adjusted EBITDA

£10.3m

+238.9%

Loss before tax

£34.6m

+21.7%

Headroom

£72.7m

-6.0%

Esken Limited Annual Report and Accounts 2022

Financial highlights

• Esken’s core operating businesses

generated a combined adjusted

EBITDA of £19.5m (2021 £3.9m).

This was driven by a strong

performance in Esken Renewables

and cash management within the

aviation businesses, combined with

£3.5m of one-off receipts associated

with Connect Airways and the

conclusion of the partnership with

Teesside International Airport.

• Esken incurred £5.6m of legal costs

relating to historical cases which are

still to be concluded, and £7.5m of

other central costs; including staff

costs, tax fees and listing costs.

Esken expects legal costs to reduce

in the current financial year. The

Group benefited by £4.7m following

an agreement to exit a long-term

onerous property lease, leaving the

overall Group adjusted EBITDA at

£10.3m (2021: £7.4m loss).

• The total loss before tax of £34.6m

is an improvement on the prior

year loss of £44.2m. The total loss

before tax, in the year under review,

includes £20.5m of depreciation,

£19.0m of net financing costs and a

£5.4m net impairment.

• During the year, Esken completed a

refinancing that included a £125m

convertible loan in relation to London

Southend Airport (LSA), together

with a new £20m working capital

facility and £55m equity raise.

• The Group’s headroom

at the year

end was £72.7m (28 February

2021: £77.4m) which is ahead of

management expectations set out

at the time of the refinancing, and

includes £14.4m of ring-fenced

cash in LSA and the £20m undrawn

revolving credit facility (RCF). The

Group has £118.5m (2021: £91.9m) of

net debt

excluding obligations under

leases (£241.9m (2021: £250.8m)

including obligations under leases)

and £39.7m of non-core assets,

which will be held for sale at the

appropriate time.

• As at 28 February 2022, the Group

has c.£47m

of future cash outflows,

payable through FY23 and FY24,

related to ongoing Propius lease

and aircraft-related costs, following

the liquidation of Stobart Air in June

2021. Its current undrawn £20m

RCF expires in February 2023. As

a result, the Group is progressing a

review of its banking requirements

in order to maintain sufficient

headroom

to cover its working

capital requirements and residual

legacy liabilities.

• The Group’s cash position is

tracking in line with management

expectations at the time of the July

2021 capital raise, although working

capital management during FY22 has

resulted in an improved cash position

at 28 February 2022 compared to

expectations. The management

of costs associated with Stobart

Air, following its liquidation in June

2021, and Propius, and work to

dispose of the £39.7m portfolio of

non-core assets remain in line with

management expectations.

ESG highlights

• Esken has for the first time collected

and voluntarily reported initial

Scope 3 emissions data, in addition

to Scope 1 and 2 data reported in

prior years.

• Across its businesses Esken

produced 139,447 tCO

representing a 492% increase on

the prior year, when adjusted to

include Scope 3 data. This increase

predominantly relates to the addition

of wider Scope 3 emissions for the

Renewables division, including third

party wood handling and transport

plus combustion of biomass fuel by

power plant customers.

• Esken Renewables undertook

third-party research with Logika

Consultants to validate Scope

1-3 emissions data. The research

established that whilst Esken

produced around 121,256 tonnes of

greenhouse gas (GHG) emissions

in FY22, it saved the UK 630,000

tonnes of additional GHG emissions

(equivalent to taking c.136k cars

off the road) by supplying biomass

power customers over 1.1m

tonnes of waste wood that would

have otherwise gone to landfill,

producing methane.

• LSA launched its Connecting

Communities Commitment,

encompassing the launch of one

of the UK’s only independent

noise forums, a charitable

partnership and various community

engagement initiatives.

• Esken established charity

partnerships for each of its divisions,

and across the business Esken

established a good governance

programme which supported its

first Task Force on Climate-related

Disclosures (TCFD) submission.

Esken has also put in place an

environment, social and governance

(ESG) steering group and Board

sub-committee with formal terms

of references. As a result of this

governance process, the business

has established an ESG risk register

and put in place ESG performance

KPIs linked to Executive Team

remuneration.

Highlights

1 Adjusted EBITDA represents profit/(loss) before interest, tax, depreciation and impairments. Refer to note 3 for reconciliation to statutory loss before tax.

2 Headroom is the sum of cash plus the £20m undrawn revolving credit facility. See note 33 for an explanation of the headroom Alternative Performance Measure.

3 See note 33 for an explanation of these Alternative Performance Measures (net debt and Propius lease and aircraft-related costs).

For more information

see pages 34-35

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Operating highlights

Aviation

• Passenger numbers during the

year under review continued to

fall, with the airport welcoming 94k

passengers, compared to 147k in the

prior year. As previously reported,

Ryanair announced its decision

to close its base from the end of

October 2021 and in light of that

development LSA chose to close its

passenger terminal for the Winter

season, allowing it to minimise its

cost base.

• Despite the further reduction in

passenger numbers, the Aviation

division reports an adjusted EBITDA

loss of £0.8m, compared to £6.1m

in the prior year. This is a result of

the one-off £3.5m Connect Airways

and Teesside benefit and profit

contributions from Star Handling

(the new name for Stobart Aviation

Services) and LSA’s hotel and solar

farm, while LSA made an overall loss.

• Post year end, LSA saw the return of

easyJet operations under an initial

short-term contract, with the airline

starting flights to Malaga, Palma and

Faro on 1 May 2022.

• Stobart Aviation Services changed

its name to Star Handling on

24 May 2022 and Stobart Jet

Centre changed to London Southend

Jet Centre on 5 April 2022.

For more information

see pages 32-33

Operating highlights

Renewables

• In total, 1.5m tonnes of fuel was

supplied by Esken Renewables to

biomass plant customers, up 4.8%

year-on-year (2021: 1.4m tonnes).

Our customers’ biomass plants

generated 1.88 MWh, representing

c.2% of the UK’s fuel supply.

• Esken Renewables reported an

adjusted EBITDA of £20.3m (2021:

£10.0m), ahead of pre-COVID-19

levels. This performance reflects

increased gate fee income earned

from receiving waste wood,

improved efficiencies in the receipt

and supply of waste wood and more

reliable biomass plant performance.

• Post year end, Stobart Energy

changed name to Esken

Renewables. The change of name,

which complies with our obligations

following the sale of the Stobart

brands in 2020, reflects both the

business’s importance to Esken and

the nature of its operations.

Esken Limited Annual Report and Accounts 2022

Our story

We go further…

It’s not enough to build valuable

growth businesses. We also

want those businesses to be fun

and rewarding places to work.

We have a clear vision, mission

and purpose that truly activates

our business...

Our vision

is to play a key role in the UK transition to

a greener future through renewables

and sustainable aviation solutions.

Our mission

is to create smarter

ways to supply

renewable fuel and

travel sustainably,

through continuous

improvement,

collaboration and

social responsibility.

Our purpose

is to develop

sustainable UK

infrastructure

that benefits our

partners, people and

communities, within

a clearly defined

ESG framework.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Our strategy

Esken’s strategic objectives are aligned with our vision and

purpose, aiming to drive sustainable shareholder value over the

medium term through growth in our aviation and renewables

businesses.

Focusing on our core

businesses to support

their growth.

Continuously evaluating

our portfolio of £39.7m

of non-core assets and

realise value.

Ensuring these core

businesses are focused

on reducing our

environmental footprint.

Maintaining strict financial

discipline through

continuous evaluation of

performance metrics.

For more information

see pages 12-19

Our values

shape how we work every day with each

other, our customers and our partners.

Take care

We’re committed to keeping ourselves

and others healthy and safe. Every day.

We focus on total wellbeing and a people-

first approach. We are committed to being

socially and environmentally conscious

and are trusted to keep our word, be

fair and be ethical.

Stay connected

We listen in order to understand, are

open-minded, honest, straight-talking and

find connections and work as one team.

Always improve

We never settle and are always

finding ways to improve. We strive to

learn more, and are constantly evolving,

thriving on new ideas and new thinking to

make our business better.

Own it together

We’re proactive, agile and flexible, taking

pride in our can-do attitude. We deliver

‘great’ every time because service,

quality and success matter.

Esken Limited Annual Report and Accounts 2022

Esken at a glance

Esken is developing sustainable

UK-focused growth businesses.

We are focused on two core

businesses, Esken Renewables

and London Southend Airport.

London Southend

Airport

Esken

Renewables

Esken Renewables is one of

the UK’s largest suppliers of

renewable fuel. It receives

a gate fee for taking waste

wood from Household Waste

and Recycling Centres and

suppliers, largely operating in

the construction industry.

It processes this waste wood into

biomass fuel and supplies it to

renewable energy plants under long-

term supply contracts.

It plays a major role in the UK’s circular

economy. This financial year Esken

Renewables helped the UK to avoid

630,000 tonnes of GHG emissions by

diverting waste wood from landfill.

London Southend Airport has

ambitions to become the next

major London airport, while

protecting the air quality in

and around its operations.

The airport offers quick journey times

by train from London Liverpool Street

to its privately owned airport train

station and delivers an easy passenger

experience with short walking

distances and innovative, quick-to-use

security equipment.

The airport is committed to benefiting

local communities and reducing the

impact of its operations on local air

quality. A proactive strategy and

continuous monitoring has ensured

air quality has remained between 29%-

45% below government guidelines

over the last ten years.

For more information

see pages 16-17

For more information

see pages 14-15

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Investment case

We are focused on creating value

for all our stakeholders.

Two core businesses,

coupled with strict

financial discipline

Esken has undergone a

significant transformation, to

focus solely on developing

its renewables and aviation

businesses. Esken has instilled

strict financial discipline

throughout the organisation,

has simplified its liabilities

and established a transparent

financial structure. The

business retains £39.7m of

residual non-core assets

which will be disposed of to

further reduce debt or invest

in core operations.

Esken Renewables

is a significant,

profitable supplier

of renewable fuel in

a growth sector

Sustainably sourced biomass

and other forms of energy

from waste will play an

increasingly critical role in

the UK’s journey to greater

energy independence and

its strategy for delivering Net

Zero in 2050. As the UK’s

largest biomass fuel supplier,

Esken Renewables is well

placed to play a leading role in

supporting this. The business

is profitable, cash generative

and well invested with the

infrastructure in place to supply

increasing volumes of biomass

fuel, and over time, other types

of renewable fuel.

London Southend

Airport has the

capacity to grow

sustainably as the

aviation sector

recovers

London Southend Airport (LSA)

benefits from an experienced

strategic partner, Carlyle Global

Infrastructure Opportunity Fund

(CGI), which brings a track

record of airport development;

Esken has provided liquidity

to support the airport through

to cash break-even. The CGI

partnership will be important

as short-haul commercial

passenger flying returns to pre-

pandemic levels. Established

London airports will return to

being capacity constrained

and airlines will require a new

base to support their growth.

LSA can respond to this

opportunity, benefiting from

an award-winning passenger

experience, London catchment

area, direct trains and the

ability to grow meaningfully,

with sustainable aviation at

its core.

Esken Limited Annual Report and Accounts 2022

Market review

London Southend Airport

Throughout the year under review,

governments across the world

gradually got to grips with managing

the spread of COVID-19 and rolled

out vaccine programmes. This in

turn led to a relaxation of travel rules

in and between the UK and other

territories, resulting in a trend by mid-

2021 towards increased capacity and

associated passenger numbers.

This improvement however was dealt

a sudden blow with the rapid spread

of the Omicron variant toward the end

of the calendar year, which slowed

growth and impacted capacity for the

Winter season across Europe. The

impact of this however now looks more

like a bump in the road rather than the

start of a new trend.

Indeed, as we enter the Summer 2022

season, travel restrictions have now

largely been either significantly reduced

or dropped altogether in many, though

not all, European countries. As a result,

airlines are looking to capitalise on

demand that has steadily built up over

the last two years.

This built up demand has been tested

following the end of our financial year,

with the conflict in Ukraine inevitably

having had an impact on airline

capacity decisions. Fuel prices inflation

and cost of living increases have also

created uncertainty for both customer

demand and airline route decisions, in

the short term.

The impact of higher fuel prices on both

customer demand and airline flying

capacity is currently unclear. However,

airlines on the whole are expected to

allocate around 80% of Summer 2019

capacity in Summer 2022, with some

low-cost carrier airlines exceeding that

position. As we expected, it has been

the low-cost carriers and short-haul

airlines that have recovered fastest.

They are seeing significant demand

for short-haul travel, mainly to other

European countries with advanced

vaccine roll-out programmes, for

leisure, visiting friends and family and

business reasons, although the level

of vaccination still varies significantly

by location.

This pent-up demand, the relaxation

of travel rules and the growth of some

airline fleets, has led the majority of

industry analysts to maintain their

forecast that aviation in general will

recover to very close to pre-pandemic

levels in calendar year 2024.

Airlines on

the whole are

expected to

allocate around

80% of Summer

2019 capacity

in Summer

2022, with

some low-cost

carrier airlines

exceeding

that position.

However, there is also a view in some

quarters that the European short-haul

aviation sector could recover towards

pre-pandemic levels by the end

of 2023.

Over the last couple of years a number

of short-haul airlines secured the

slots to operate from Heathrow and

Gatwick that would normally be taken

up by long-haul operators or airlines

with long-standing bases at those

airports. The ability to secure slots at

these airports on a short-term basis

is however becoming increasingly

rare, with few slots now available for

the Summer 2022 season, though we

have seen some recent transactions

at Gatwick. There has been a trend

towards a focus on ‘primary’ airports

(Heathrow and Gatwick) which is likely

to ease as capacity at those airports

is taken up. However, by Summer

2024, or at the latest Summer 2025, it

is expected that the London aviation

system will be capacity constrained

once again.

This return to capacity constraints

comes at a time when many airlines

are planning to grow, with large,

long-standing fleet orders ready to be

fulfilled. The constraints on capacity,

coupled with the growth in airline fleets,

is likely to make London Southend

Airport the natural solution to airlines

looking to operate within the London

market in a relatively short timescale.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Esken Renewables

The conflict in Ukraine has brought the

UK’s ability to generate and rely on its

own energy sources into sharp focus.

The war has meant that countries

across Europe are being forced to

reduce their reliance on Russian oil and

gas supplies and re-evaluate their own

ability to generate energy.

The UK must seek to maintain its

energy security by diversifying the

sources of its energy, while increasing

the contribution of renewable energy

sources. UK-sourced sustainable

bioenergy will continue to play an

important role in this journey to

increased energy independence.

Currently the UK sources 7-9% of

its electricity supply from the UK’s

biomass power supply chain. The

Climate Change Committee believes

both that sustainably-sourced

bioenergy could contribute up to 15%

of the UK’s primary energy by 2050

and that “sustainable bioenergy is

essential for reaching Net Zero”.

The UK Government is expected

to publish its Biomass Strategy in

2022, setting out how biomass can

best contribute towards Net Zero

across the economy. In November

2021 the UK Government published

its Biomass Policy Statement which

was a welcome step towards this

new Biomass Strategy. The key

principles of the statement were to

set out how biomass can help the UK

deliver its carbon budget and Net Zero

ambitions, and how biomass can be

utilised with carbon capture to achieve

negative emissions. It is expected

that under the new strategy, biomass

will be prioritised over the longer

term to support sustainable fossil

fuel replacement, fuels from waste,

aviation fuel and hydrogen production.

We support the role of biomass at

the heart of the UK’s transition to Net

Zero and advocate the numerous

benefits of waste and by-product-

derived biomass. Combining waste

and by-product-derived bioenergy

with carbon capture and storage

(BECCS), as well as hydrogen, will be

critical to the UK’s decarbonisation and

energy security. Esken Renewables

will work closely with the wider sector

as the Biomass Strategy evolves and

carbon capture and hydrogen business

models develop.

The conflict in

Ukraine has

brought the UK’s

ability to generate

and rely on its own

energy sources

into sharp focus.

Our core business is the production

of waste wood derived biomass fuel,

which is currently delivering significant

carbon benefit to the UK economy.

Over the past couple of years waste

wood volumes have been volatile,

due to the lockdowns imposed as a

result of the pandemic. However, this

year we have seen a stable return of

waste wood volumes as the economic

activity has started to recover

and stabilise.

Construction output increased 12.7%

in 2021 from 2020 levels, and in

December 2021 construction output

was in line with pre-pandemic levels.

This resulted in an improvement in

waste wood availability, which along

with waste wood from recycling

centres, underpinned gate fee pricing.

At the same time, the biomass

power plants that we supply are now

maturing. Plant operators are seeking

to improve availability and operate in

a more consistent way, turning their

focus to long-term efficiency and

asset optimisation.

The increased availability of waste

wood and improving picture around

plant availability allowed Esken

Renewables to increase the amount

of waste wood it diverts away from

landfill. As a result, we were able to

prevent 630,000 tonnes of greenhouse

gas emissions from entering the

atmosphere. That’s the same volume

of emissions savings as taking 135,746

cars off the road for a year.

The importance of sustainable

biomass fuel to both UK domestic

energy security and to achieving Net

Zero targets is a key driver to Esken

Renewables’ growth ambitions, and we

will continue to strive to take domestic

waste feedstocks and optimise the

process for UK electricity generation.

Biomass will play an increasingly

important role in future UK energy

generation.

Esken Limited Annual Report and Accounts 2022

Business model

Esken creates smarter

ways to enable people

and businesses to travel,

connect and grow.

Our strengths

Our people

Esken recognises its people are at the

heart of everything it does. Esken has

therefore put in place a values-led

approach to people development with

a strong focus on continuous learning.

Our culture

Our people are encouraged to stay

connected and work as a team,

continuously seek to improve and

own our challenges together, taking

individual and collective accountability,

and above all to take care of each other

and the world around us.

Our focus

We all share in our vision to establish

sustainable UK infrastructure businesses

that benefit our partners, people

and communities. We all have a part

to play in reducing the UK’s carbon

emissions through renewables and

sustainable aviation.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategy setting

Support

Measuring progress

What we do

Esken’s business model is to set the right strategy in order to

deliver sustainable growth in our core aviation and renewables

businesses.

We then set accountability from Board level down through the core businesses to

deliver the strategy and provide them with the support needed to achieve their

growth targets and sustainability goals.

The Board then monitors progress of the businesses against these targets.

Strategy setting

Having exited loss-making businesses

Stobart Rail & Civils and Stobart Air,

the Board has been able to focus on

growing its renewables and aviation

businesses and has set Group level

strategic priorities to achieve this

objective. Esken has optimised the

accountability of those businesses,

assigning responsibility for strategy

delivery to Executive Directors,

who work directly with the core

businesses. That Board possesses a

range of expertise including airport

development, financial restructuring,

ESG and people development.

Support

Esken provides a range of support and

guidance to its operating businesses.

Having recapitalised the business

through a major refinancing, Esken

has sought to optimise its financial

structure to maintain the right levels

of liquidity and reduce interest rate

payments. Major focuses for support

this year have included advances

in its ESG framework, learning and

development programmes, internal

communications structure and health

and safety policies.

Measuring progress

Esken has put in place a robust

framework for measuring progress,

particularly in terms of financial discipline

and ESG performance. Esken has

strong cash flow modelling and financial

planning structures that ensure our

businesses are focused on the bottom

line, while also taking into consideration

ESG impacts and making progress

towards our sustainability targets.

By delivering our

strategic goals

we will create

value for our

stakeholders

Employees

Sustained growth will allow

our people to flourish in an

inclusive and supportive

environment.

Partners, customers

and suppliers

Our partners, customers

and suppliers will share in

the successful outcome of

our strategy and be able to

trust us to deliver on their

expectations.

Shareholders and

banking partners

We will create significant

value for our shareholders

by delivering on a strategy

that responds to business

challenges while seeking

new opportunities.

Communities

Delivering our growth

objectives will allow us to

help communities prosper

through the creation of local

employment opportunities,

and establish the connections

communities need to thrive.

Regulators, government

agencies and unions

Maintaining a positive

dialogue helps us to share

our vision for our business

and provide reassurance that

we recognise the importance

of excellent standards of

business conduct.

Esken Limited Annual Report and Accounts 2022

Our strategy

Esken’s strategic objective is to drive

sustainable shareholder value over the

medium term through growth in our

aviation and renewables businesses.

Focusing on our core businesses and

ensuring we have the right management

structure and reporting lines, a clear

strategy, and the appropriate support

and performance measurements in place

to support their growth.

FY22 progress

During the year, Esken redefined its management structures

and reporting processes with Lewis Girdwood, CFO, taking on

main Board responsibility for the Aviation division. Nick Dilworth,

COO, took on main Board responsibility for Esken Renewables,

in addition to his Executive responsibility for ESG.

Ensuring these core businesses are

focused on reducing our environmental

footprint and positively impacting our

stakeholders.

FY22 progress

Esken put in place a governance structure with Board

oversight to deliver its ESG framework, established charity

partnerships, developed a volunteering framework and

started to gather social impact metrics. Esken also improved

its diversity data, put in place safety KPIs and worked

toward our Roadmap to Net Zero with data collection

for Scope 1-3 carbon footprint.

We aim to do this by:

Both our operating businesses are working toward clearly defined growth strategies:

Esken Renewables aims to

continue to strengthen its

relationships with existing and

new suppliers and customers,

allowing it to optimise

performance and work in

partnership to manage risks.

2021/2022 progress

Having worked closely with its

biomass plant partners throughout

the lockdown period, Esken

Renewables was able to capitalise

on its strengthened relationships to

develop a defined plan for satisfying

demand throughout FY22 with clearly

forecast and planned plant downtime

and demand peaks.

Continuously evaluate every

aspect of its supply chain

infrastructure to identify

opportunities to increase

efficiencies, optimise

competitive advantages

and deliver sustainable

improvements.

2021/2022 progress

Esken Renewables’ close working

relationships, and the ability to

forecast peaks and troughs in

demand, meant it could optimise

the use of its national network of

suppliers, taking waste wood in the

locations where gate fees can be

maximised, and manage stocks to

optimise performance.

Seek opportunities to

increase market share within

its core operations through

growing existing partnership

agreements, securing

new supply contracts and

expanding into adjacent

markets that leverage its

existing infrastructure.

2021/2022 progress

Esken Renewables sees a number

of opportunities to secure additional

biomass supply capacity at existing

UK biomass plants. Securing these

additional contracts is a key focus for

the coming year.

Esken Renewables

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Continuously evaluating our portfolio of

£39.7m of non-core assets and realising

value as market conditions for asset sales

improve over the coming years.

FY22 progress

Despite a challenging market backdrop for achieving

optimum value, Esken has continued to explore

opportunities to realise value through asset sales

within its portfolio of non-core assets.

Maintaining strict financial discipline

through continuous evaluation of

performance metrics and assessment

of the most efficient capital structures.

FY22 progress

Esken continues to maintain strict financial discipline as

demonstrated by Esken Renewables slightly exceeding

guidance and the aviation business reducing adjusted

EBITDA losses, despite the challenges that continue to

affect that sector.

London Southend Airport’s

(LSA) primary focus is to target

airline agreements that are

profitable and sustainable for

all parties, while developing

ancillary incomes from sources

including global logistics,

private jets, train station

usage, hotel occupancy

and car park revenue.

2021/2022 progress

The aviation industry has experienced

significant challenge, through the global

pandemic and the Ukrainian crisis.

This has led to continued uncertainty

amongst airlines who have retrenched to

their established bases. LSA continues

to undertake discussions with airlines

focused on Summer flying in 2023

and 2024.

London Southend Airport

The airport will continuously

seek to develop its airline

proposition of proven routes,

peak slots, cost-effective

operations, an enjoyable

passenger experience and

an attractive and growing

catchment area.

2021/2022 progress

LSA has continued to develop

its airline proposition, principally

focused on a best-in-class passenger

experience. It has invested in

next-generation security and

baggage-handling equipment and is

redeveloping its digital experience

for passengers.

LSA’s growth will be underpinned

by a focus on continuously

seeking to deliver benefits to the

community in which it operates.

This includes setting and

delivering on clear environmental

targets, providing economic

benefits and job opportunities

and acting as a trusted and

transparent local partner.

2021/2022 progress

LSA made significant progress in

terms of community engagement,

launching its Connecting Communities

Commitment, launching one of the UK’s

only independent community noise

forums, appointing a charity partner, and

completing a community survey that

indicated significant local support for

the airport.

Esken Limited Annual Report and Accounts 2022

Strategy in action – embedding ESG

Esken Renewables

It established that in FY22 Esken

Renewables received, treated and

supplied 1.1m tonnes of waste wood

that would otherwise be sent to

landfill. Doing so enabled the UK

to avoid 630,000 tonnes of GHG

emissions per year from landfilling

waste wood. That’s equivalent to

taking 135,746 cars off the road.

Esken Renewables also supplied

300,000 tonnes of forestry by-

products to biomass plants, meaning

Esken Renewables supplied 1.5m

tonnes of biomass fuel in total.

Our biomass plant customers used

that fuel to generate an estimated

1,883,000 MWh of electricity, which

represents c.2% of the UK’s domestic

energy use and is sufficient to power

around 651,322 homes.

Producing energy using biomass plants

compared to doing so using gas-fired

electricity also meant that the UK

was able to avoid 714,000 tonnes of

GHG emissions in the year from fossil

fuels. The combined GHG emissions

savings of avoiding waste wood going

to landfill and using it to generate

renewable energy meant that the UK

avoided around 1.344 MTCO

e in FY22.

Of course it is also important to

consider Esken Renewables’ footprint

from the processing and supply of

biomass fuel. Esken Renewables

generate emissions totalling 19,000

tonnes per annum. Over 80% of this

is related to diesel fuel consumption

in Esken Renewables’ haulage

vehicles and machinery.

Esken Renewables

engaged with Logika

Consultants to develop

a report that would

establish both its own

environmental footprint

and the contribution it

makes to reducing UK

greenhouse gas (GHG)

emissions across the

supply chain.

Delivering

benefits through

reducing emissions

Taking Climate Action

For more information on ESG

see pages 54-56

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Our biomass plant customers

used our fuel to generate

1,880,000 MWh of electricity,

which is sufficient to power

around 650,000 homes

Delivering

benefits through

reducing emissions

Taking Climate Action

Esken Renewables generates 121,256

tonnes of GHG emissions when

accounting for third party wood

handling and transport.

Esken Renewables’ plan to tackle these

emissions in the future through the use

of biofuels in site machinery, which

could reduce its direct emissions by

up to 20% in the near future. The

electrification of site-plant and the

introduction of zero-emission haulage

vehicles in the next decade will further

reduce this.

GHG emissions from Esken

Renewables’ customers are relatively

balanced by CO

absorbed by the

biomass during its growth cycle,

ensuring the energy generated has

low carbon intensity over its lifecycle.

The residual carbon intensity of

electricity exported by Esken

Renewables’ customers is

around 59 gCO

e/kWh, which is

over six times lower than natural

gas power generation.

In the future, it is anticipated that

Esken Renewables’ customers will

have the opportunity to upgrade

their power plants to include carbon

capture and storage, potentially

creating carbon-negative power

stations and significantly contributing

to the UK’s efforts of achieving Net

Zero carbon by 2050.

Esken Limited Annual Report and Accounts 2022

Strategy in action – embedding ESG

London Southend Airport

Developing a positive relationship

between LSA and the community in

which it operates is a key pillar for

realising its growth ambitions.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Understanding

our communities

We want to establish an airport

that delivers tangible value to

local residents, while also taking

positive steps forward toward our

sustainability goals.

In order to encapsulate the various

initiatives that contribute to those

goals LSA launched its Connecting

Communities Commitment (the

Commitment). The Commitment

included an Environmental Action

Plan, the launch of one of the UK’s

only independent noise forums and a

two-year partnership with South East

and Central Essex Mind (SECE Mind);

a local mental health charity offering

information and advice to people with

a range of mental health problems.

Building Sustainable

Communities

For more information on ESG

see pages 36-58

Throughout the financial year LSA took

steps to bring the Commitment to life.

It has regularly engaged with local

residents, businesses and councillors

and hosted stakeholder events to

discuss key topics, such as the ways in

which the pandemic has changed our

working lives and the potential to bring

a hydrogen hub to serve Southend and

Rochford’s vehicle fuel needs.

The airport has also sought to

contribute to the community directly.

During the height of lockdowns, teams

from LSA delivered food and toiletry

packages to vulnerable people and

provided car parking space to be used

as COVID-19 test centres.

The airport cleaning team volunteered

to spring-clean the communal areas

of Nelson Gate, which is a supported

housing facility run by SECE Mind, and

the airport welcomed members of the

public into the terminal for dedicated

tours to support mental health and

anxiety for anyone feeling nervous or

anxious about a return to flying after

the pandemic.

Teams at LSA have also sought to

raise money for charity, most notably

inviting staff members and the local

community to walk or run the length

of its runway whilst raising £15,015 for

SECE Mind.

Esken Limited Annual Report and Accounts 2022

Strategy in action – embedding ESG

Governance

Putting in place a structure to achieve

this has been the priority for this

year, and has led to the creation

of a governance programme that

drives transparency, accountability,

and continuity. The established

governance structure brings together

colleagues from across Esken’s

divisions and functions, providing a

bottom-up approach and enhanced

visibility from the Board.

The structure we have put in place

is comprised of working groups to

support the development and progress

of Esken’s social impact programmes

and environmental mitigation

plans. These working groups have

representatives from each of our

divisions. This means we are able

to take a collaborative approach to

sharing knowledge, best practice

and lessons learnt. The output from

the working groups is reported up to

the Steering Group and supports the

development of a cohesive ESG plan

for the business.

The Steering Group is comprised of

the CEOs of our business divisions

and core Group function heads.

As the accountable body for ESG,

the Steering Group meets monthly

to review progress and ensure

the business is compliant, taking

appropriate steps to mitigate our

environmental impact and driving a

positive social impact programme.

We have also put in place an ESG Board

sub-committee with formal terms of

reference. The sub-committee meets

monthly and receives all minutes

from both the working groups and

Steering Group. The sub-committee

also reports into the Audit and

Renumeration Committees. As a

result of this governance process

the business has also been able to

establish a risk register, invest in

public affairs subscriptions to be

informed of emerging regulation and

legislation, and develop KPIs across

the ESG framework.

An element of the Executive Directors

bonus targets will be based on the

achievement of the ESG KPIs.

The governance structure we have

put in place will provide the guidance,

verification and sustainability we

need as we continue to progress

our ESG programme.

It is essential for

us to embed ESG

within our working

practices in order to

effectively change the

business culture.

Strong

governance

oversight

For more information on governance

see pages 80-87

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

The governance

structure we

have put in place

will provide

the guidance,

verification and

sustainability

we need.

Strong

governance

oversight

Esken Limited Annual Report and Accounts 2022

Chairman’s statement

David Shearer

I am pleased to present

my Chairman’s statement

for the year to the end of

February 2022. Following

on the challenges of

the prior year this has

been a year of transition

for the Group as we

navigated the pandemic

and continued the journey

to a focused renewables

and aviation business while

continuing to address

residual legacy issues.

Review of the year

We entered the year with continuing

uncertainty around the pandemic

and a lack of clarity on the extent

of lockdowns and the impact which

these would have on the aviation

industry, the appetite for consumers

to travel and the airlines’ commitment

to route schedules. Against this

backdrop we planned accordingly to

ensure that the Group would have

the financial resources to manage

a prolonged downturn, while at the

same time maintaining the operational

flexibility to respond quickly to any

improvement in demand.

Esken continued on its journey to

a focused aviation and renewables

business having exited the loss-

making Stobart Rail & Civils business

Driving

sustainable

shareholder

value

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

The benefits of

the streamlining

of our operations

can be seen in our

full year results.

Esken’s core

operating divisions

generated a

combined adjusted

EBITDA of £19.5m

compared with

£3.9m in the

prior year.

David Shearer,

Executive Chairman

in the prior year. In June 2021 we

unfortunately had to withdraw our

support for the Stobart Air business

which was placed in liquidation

with the loss of 480 jobs. We had

maintained support for this business

since it was re-acquired in April 2020,

following the collapse of Connect

Airways. We tried tirelessly to find

a suitable buyer in view of the

significantly better outcome which

would have been achieved for both

employees and shareholders given the

legacy liabilities. Sadly, the continuing

impact of the pandemic on passenger

levels meant that we could no longer

sustain our support without putting

the future viability of the Group at risk.

Esken continues to fulfil its residual

lease and related maintenance

liabilities on certain aircraft as these

run through to September 2023.

In July 2021 we announced that

agreement had been reached

with Carlyle Global Infrastructure

Opportunity Fund (CGI) to invest

£125m, by way of a convertible loan

note into London Southend Airport

(LSA) and this completed in August

2021. At the same time, we concluded

an equity raise of £55m and a new

£20m working capital facility. This

finance raise served two purposes.

Firstly, it secured the funding to

enable the Group to meet certain

legacy obligations and provide the

working capital to support its recovery.

Secondly and importantly, it introduced

an experienced airport investor and

partner into LSA. The convertible

loan implied an equity value on the

airport of c.£400m in the event of the

conversion option being exercised.

As we simplified the business into two

primary divisions we decided also to

streamline the management team,

following the departure of Warwick

Brady in the early part of the year.

After a consultation with a number of

our major shareholders, we announced

in November 2021 that we would

dispense with the role of Group Chief

Executive and would not be seeking

to appoint a replacement. Each of the

existing Executive Directors would

take main Board responsibility for

one of the operating divisions with

Nick Dilworth becoming Executive

Director – Renewables and Lewis

Girdwood becoming Executive Director

– Aviation. I would remain as Executive

Chairman with overall executive

responsibility for the business while

focusing on stakeholder management

and the delivery of the Group strategy.

We have also made a number

of changes within the senior

management team to ensure that

we have the right capabilities in

place to drive performance into

recovery. These changes will improve

our overall management capability

within the Group and will also make

a saving in cost compared with the

previous structure.

During the year the Group continued

to make use of the furlough scheme

with a number of colleagues in the

Aviation division being on furlough until

30 September 2021 when that scheme

terminated. The use of this scheme

enabled us to maintain the operating

capability of the business through the

worst of the pandemic.

Subsequent to the year end we

have rebranded our Stobart Energy

business as Esken Renewables. This

was a requirement of our decision in

May 2020 to sell the Stobart brands

to Logistics Development Group plc,

which was at that time the owner of

Eddie Stobart Logistics, but at the

same time reflects more clearly the

description of what the business

actually does. The Group, as part of

that transaction was also required

to change the name of Stobart Jet

Centre, now London Southend Jet

Centre, and Stobart Aviation Services,

now Star Handling Services.

Esken Limited Annual Report and Accounts 2022

Chairman’s statement

continued

Results

The benefits of the streamlining of our

operations can be seen in our full year

results. Esken’s core operating divisions

generated a combined adjusted EBITDA

of £19.5m compared with £3.9m in

the prior year. Esken’s reported loss

before tax of £34.6m represents an

improvement compared to the £44.2m

reported in the prior year. The loss

before tax is after £19.0m of financing

costs, £20.5m of deprecation, £5.4m

of net impairments and £12.1m of

net central costs (including £5.6m of

legal costs relating to historical cases

which are still to be concluded). Esken

expects these central costs to reduce

significantly in FY23.

The improvement in adjusted EBITDA

is a result of a strong performance

in Esken Renewables which slightly

exceeded expectations to report

an adjusted EBITDA of £20.3m. The

continued financial discipline within

LSA, alongside positive contributions

from Star Handling Services, our

check-in and handling business,

and the airport’s hotel and solar farm

meant the Aviation division as a whole

reported an adjusted EBITDA loss of

£0.8m, after £3.5m of one-off receipts

in connection with Connect Airways

and Teesside International Airport.

Esken Renewables’ performance

followed a full recovery in the

construction sector after interruptions

resulting from the first lockdown in the

prior year. This led to an improvement in

the availability of waste wood supplies

and a consequent recovery in gate

fees. The other contributing factor was

a maturing of the energy plants which

are supplied by Esken. These plants

had fewer unplanned outages in the

year allowing us to supply 1.5m tonnes

of biomass fuel compared to 1.4m

tonnes in the prior year.

Whilst there is no direct relationship

between energy price increases and

our long-term RPI-linked fuel-supply

contracts, improved performance

of the energy generators is positive

for the sector as a whole.

Esken Renewables plays a role

within the UK’s circular economy and

the journey towards Net Zero. The

energy generating stations which we

supply account for c.2% of all energy

generated within the national grid or

1.8m MWh.

Biomass fuel remains a key part of

the energy infrastructure within the

UK and we will work closely with the

wider sector as the strategy develops

to identify additional opportunities for

the business. Diverting waste wood

from landfill to be used as biomass fuel

allowed us to remove 630,000 tonnes

of carbon emissions from entering

the atmosphere compared with other

means of disposal.

The adjusted EBITDA loss for the

Aviation business of £0.8m compared

with a loss of £6.1m in the prior year

is a marked improvement given the

significant drop in passenger numbers

through the period of the pandemic.

This performance reflects the strict

financial discipline which has been

applied and the continued income

from the global logistics operation.

Aviation continued to be impacted

significantly by further lockdowns and

the restrictions on travel across Europe.

LSA saw passenger numbers continue

to decline during the year under

review, being down 36.2%

to 94k.

In the latter part of the year, higher fuel

prices and continuing uncertainty within

the aviation sector has impacted airline

allocation decisions with a number

retracting to traditional established

bases despite a market improvement

in booking volumes for Summer 2022.

We were very pleased to see easyJet

return to operate flights from London

Southend Airport to Malaga, Palma and

Faro for this summer. We continue to

have constructive dialogue with a range

of airlines with a focus on delivering the

right airline agreements for Esken for

Summer 2023 onwards.

LSA has stepped up its engagement

with the local community. The

airport has for a long time operated

well within government air quality

guidelines with monitoring showing a

continuous improvement in and around

the airport over the last decade. We

have sought to build on that position,

launching the Connecting Communities

Commitment which detailed an

Environmental Action Plan, the launch

of one of the UK’s only community

noise forums and the establishment

of a partnership with local charity,

South East and Central Essex MIND,

amongst other initiatives.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

During the year, the land at Port

of Weston in Runcorn increased

in value leading to a small reversal

of impairment of £0.8m, resulting in

non-core assets with a book value

of £39.7m as at 28 February 2022,

an increase of £0.5m on the prior year.

The Group plans to realise value in the

short term as the market condition for

asset sales improves.

Environmental, social

and governance

The focus on connecting with

our communities and acting as

a responsible business has been a

key theme throughout the business in

the year, with Esken stepping up its

environmental, social and governance

(ESG) activities. We have put in place

an ESG governance structure with

Board oversight to deliver our ESG

framework. We have established

charity partnerships for each of the

operating businesses, developed a

volunteering framework and started

to gather social impact metrics.

Esken has also improved its diversity

data, established safety KPIs and

substantially completed our work

on establishing our roadmap towards

Net Zero with a clear process for data

collection for our Scope 1-3 carbon

footprint. We expect to finalise our

roadmap to Net Zero in FY23.

We were very pleased to see easyJet

return to operate flights from London

Southend Airport to Malaga, Palma

and Faro for this Summer.

David Shearer,

Executive Chairman

Esken Limited Annual Report and Accounts 2022

The progress through our ESG

framework underpins our desire to

play a key role in reducing the UK’s

carbon emissions through renewable

energy and sustainable aviation while

supporting our strategic objective

to drive sustainable shareholder

value over the medium term.

Our renewables business already

contributes to the UK’s targets and

we have the opportunity at LSA to

develop future passenger growth in

a sustainable way.

Strategy and funding

Our strategy for the Group is clear

and was stated last year. We will focus

on the two core operating divisions

of Renewables and Aviation and

drive value in these businesses in a

sustainable way over the medium term.

All remaining non-core assets will be

realised with the funds being used to

reduce residual liabilities and invest in

the core businesses.

We will seek to grow the renewables

business in its core market and be

alert to new opportunities which might

arise as the UK transitions to a Net

Zero carbon economy by 2050. The

prime asset in the aviation business

is LSA which before the pandemic

offered passenger services to over

40 destinations to a catchment

area of over 8m people within easy

travelling distance of the airport.

As air travel continues to recover

the London airport market will once

again become capacity constrained.

This fact, coupled with the intrinsic

attractiveness in terms of operating

costs, passenger experience and ease

of access by rail from central London

underpins our view of the medium-

term value of the airport. We will look

to enter into deals with the right airline

and logistics partners which make

commercial sense to both parties

as we develop the airport for future

sustainable travel.

The business secured a new £125m,

seven-year convertible loan into the

airport from CGI and also re-financed

the revolving credit facility (RCF) with

our existing lenders; entering into a

new £20m RCF, which matures in

February 2023. The airport retains

a ring-fenced cash facility which

underpins its funding needs through

the recovery period.

The Group is progressing a review

of its banking requirements to ensure

it has sufficient headroom to cover its

residual Propius aircraft liabilities and

working capital needs following the

expiry of the RCF in February 2023.

Board and people

Once again can I express my

personal thanks to my Board and

all of our colleagues at Esken for

their support over the last year. It

has continued to be a difficult period

for everyone both at work and at home

and the efforts and dedication of our

staff through these challenging times

has been appreciated.

I have already referred to the decision

not to seek to appoint a new Group

Chief Executive and streamline the

Executive management team with

a view to improving management

of the operations, while at the same

time mitigating unnecessary cost.

In view of the fact that I will remain

in an Executive Chairman position

and to ensure effective oversight

and robust corporate governance,

David Blackwood assumed the

role of Deputy Chairman and Senior

Independent Director with effect from

3 November 2021. This enhanced

role ensures that the Board and

shareholders have a point of contact

independent from myself should they

wish to raise any matters of concern.

In view of the significance of our

ESG ambitions we have created a

Board level ESG Committee which

Ginny Pulbrook has agreed to Chair,

adding to her responsibilities as the

designated Board level People Director.

John Coombs has indicated his

desire to step down from the Board

and he will retire with effect from

the conclusion of the AGM, after

eight years as a Non-Executive

Director including three as Chair

of the Remuneration Committee.

Clive Condie has agreed to take on

the role as Chair of the Remuneration

Committee following the AGM.

Chairman’s statement

continued

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

On behalf of the Board, and personally,

I express our thanks to John for his

dedication and commitment to his

roles over the last eight years and

would like to wish him well in the

future. I wish to also thank each of my

fellow Directors for agreeing to take on

the additional responsibilities. In view

of the reduction in scale of the Group’s

operations and the fact that we are

still in the recovery phase following

the pandemic we now do not intend

to recruit an additional Non-Executive

Director to the Board.

We will keep the position under

review and ensure that we take

steps to provide adequately for

Board succession at the point

when this becomes an issue. While

recognising that the Board does not

meet the expected target for diversity

and that this will now not change in

the short term, it’s the right thing

not to add additional cost into

the business at present.

Future

As we emerge finally from the

pandemic we find ourselves facing

the new challenges arising from the

impacts of the war in Ukraine, tight

labour market, fuel price inflation and

increasing interest rates. The policy

responses to these challenges taken

by governments round the world

will undoubtedly have an impact

on business generally and on the

markets which we serve. In the last

two years the steps which we have

taken to streamline the business have

enhanced our ability to respond quickly

to these challenges.

Our renewables business offers a

resilient base given the increasing

demands for carbon neutral energy.

Our Aviation business starts from a

low base and given the steps we have

taken to minimise costs, can grow

its operations in line with passenger

demand. The inherent desire amongst

the public to travel now that restrictions

have been removed is likely to offer

a demand-pull in the aviation sector

which will benefit the airport over

the medium term.

We will continue to apply strict

financial discipline in the year

ahead ensuring that we take the

right decisions for the medium term.

While there is economic and market

uncertainty we look ahead with a

degree of confidence as we navigate

the recovery phase of the Group.

David Shearer

Executive Chairman

24 May 2022

Esken Limited Annual Report and Accounts 2022

23,411

24,742

56,786

(773)

(6,075)

(696)

14,975

10,005

20,308

1 Adjusted EBITDA represents loss before interest, tax, depreciation and impairments.

2 See note 33 for an explanation of the divisional operating cash flow Alternative Performance Measure.

Key performance indicators

We assess the Group’s performance according to

a wide range of measures and indicators. Our key

performance indicators (KPIs) help the Board and

Executive management team measure performance

against our strategic priorities and business plans.

London Southend Airport

Esken Renewables

Revenue (£’000)

Total passenger numbers at LSA

Tonnes supplied (MT)

Adjusted EBITDA

(£’000)

Adjusted EBITDA

(£’000)

Cargo tonnage (thousand tonnes)

Volume of waste wood supplied (MT)

Divisional operating cash flow

(£’000)

Divisional operating cash flow

(£’000)

Aviation revenues continue to be affected

by the prolonged impact of the COVID-19

pandemic on operations, decreasing by 5.4%

following a reduction in passenger numbers.

Renewables revenue increased by 6.6%,

with tonnes supplied increasing from 1.4m

to 1.5m as the renewables business returns

to pre-COVID-19 levels of operations.

Continued impact of the COVID-19 pandemic

has resulted in a reduction in passenger

volumes by 36.2%, with FY21 benefiting

from an unaffected month of operation in

March 2021.

Return to normal market conditions following

the resumption of the construction industry

following COVID-19, has resulted in a 4.8%

increase in tonnes supplied.

Adjusted EBITDA improvement of £5.3m

includes £3.5m of one-off benefits, with the

remaining improvement driven by reduced

airline marketing costs and savings in staff

and general overheads, offsetting a reduction

in passenger-related spend.

Recovery of the business to normal pre-

COVID-19 market conditions, accompanied by

increased gate fees, has resulted in a £10.3m

increase in adjusted EBITDA.

Reduction in cargo tonnes by 70.8% due to

the impact of Brexit on the transfer of goods

from Europe, although impact on volume of

daily rotations was less significant, reducing

by 36.7%.

The volume of waste wood supplies represents

a combination of the waste wood that is

supplied via third parties and waste wood

that is received by Esken Renewables under

the gate fee mechanism, processed and then

supplied to our biomass plant partner.

Improvement in cash profit due to continued

actions to mitigate the EBITDA impact of

COVID-19, offset by payment of Part 1 claims

liabilities by the Aviation division.

£2.5m increase in cash flow from operating

activities, driven by the adjusted EBITDA

improvement, with the business maintaining

strong cash conversion and working capital

management.

17,924

9,942

15,440

79,650

74,733

76,339

1.5

1,159

932

954

1.5

1.4

7.0

(4,663)

(4,050)

(8,041)

8.1

93,957

2,142,310

147,208

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

104,633

101,404

142,098

10,255

(7,384)

(5,910)

72,738

77,408

14,802

Nil

11,125

Nil

Group: Financial Group: ESG

Revenue (£’000)

Headroom (£’000)

Loss before tax (£’000)

Net debt (£’m)

Adjusted EBITDA

(£’000) Accident/incident rate

Loss per share – total (pence) Minimising our environmental impact

(% of waste)

Developing our people

(Number of hours of training)

Cash flow from operating activities (£’000)

Taking climate action

(Tonnes CO

per £m of revenue)

Revenue has increased by 3.2% to £104.6m,

driven by the return to normal market

conditions in the renewables business,

partially offset by reduced passengers

travelling through London Southend Airport.

The Group had £72.7m of cash and undrawn

bank facilities available at 28 February 2022,

driven by net proceeds of £52m from the issue

of ordinary shares and £111m from the Carlyle

convertible debt transaction, in addition to the

£20m undrawn revolving credit facility.

Loss before tax improvement of £9.3m to

a loss of £34.6m, driven by the favourable

performance in adjusted EBITDA and non-

repeat of £8.0m loan note impairment in FY21,

partially offset by higher Finance costs and the

£5m impairment of Property assets in FY22.

Net debt has reduced from the prior year due

to the net £51m equity raise proceeds, with the

£125m Carlyle convertible loan allowing repayment

of the existing RCF facility. This has been partially

offset by cash flow required to fund legacy Stobart

Air and Propius liabilities, in addition to interest

accrued on the Carlyle convertible loan.

Group adjusted EBITDA increased by £17.6m

to a profit of £10.3m, which includes £8.2m of

one-off adjustments, resulting in a like-for-

like adjusted EBITDA improvement of £9.4m,

driven by the Esken Renewables improvement

and strict cost control across the Group.

The Reporting of Injuries, Diseases and

Dangerous Occurrences Regulations

(RIDDOR) 2013, regulates the statutory

obligation to report deaths, injuries, diseases

and dangerous occurrences that take place

at work or in connection with work. The

reported figure is arrived at by dividing the

number of RIDDORs by the number of hours

worked, multiplied by 100,000.

Earnings per share remains negative as the

Group recovers from the impact of COVID-19

and disposes of legacy underperforming

operating divisions.

This number is calculated across all our

divisions for waste that is recycled and

converted into energy. Waste that cannot

be recycled makes up the remaining 0.5%.

Reporting the number of hours invested

in training fulfils our commitment to

developing our people to give them the

skills they need to meet their personal

development goals.

Continued strict financial discipline, minimising

costs and capex, and managing the Group’s

working capital in order to reduce cash burn,

in addition to the £3.5m of one-off receipts

associated with Connect Airways and Teesside

International Airport have resulted in Group

cash flow from operating activities improving

by £15.0m.

These figures for CO

represent the

equivalent amounts of CO

for greenhouse

gases for Scope 1-3 emissions and using

FY19 as baseline data. For more information

see page 52.

241.9

235.5

250.8

Total shareholder returns (£’000)

Total shareholder returns remain at nil in FY22

due to retaining cash within the business in

response to the unprecedented impact of

COVID-19 upon the Group.

0.44

0.43

0.59

99.5

50,414

37,382

68,234

(14,484)

(4.26)

(34,567)

(29,443)

(22,221)

1,333

198

147

Clarifying the picture

The Group reports a £10.3m adjusted EBITDA gain and a £34.6m

loss before tax for the year ended 28 February 2022. Whilst this

result demonstrates progress, particularly given the considerable

ongoing challenges in the airline industry, it is worth noting some

one-off items that cloud the picture somewhat, and we think it

is best to qualify the result to give the reader a clear, transparent

view of the Group’s performance this year.

There were one-off receipts in the Aviation division totalling

£3.5m, associated with Connect Airways and the conclusion of

the partnership with Teesside International Airport. In the Non-

Strategic Infrastructure division an agreement was reached to

exit a long-term onerous property lease, resulting in the release

of provisions and reassessment of lease term, generating

£4.7m income.

Aviation emerging from COVID-19

The Aviation division reports an adjusted EBITDA loss of

£0.8m, which includes the £3.5m Connect Airways and

Teesside benefit. As previously announced, the Group

decided to close London Southend Airport (LSA) to

commercial passengers during the Winter period just gone

to position the airport for the beginning of a return to flying

in Summer 2022. With passenger numbers in the year at

less than 5% of pre-COVID-19 levels, we implemented strict

cost control to minimise cash burn.

The majority of European travel restrictions have now been

lifted and the airline industry has seen an improvement in

booking volumes for Summer 2022. LSA is targeting gradual

growth through 2022 and 2023 and as the first step on

this journey easyJet will operate three routes out of LSA

to Malaga, Palma and Faro.

Renewables bounce back

The Renewables division (previously the Energy division)

has had a strong year seeing an increase in adjusted EBITDA

to £20.3m which is now ahead of pre-COVID-19 levels. The

supply of waste wood in the market was far healthier than

the prior year, which had a twofold impact. Firstly, the division

was in a much more competitive position regarding gate fees

charged on inbound waste wood. Secondly, through efficient

use of its supply chain, the division was able to source waste

wood from a smaller geographical area, reducing the need for

imports and significantly reducing costs. The result of these

factors is that the business is now well placed to maintain its

pre-COVID-19 level.

Discontinued operations

Following the liquidation of Stobart Air in June 2021,

the results of Stobart Air and Propius are presented in

discontinued operations and the prior year comparatives

restated accordingly. The total loss from discontinued

operations of Stobart Air and Propius, along with some

residual costs relating to Stobart Rail & Civils, was £2.4m,

including a profit on liquidation of £11.3m from the

deconsolidation of Stobart Air’s balance sheet.

Financial review

Lewis Girdwood

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

At 28 February 2022 the Group has c.£47m of outstanding

cash outflows payable through to September 2023 related to

ongoing Propius lease and aircraft-related costs, see note 33

for breakdown of the costs. Towards the end of calendar year

2022 Propius will begin the staggered hand-back of the eight

ATR aircraft to GOAL. The remaining aircraft costs have been

fully provided for in these financial statements, although there

is estimation uncertainty regarding part of the maintenance

provision, see notes 2 and 25. The provision excludes any

future foreign currency exchange exposure.

Balance sheet and liquidity

During the year the Group restructured its debt and sourced

alternative funding solutions. An agreement was reached

with Carlyle Global Infrastructure Opportunity Fund (CGI) for

a £125m investment in LSA through a 30% convertible debt

instrument (£111.5m net), and £55.2m of gross proceeds

(£52.3m net) were received from a successful capital raise.

This enabled the repayment of the Group’s old revolving

credit facility (RCF) in full, which was drawn at £108m prior

to repayment. A new £20m RCF was agreed which remained

undrawn at 28 February 2022. The Group’s headroom at the

year end is £72.7m and includes £14.4m of ring-fenced cash

in LSA and the £20m RCF. The Group also has non-core

assets, with a net book value of £39.7m, which can be sold

at a time and price most beneficial to the Group.

Revenue

2022

£m

Restated

2021

£m Movement

Aviation 23.4 24.7 -5.4%

Renewables 79.7 74.7 6.6%

Revenue from two main

operating divisions 103.1 99.4 3.7%

Investments – – 0.0%

Non-Strategic Infrastructure 0.7 1.1 -37.4%

Group Central

and Eliminations 0.8 0.9 4.5%

Total revenue 104.6 101.4 3.2%

Revenue from continuing operations has increased by

3.2% to £104.6m. Revenue from our key growth divisions,

Aviation and Renewables, has increased by 3.7% to £103.1m.

Revenue in the Aviation division continues to be significantly

impacted by COVID-19. Passenger numbers at LSA were

down by 36.2% year-on-year, with the prior year including

one month of restriction-free flying prior to lockdown.

An increase in gate fees has been the main driver for the

improvement in Renewables revenue, in addition to an

increase in the outbound supply of biomass material.

Profitability

2022

£m

Restated

2021

£m Movement

Adjusted EBITDA

Aviation (0.8) (6.1) 87.3%

Renewables 20.3 10.0 103.0%

Adjusted EBITDA

from two

main operating divisions 19.5 3.9 397.1%

Investments (0.4) 0.1 -404.7%

Non-Strategic Infrastructure 3.3 (1.7) 297.2%

Group Central

and Eliminations (12.1) (9.7) -24.3%

Adjusted EBITDA

10.3 (7.4) 238.9%

Depreciation (20.5) (19.4)

(Impairment)/reversal of

impairment of property (5.4) 0.8

Operating loss (15.6) (26.0)

Impairment of loan notes – (8.0)

Finance costs (net) (19.0) (10.2)

Loss before tax (34.6) (44.2)

Tax 9.9 7.1

Loss for the year from

continuing operations (24.7) (37.1)

Loss from discontinued

operations, net of tax (2.4) (118.0)

Loss for the year (27.1) (155.1)

1 2021 results have been restated where required in line with IFRS 5 Discontinued

Operations.

2 Adjusted EBITDA represents profit/(loss) before interest, tax, depreciation and

impairments. Refer to note 3 for reconciliation of divisional adjusted EBITDA to

loss before tax.

Profitability

Adjusted EBITDA and profit before tax are the Group’s key

measures of profitability. Adjusted EBITDA has increased

by 238.9% to a £10.3m gain (2021: £7.4m loss) and the

loss before tax has decreased by £9.6m to £34.6m

(2021: £44.2m).

The Aviation division adjusted EBITDA has increased by

87.3% to a loss of £0.8m (2021: £6.1m) primarily due to

£3.5m of one-off receipts associated with Connect Airways

and the conclusion of the partnership with Teesside

International Airport, and a reduction in airline support

costs. In the Renewables division, performance has

returned to pre-COVID-19 levels with an increase in gate

fees and a reduction in the cost of sourcing waste wood,

leading to adjusted EBITDA increasing by 103.0% to £20.3m

(2021: £10.0m).

We have simplified the

Group and made progress

in both operating divisions

supported by smart cost

management where

appropriate.

Esken Limited Annual Report and Accounts 2022

Finance costs

Finance costs increased by £8.0m to £21.2m, mainly due

to interest charged on the CGI convertible debt instrument

in the current year and higher interest charges on the RCF

prior to its repayment. Finance income decreased by £0.8m

to £2.2m primarily due to a decrease in the interest received

on the change in fair value of financial liabilities.

Tax

The tax credit on continuing operations of £9.9m (2021:

£7.1m) reflects an effective tax rate of 28.5% (2021: 16.0%).

The effective rate is higher than the standard rate of 19%,

mainly due to the settlement and release of the uncertain

tax position. Deferred tax has been calculated at a blended

rate. The amounts expected to unwind pre 1 April 2023 are

calculated at 19% and the amounts expected to unwind post

1 April 2023 are calculated at 25%.

Discontinued operations

On 14 June 2021 Stobart Air was placed into liquidation

and its balance sheet was deconsolidated from the Group

accounts. The operational loss of Stobart Air prior to

liquidation of £1.1m and the profit on liquidation of £11.3m

are presented in discontinued operations. Following

the liquidation of Stobart Air, the results of Propius, our

aircraft leasing business that leased all eight of its aircraft

to Stobart Air, have been presented as discontinued.

Propius is abandoned in line with the IFRS 5 definition of

a discontinued operation. The operational loss of Propius

of £12.3m has been presented in discontinued operations.

The prior period results have been restated within the

consolidated income statement, consolidated statement

of cash flows and accompanying notes accordingly. The

current year loss from discontinued operations also includes

a £0.3m loss related to residual costs from the disposal of

Stobart Rail & Civils in the prior year.

Loss per share

Loss per share from continuing operations was 2.99p (2021:

6.89p). Total basic loss per share was 3.28p (2021: 28.81p).

Share movements and dividends

On 7 May 2021 the Group issued 6,000,000 new ordinary

shares to Cyrus Capital Partners (Cyrus) to satisfy the put

option between Esken and Cyrus. On 26 August 2021 the

Group issued 394,410,618 new ordinary shares following

a Firm Placing and Placing and Open Offer (Capital Raise).

The Capital Raise resulted in gross proceeds of £55.2m

(£52.3m net).

The number of shares held by the employee benefit trust

increased from 3,778,457 at 28 February 2021 to 4,600,764

at 28 February 2022 after the trust purchased 822,307

shares issued on the Capital Raise.

Financial review

continued

In the Non-Strategic Infrastructure division the agreement

to exit a long-term onerous property lease is the main driver

of the increase in adjusted EBITDA to a gain of £3.3m (2021:

£1.7m loss). The Group Central and Eliminations division’s

adjusted EBITDA loss increased by 24.3% to £12.1m (2021:

£9.7m) mainly due to one-off legal fees and an increase in

the provision for part 1 claims relating to LSA.

Business segments

The business segments reported in the financial statements

are Aviation, Renewables, Investments and Non-Strategic

Infrastructure, which represent the operational and reporting

structure of the Group.

The Operational Review contains further details about the

performance of the operating divisions.

The fair value of the investment in Logistics Development

Group plc (LDG), reduced by £1.2m (2021: £5.7m increase)

due to a decrease in the LDG share price. The loss on

revaluation of the investment to current market share

price is presented in the consolidated statement of

comprehensive income.

The Non-Strategic Infrastructure division continues to

realise value from its property assets when the time and

price is right. At 28 February 2022, the book value of

Infrastructure assets held was £39.7m (2021: £39.2m).

During the year, there were no (2021: one) property

disposals, generating net proceeds of £nil (2021: £1.4m).

Depreciation

Depreciation has remained broadly in line year-on-year,

with the small increase from £19.4m to £20.5m, principally

due to fixed asset additions in the Aviation division, related

to terminal improvements at LSA.

Impairment of property assets

A right-of-use asset relating to land leased in Widnes has

been impaired by £6.2m. The land relates to a sale-and-

leaseback transaction and was recognised following the

adoption of IFRS 16. It was anticipated that the land would

be used in the Renewables division but during the year

the Group reassessed its strategy for the use of the land

and concluded that this was not viable. The impairment is

non-cash and does not impact the trading operations of

any business unit.

At the year end three land and building and property

inventory assets were subject to external independent

development valuations. This led to an overall reversal

of impairment of £0.8m (2021: £0.8m).

Impairment of loan notes

In the prior year shareholder loan notes relating to Mersey

Bioenergy Holdings Limited, the Widnes biomass plant

owner, were impaired from £8.0m to £nil shown on a

separate line, Impairment of loan notes, on the consolidated

income statement. There has been no change in the

impairment of the loan notes in the current year.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Balance sheet

2022

£m

2021

£m

Non-current assets 353.5 369.4

Current assets 89.2 55.4

Non-current liabilities (239.5) (172.6)

Current liabilities (133.1) (203.9)

Net assets 70.1 48.3

Net assets have increased by £21.8m, mainly due to the

Capital Raise partially offset by the loss in the year.

The overall value of property, plant and equipment (PPE)

of £265.6m (2021: £285.6m) has decreased in the year

mainly due to depreciation charge across the Group and

impairment of the Widnes land, partly offset by fixed asset

additions related to terminal improvements at LSA and plant

and machinery in Renewables. Other financial assets have

increased by £3.7m due to an investment in an insurance

captive cell, partly offset by the downward revaluation of

the investment in LDG.

Current assets have increased principally due to a higher

cash balance at year end of £52.7m (2021: £12.4m); see

following section on the major cash flows in the year.

Non-current liabilities have increased from £172.6m to

£239.5m. In the year a £118.9m liability was recognised

on the balance sheet for the CGI convertible debt. This is

partially offset by a £23.4m reduction in lease liabilities,

due to de-consolidation of Stobart Air’s balance sheet and

capital repayments. There was also a reduction in non-

current provisions of £26.3m. The main drivers of this were

corporation tax, due to a £9.5m release and £3.3m reclass

to corporation tax and other creditors, a £5.0m reduction in

maintenance provisions, mostly due to a reclass to current

liabilities, and a £3.9m reclass of development commitment

provisions to current liabilities.

Current liabilities have reduced mainly due to the repayment

of the £52.3m RCF liability and a £20.4m reduction in trade

and other payables, the main driver of which was the de-

consolidation of Stobart Air’s balance sheet.

Debt and gearing

2022 2021

Loans and borrowings £294.6m £263.2m

Cash (£52.7m) (£12.4m)

Net debt £241.9m £250.8m

Adjusted EBITDA/interest 0.6 (0.8)

Net debt/total assets 54.6% 59.0%

Gearing 344.9% 519.2%

See note 22 for more details on net debt. The alternative

performance measures of net debt and gearing are

explained in note 33.

During the year the Group agreed the £125m convertible

debt instrument with CGI. A new £20m RCF was signed

with the current bank lenders replacing the old £120m

RCF, which was fully repaid in the period. At 28 February

2022 the committed undrawn headroom on the £20m

(28 February 2021: £120m) RCF was £20m (28 February

2021: £65m), and with a cash balance of £52.7m

(28 February 2021: £12.4m), total headroom was £72.7m

(28 February 2021: £77.4m).

Cash flow

2022

£m

2021

£m

Operating cash flow 2.8 0.8

Investing activities (5.2) 6.0

Financing activities 82.2 43.8

Increase in the year 79.8 50.6

Discontinued operations (39.5) (48.0)

At beginning of year 12.4 9.8

Cash at end of year 52.7 12.4

Discontinued cash flows in the year primarily relate to the

operations of Stobart Air and Propius.

Investing activities include outflows of £4.9m for the

investment in the insurance captive cell and £3.0m for the

purchase of PPE. Investing inflows include £1.5m for the

receipt of the capital element of net investment in leases

and £1.1m from the sale of PPE.

Financing activities includes net proceeds from the CGI

convertible debt £111.5m and the Capital Raise £52.3m.

Offsetting this there were outflows for the net repayment

of the RCF £58.2m, the repayment of the capital element

of lease obligations £17.0m, and interest payments £9.0m.

Lewis Girdwood

Chief Financial Officer

24 May 2022

Esken Limited Annual Report and Accounts 2022

After a period of immense challenge,

the aviation sector is now starting

to see the green shoots of recovery.

Travel restrictions to many of the

UK’s most popular destinations

have been relaxed. As a result, an

increasing number of people are

booking flights for the Summer

2022 season with confidence.

This growing confidence is starting

to underpin a recovery at London

Southend Airport (LSA). easyJet is now

operating flights from LSA to three

Summer destinations: Malaga, Palma

and Faro. These are hugely popular,

proven routes. Though we are still at

an early stage of this operation, signs

are encouraging. It is our expectation

that the strong performance of these

routes will help encourage easyJet and

other airlines to put on sale further

flights for FY24 and beyond as we

continue to work toward a positive

cash contribution.

The return of easyJet flights to LSA

following its base closure in FY20

is of course a major milestone in

the airport’s recovery. However,

there remains much to do to return

the airport to the scale of growth

it experienced pre-pandemic. The

easyJet flights have been secured on

mutually positive economic terms, and

we will continue to focus on further

airline agreements that are profitable

for all parties.

We have a clear strategy to capture

the recovery and long-term growth

in commercial passenger flying,

with airlines attracted to our clear

proposition of proven routes, cost-

effective operations and an attractive

and growing catchment area with

strong transport links to London.

Operational review

London Southend Airport

Key points

• Adjusted EBITDA improved to

a loss of £0.8m compared to a

loss of £6.1m in the prior year.

• This performance includes

£3.5m of one-off receipts

associated with Connect

Airways and Teesside

International Airport.

• London Southend Airport

welcomed the return of

easyJet flights on 1 May 2022.

COVID-19 created

unprecedented

challenges for London

Southend Airport and

the aviation sector

as a whole.

Corporate Governance Financial Statements

Strategic Report

Esken Limited Annual Report and Accounts 2022

Esken and LSA will continue to develop

and refine that proposition to ensure

the right building blocks are in place to

rebound quickly on the back of securing

the right commercial agreements.

During the year, LSA moved to

strengthen its Operating Board, making

two high-quality external appointments,

while also promoting from within. LSA

appointed Phil Grewock, an experienced

Finance Director whose previous

experience includes Warwick Estates,

Stansted Airport and Countrywide PLC,

and who played a key role in securing

£1.2bn of project finance for London

Gateway Phase 1. The airport also

appointed Nigel Mayes as Business

Development Director. Nigel has over

25 years’ industry experience, most

recently as Managing Director for

Routes, and has been responsible

for the development of over 100 new

air services for various clients. LSA

also made two internal appointments,

promoting Caroline Fitzgerald to

Commercial Director and Marc Taylor

to Operations Director. Phil, Nigel,

Caroline and Marc join airport CEO,

Glyn Jones, and Executive Director

– Aviation, Lewis Girdwood, on a

reformed Operating Board, as well as

by representatives from our strategic

partner, Carlyle.

LSA has also invested time and energy

to develop its community relationships.

During the year, we launched

our Connecting the Communities

Commitment, encompassing an

Environmental Action Plan, a two-year

charity partnership with MIND South

Essex, the launch of one of the UK’s

only Community Noise Forums and a

range of employment and education

initiatives. The airport continues its

journey towards carbon neutrality,

through its membership of the Airport

Carbon Accreditation scheme and

saw a further improvement in air

quality as reported from its NoX

monitoring programme.

The airport has made these advances,

alongside further investments in

next-generation baggage scanning

equipment and an exploration

of improved digital marketing

technologies, against a backdrop of

continued strict financial discipline.

Passenger numbers during the year

under review continued to fall, with

the airport welcoming 94k passengers,

compared to 147k in the prior year.

As previously reported, Ryanair

announced its decision to close its

base from the end of October 2021,

and in light of that development LSA

chose to close its passenger terminal

for the Winter season, allowing it to

reduce its cost base.

Despite this further reduction in

passenger numbers, the Aviation

division has continued to report an

improved financial position. Adjusted

EBITDA improved to a loss of £0.8m

compared to a loss of £6.1m in the

prior year. This performance reflects

£3.5m of one-off receipts associated

with Connect Airways and Teesside

International Airport, and positive

contributions from our check-in and

baggage-handling company, Star

Handling (formerly Stobart Aviation

Services), as well as the airport’s

hotel and solar farm. The airport has

also benefited from income from its

global logistics operation. However,

this operation has reduced in scale

over the course of the year. Aircraft

turns have reduced to one arrival and

departure daily at the current time, but

we expect this to increase over the

medium term.

That generally positive trend

underpins the Group’s outlook for LSA.

The impact of rising fuel prices on

customer demand and capacity is at

this stage unclear. However, we are

now emerging from the pandemic-

driven crisis with a return to flights

with a significant airline and the

expectation of more flights and more

airlines to come. The discussions with

airlines will be aided by a strengthened

management team, alignment with

our investment partner, and a clearly

defined airport proposition.

Lewis Girdwood

Chief Financial Officer

24 May 2022

We are

emerging from

the pandemic with

a return to flights

and the expectation

of more flights

and more airlines

to come.

Esken Limited Annual Report and Accounts 2022

Operational review

Esken Renewables

While tonnes supplied was relatively

flat, moving from 1.4m to 1.5m tonnes,

adjusted EBITDA improved significantly

from £10.0m to £20.3m, marginally

ahead of the expected range of £18-

20m. This performance is mainly as

a result of improved gate fee pricing

following the resolution of COVID-19

market impacts and the actions

taken by management, both this year

and in previous years, to optimise

performance and adapt to gate fee

pricing dynamics.

The supply of waste wood in the UK

has now stabilised, with construction

site activity fully resumed, and

Household Waste and Recycling

Centres largely open and operational.

Demand has also been more

consistent, with biomass plants now

commissioned and moving to optimise

operational performance through the

coming years. This in turn has led

to more consistent fuel sales. The

consistency of supply and demand

on waste wood means that we now

expect effective management to

result in gate fees stabilising around

current levels, adhering to normalised

price structures.

With gate fees now stable, Esken’s

focus is to optimise performance.

Central to this is to build, maintain

and enhance customer and supplier

relationships. In the prior year as a

result of challenges brought about

by the UK’s various COVID-19

lockdowns, Esken Renewables

focused on ensuring that all of its

customer demand needs were met

in a controlled and planned way.

As a result, we were able to capitalise

on its strengthened relationships

and work alongside its partners to

develop a defined plan for satisfying

demand throughout FY22 with

clearly forecasted and planned plant

downtime and demand peaks.

Furthermore, this visibility enabled

Esken Renewables to optimise the use

of its national network of suppliers and

infrastructure. The ability to take waste

wood at the time and in the locations

where gate fees can be maximised,

and move it and store it for where and

when it is needed, allows us to provide

fuel supply resilience and service for

our customers.

Key points

• Adjusted EBITDA improved

significantly from £10.0m to

£20.3m, marginally ahead

of the expected range of

£18-20m.

• This performance is mainly

as a result of improved

gate fee pricing following

the resolution of COVID-19

market impacts.

• The business changed name

from Stobart Energy to

Esken Renewables to better

reflect its operational focus.

Esken Renewables

enjoyed a strong

financial performance

throughout FY22.

We processed

over 1.1m tonnes

of waste wood,

saving the UK up

to 630,000 tonnes

of greenhouse gas

emissions.

Corporate Governance Financial Statements

Strategic Report

Esken Limited Annual Report and Accounts 2022

Despite these strengths, Esken

Renewables continued to manage a

range of supply chain risks throughout

the year under review. One of our plant

customers undertook a series of major

maintenance activities during FY22,

impacting our anticipated fuel sales.

The extensive maintenance undertaken

will likely result in robust plant availability

in future years.

The business also successfully

navigated the national HGV driver

shortage, putting in place strategies to

largely mitigate wage inflation through

highlighting training, development and

job security. It managed rising diesel

and insurance costs through RPI linked

contracts and other pricing levers,

whilst it also sought to secure skilled

and experienced drivers.

While a number of underlying costs

have increased, so too have wholesale

energy prices. There is no direct

relationship between energy price

increases and Esken Renewables’ long-

term RPI-linked biomass fuel supply

contracts. However, stronger and

more profitable customers are good

for Esken Renewables, particularly

when our customers are motivated

to increase availability and generate

additional bioenergy.

It is important to differentiate

sustainable bioenergy, which Esken

Renewables supports, from other

types of imported, virgin-derived

biomass fuel. Two thirds of the

biomass fuel that Esken Renewables

supplies is waste wood, that would

otherwise likely be destined for landfill.

In this financial year we received,

processed, and supplied over 1.1m

tonnes of waste wood, saving the UK

up to 630,000 tonnes of greenhouse

gas emissions.

The remaining biomass fuel that we

supply is sourced from managed

woodlands and forestry by-products

supplied alongside a small amount of

higher-quality biomass.

Our strategic partner AW Jenkinson

Forest Products supplies the majority

of this product, with Esken Renewables

managing the contract and customer

relationship. Esken Renewables also

delivers forest by-products that it

sources directly from a combination of

arboricultural residues, branches and

bark residues from harvesting by its

own forestry team.

Ensuring that wood from the

construction industry or from forest

by-products is not wasted, and

instead used to provide renewable

fuel, allows us to play a key role in the

UK’s circular economy. Increasing our

role within this sphere is a key area

of focus and part of the motivation

to change name from Stobart Energy

to Esken Renewables, also allowing

the business to fulfil its share of

the obligation under the brand sale

agreement that was struck with

Eddie Stobart Logistics plc in 2020.

Esken Renewables sees opportunities

to secure additional biomass supply

capacity at existing UK biomass

plants. It will seek to do this, alongside

exploring opportunities to supply other

types of renewable fuels that leverage

the existing infrastructure. Doing so

will enable the business to build on its

existing UK-wide footprint and enable

further profitable growth.

Nick Dilworth

Chief Operating Officer

24 May 2022

Esken Limited Annual Report and Accounts 2022

Sustainability report

Nick Dilworth

You can find our disclosures against each

TCFD Recommended Disclosure and

the related Recommendation covering

Governance, Strategy, Risk Management

and Metrics & Targets on pages 52-55.

The Group has not included climate-

related financial disclosures consistent

with the TCFD recommendations in

relation to strategy (all recommended

disclosures) and metrics and targets

(disclosure c – target). The Group does

not meet the above recommendations

due to the Roadmap to Net Zero not

being finalised, which includes the future

climate-related strategy and targets for

the Group. The Roadmap is underway

and is expected to be completed by the

next annual report where full compliance

with the TCFD recommended disclosures

is anticipated.

During this first year we have developed

a robust governance structure in line

with the TCFD guidelines. Developing

this strong foundation, which aims to

drive continuity, accountability and

transparency, brings about the cultural

change to embed ESG at the core of

the business. The governance structure

has been developed to support the ESG

programme implementation plan.

We have established working groups,

which comprise of colleagues from

across our business divisions, to drive

forward progress across our five-

pillar framework. We have a Steering

Group as the accountable body with

oversight of the whole ESG programme

including the risks and opportunities;

it receives regular updates from the

various working groups and reports

in to a formal ESG sub-committee of

the Board, who have full oversight,

receiving monthly briefings on progress.

We continue to focus on metrics

and over the last twelve months we

have developed base-line data in

order to develop reportable KPIs for

our next reporting period. For the

business to demonstrate progress we

understand the requirement for metrics

to be gathered and reported, and for

senior managers in the business to

demonstrate leadership; this is why

an element of the Executive Directors

bonus targets will be based on the

achievement of the ESG KPIs.

ESG – at the core of our business

decision-making

In the year when the UK Government

hosted COP26, it focused corporates,

communities and the general public

to address the issue of the climate

crisis. I’m pleased to say that over

the past twelve months, Esken has

also continued to drive forward, its

environmental, social and governance

programme and throughout this

section of the Annual Report I will

update on our progress.

As we continue to face the challenges

of emerging from the pandemic, we

remain committed to developing an ESG

programme that can deliver positive

social impact in our local communities

and reduce our environmental impact.

We will achieve this by developing a

credible plan for our roadmap to Net

Zero, and our social impact programme,

both of which have been linked to

Executive management team KPIs

this financial year.

We remain committed to embedding our

responsible business practices across

everything we do, bringing about a

cultural change to set us up for success.

During COP26, we engaged with our

colleagues to canvass their views on

what we could do differently; we listened

and responded, offering timelines for

delivery, or when ideas were not possible,

being open and transparent with our

teams in our response.

We understand the importance of

developing trust with our stakeholders

and shareholders, which is why this

year we have reported against the

Task Force on Climate-related Financial

Disclosures (TCFD) guidelines. This is

Esken’s first year of disclosing in line with

the FCA listing rule which requires us

to report on a ‘comply or explain’ basis

against the TCFD Recommendations

and Recommended Disclosures.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

We will continue to monitor data

across all our programme areas, from

environment through to diversity, to

inform our programme development

and implementation, including our

Roadmap to Net Zero which will be

developed during the new financial

year. Over the next 12 months I look

forward to the leadership teams,

across the business, leading the way

on employee volunteering and safety.

Over the year we have developed

an ESG risk register, which has been

considered by the Steering Group and

will start to be embedded in the wider

risk registers across the Group. We

have also included a risk statement in

the Taking Climate Action section of

this report as we start to formalise our

approach to ESG and climate change.

The risk register has been comprised

during the year and as we progress

our ESG programme we will report

against our risk register in next year’s

Annual Report.

To further develop our strategy we

have joined Business in the Community

(BITC). Membership of BITC offers

peer support for senior leaders and

our key functions in the business. This

has supported the development of our

colleagues, which in turn has supported

the development of our programmes.

We remain committed to running

another materiality assessment, but we

have taken the decision to rerun the

assessment when we have established

a stronger programme. The original

assessment was conducted in 2019

and we are committed to reviewing this

by 2024. We have however, enhanced

our five-pillar framework by aligning

the pillars to the UN Sustainable

Development Goals, which you will

see throughout this section.

I am proud to be the Executive Sponsor

for ESG and I am pleased with the

progress we’ve made this year, with

the support of my colleagues across

the Group. I look forward to reporting

on further progress next year.

Nick Dilworth

Chief Operating Officer

24 May 2022

We understand the importance of

good governance, which is why

our priority this year has been to

create a governance programme that

drives transparency, accountability

and continuity. The new structure

we have developed has driven

engagement from the bottom up and

enhanced visibility from top down,

and has driven the culture change

programme across the business.

At the beginning of the year,

we established a working group

structure to support the development

and progress of our social impact

programmes and environmental

mitigation. The working groups

are comprised of representatives

from each of our divisions. This

collaborative approach has led to

sharing knowledge, developing a

cohesive plan for the business and

an annual communications calendar

to celebrate key ESG dates. The

output from the working groups is

reported up to the Steering Group.

The Steering Group is comprised

of representatives from across our

divisions and key Group functions.

Meeting monthly, it reviews progress,

are the accountable body for

decision-making and ensures the

business is compliant across the

environmental and social agenda.

The Board has oversight of

environmental, social and

governance matters across the

business. Board members receive

monthly updates which provide an

overview of the ESG programme.

For the business to demonstrate

progress we understand the

requirement for metrics to be

gathered and reported. Through the

governance process the business

has established KPIs across the

five-pillar ESG framework. An

element of the Executive Directors

bonus targets will be based on the

achievement of the ESG KPIs.

We have started to gather social

impact metrics and we have

enhanced our environmental data

collection and can report Scope

1-3 emissions data this year. Our

colleagues have provided an insight

into their review of our performance

via the employee survey that saw

50% of our colleagues say “the

business creates the right culture

and is committed to making a

positive change to our people,

community and environment”.

We will also be able to gather

information on how they have

individually supported the social

impact and environmental mitigation

agenda as questions have now been

included in annual appraisals.

To support our progress we will

seek external verification on our

data. We will undertake the BITC

Responsible Business Tracker to

help us benchmark against our

peers, support with gap analysis

and allow us to share best practice.

We have invested in public affairs

subscriptions to help us keep

abreast of emerging legislation and

regulations and to meet all future

compliance requirements, including

changes to comply with the TCFD.

We have developed an ESG risk

assessed and managed risks in line

with Esken’s relevant frameworks.

The identified ESG risks will be

embedded in each of the divisions

risk registers.

Governance

Esken Limited Annual Report and Accounts 2022

Sustainability report

continued

Renewables

Division

Richard Jenkins

Aviation Division

Glyn Jones

Aviation Services

Division

Graeme Undy

Group Head

of ESG

Sundeep Sangha

Executive Sponsor

Nick Dilworth

Board Sponsor

Ginny Pulbrook

Audit

Committee

Remuneration

Committee

Risk & Safety

Mick Grimmer

People

Angela Smith

Communications

Charlie Geller

The governance structure illustrates how the business is driving through accountability, transparency and continuity of the

ESG programme.

Steering Group & Board engagement

Governance structure

We are delighted to announce that Esken has joined Business in the

Community (BITC), the largest and longest established business-led

network dedicated to responsible business. BITC has a membership

of over 600 businesses across Britain and Northern Ireland, each

committed to embedding and continually improving their responsible

business practice.

Business in the Community

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

In 2019 we ran a materiality assessment and the matrix was used to develop our five-pillar framework. We have made further

progress and now align our priorities to the UN Sustainability Goals. As we continue to develop our ESG programme we will

undertake a materiality assessment within a five year period.

Aligned to the five-pillar framework, working groups have been established with representatives from across our

divisions, to inform and develop our future environmental mitigation and social impact programmes.

Materiality matrix

Working groups

Building

sustainable

communities

Developing

our people

Excelling in health

and wellbeing,

safety and security

Taking climate

action

Minimising our

environmental

impact

Energy

Carbon reduction

and Roadmap to

Net Zero including

offsetting

Scope 1–3 data to

calculate carbon

footprint

External

verification

Strategy and

target operating

model

Education,

employment

and skills

Charitable

giving

Employee

volunteering

Responsible

procurement

Diversity

Air quality

Water

Waste

Biodiversity

Circular economy

Esken Limited Annual Report and Accounts 2022

Sustainability report

continued

Building sustainable

communities

Charitable giving

This year each of our operational divisions

established charity partnerships. The charity

partners were FareShare, Help for Heroes and

South East and Central Essex Mind (SECE

Mind). Esken committed to supporting the

partnership by matching up to £5,000 in

fundraising for each partnership.

Overview

Esken remains committed to being a good

neighbour and having a positive social impact in

the communities in which we operate. Through

the governance structure we have established the

Building Sustainable Communities working groups

comprised of representatives from across all our

operational divisions. The focus for the Group is

on charitable giving, employee volunteering and

gathering and reporting social impact.

2022

£10,847

2021

£N/A

2020

£N/A

2022

2021

N/A

2020

N/A

In June 2020 Esken Renewables announced a partnership

with FareShare, the UK’s largest charity fighting hunger and

food waste. The team chose FareShare as their charity partner

following consultation with colleagues from across our People

Forums. FareShare mirrors our business model by sourcing

waste food from across the UK and supplying it to those that

need it most. The choice of FareShare reflects the proud

track record of our colleagues supporting foodbanks and the

success of our Christmas food drives in previous years. As the

relationship develops, the team aims to explore opportunities

to lend our supply chain expertise to support FareShare,

undertake food drives throughout the year and seek out

volunteering opportunities for our people.

FareShare partnership

Fundraising for charity partners

Number of volunteering hours

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

In June 2021 Star Handling

(formerly Stobart Aviation Services)

announced their partnership with

Help for Heroes, the UK’s leading

armed forces and veterans charity.

Help for Heroes was selected as

our charity partner following an

employee vote across all sites. It’s

a great partnership, especially as a

number of colleagues are ex-armed

forces or current reservists.

In September 2021 the team took

on The Step2It challenge as their

flagship fundraising event for the

year. On World Mental Health Day

the team shared a new study

from Help for Heroes about the

importance of mental health.

Help for Heroes

The National

Three Peaks

challenge

Esken Renewables have established

a fundraising committee as part of

our People Forum which supports

fundraising events, promotion

and activities. In September 2021

the team took on The National

Three Peaks – Britain’s toughest

outdoor challenge as their flagship

fundraising event for the year.

Esken Limited Annual Report and Accounts 2022

Sustainability report

continued

Building sustainable

communities

In July London Southend Airport

announced its partnership with SECE

Mind. SECE Mind is a local mental

health charity offering information

and advice to people with a range

of mental health problems, whilst

lobbying government and local

authorities on their behalf. Our

employees chose to partner with

SECE Mind, recognising the important

role that the charity can play in the

community and with our colleagues

and passengers. The team has

developed both internal and external

awareness around mental health and

the work of SECE Mind.

In December 2021, the airport hosted

their annual Mental Elf fundraiser. They

opened their doors to members of the

public with a festive fundraiser to walk

or run the length of its runway whilst

raising vital funds for SECE Mind.

In February 2022, the airport cleaning

team volunteered to spring-clean

the communal areas of Nelson Gate,

which is a supported housing facility

run by SECE Mind that provides

specialised accommodation to give

a safe and stable environment for

recovery after a mental health crisis.

Three members of the team each

donated a full day to the project.

In September 2021, the airport

welcomed members of the public

into the terminal for dedicated

tours to support mental health and

anxiety for anyone feeling nervous

or anxious about a return to flying

after the pandemic, and those

with hidden disabilities that want

to familiarise themselves with an

airport prior to travelling.

In October 2021 the team hosted

‘Coffee with Cath’, an opportunity

for colleagues to sit and talk to a

member of the SECE Mind team to

understand the work they do and the

support and help they can provide.

In February 2022, during our ‘Time

to Talk’ day the team streamed tips

from SECE Mind on how to cope

with general mental health including

stress and anxiety.

London Southend Airport and South East

and Central Essex Mind

In September,

the airport

welcomed

members of

the public into

the terminal

for dedicated

tours to support

mental health

and anxiety.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

London Southend Airport’s aim is

to provide employability support to

every child in Southend and Rochford.

The airport partnered with Southend

Borough Council to support their

economic development programmes,

it also attended a number of careers

fairs and events at schools in the

local area, and support a number of

initiatives the council has developed

to help drive economic growth through

skills development in the borough.

These included:

• the Industry Champion programme

enabling local business people to

support a number of school and

college career activities, offering

young people from low-income

backgrounds support and guidance

to build meaningful careers;

• the Enterprise Adviser Network, a

national programme that pairs senior

business leaders with schools and

colleges to build a robust careers

plan for young people enhancing the

careers provision;

• the 60 Minute Mentor, an employer-

led mentoring programme which

pairs local business leaders with

disengaged year-8 students, who

would benefit from a role model

to talk about career options and

choices around education or training

post 16 years; and

• PAVE – an employment and skills

programme, funded by DWP and

delivered by Southend Borough

Council, that works in partnership

with local employers to support

unemployed over-25s back

into work.

Employee volunteering

Esken understands the benefit

of employee volunteering to our

community as well as our colleagues,

and is committed to launching an

employee volunteering programme.

Through the working group an

employee volunteering framework has

been developed and has been aligned

to our charitable giving, education,

employment and skills programmes

and environmental mitigation.

This year a pilot employee volunteering

day was hosted by Runcorn Local

Natural Reserve for the Steering

Group and all ESG Working Groups,

to help inform any future programme.

The activity involved the removal of

encroaching birch regeneration, which

threatens the natural grassland and

heathland. We donated 75 hours of

volunteering for the pilot event.

Education, employment and skills

One of the main ways Esken can

positively impact its local community

is to invest in local education

programmes, employment initiatives

and provide skills development.

We continue to develop our

programmes, but this year focused

on education and work experience.

Esken Renewables hosted three

virtual work experiences and

London Southend Airport partnered

with Southend Borough Council to

support their economic development

programmes.

London Southend

Airport Local

Authority

Partnership

Esken Limited Annual Report and Accounts 2022

Sustainability report

continued

Building sustainable

communities

Esken Renewables wanted to raise

the profile of a career in logistics with

pupils of school-leaver age. With a

shortage of LGV drivers in the UK,

a career as an LGV driver is often

overlooked by many young people.

The team hosted a virtual work

experience for ten year 12 students

from St. Nicholas Catholic Sixth Form.

The two-day activity began with an

overview of Esken Renewables, time

with the team and a summary of the

task, which was to develop a strategy

to mitigate the risks of the medium-

term impact to the commercial

challenges and profitability. Students

were asked to formulate a strategy

to mitigate three areas of concern

for Esken Renewables: reliable waste

wood supply, LGV driver shortage and

fleet utilisation.

In a ‘Dragons’ Den’ style final

presentation, students were encouraged

to be creative in their approach and

include as much of their own research

as possible in their final presentations,

by gaining as much understanding as

possible of the logistics industry.

Virtual work

experience

Military covenant

As a business that benefits from the

transferable skills of armed forces

professionals, we are proud signatories

of the Armed Forces Covenant. The

team works proactively to encourage ex-

service personnel to join the business,

working with the Career Transition

Partnership, developing relationships

with local reservist units and works

with recruitment agencies who share

our ethos and are also Armed Forces

Covenant accredited. The team have

worked to put in place new support

mechanisms and policies to support

our armed forces veterans, volunteers,

reservists and partners. They also

work with their people champions and

leadership team to ensure that we

have the best support in place for our

employees; this includes an ex-forces

Yammer social media group to develop

our internal communications network

across the business.

Esken Renewables have been members

of the Armed Forces Covenant (Bronze

level) since 2020, gaining our Silver

status in the same year and looking

to ‘go for Gold’ in 2022.

In 2020 Star Handling (formerly

Stobart Aviation Services) signed

the Armed Forces Covenant and

have submitted an expression of

interest for the Silver upgrade.

London Southend Airport became a

member of the Armed Forces Covenant

(Bronze) in August 2021 and is now

working towards the Silver award.

Responsible procurement

At Esken we understand the importance

of working with our supply chain to

positively contribute to our positive

social impact and mitigate our

environmental impact.

Supplier Code of Conduct

This year we introduced our Supplier

Code of Conduct into our supply

chain, which is aligned with our new

corporate values. The document sets

out what suppliers can expect from

Esken, as well as the importance

of fairness, social responsibility,

sustainability and transparency that

Esken expects from its supply chain.

Modern slavery

Since 2020 we have annually reviewed

our Modern Slavery Statement and

Modern Slavery & Human Trafficking

Policy. On Anti-Modern Slavery Day

we wrote to our colleagues to raise

awareness of our policy and we have

established compulsory training for all

our colleagues.

Social enterprises

Esken have introduced three social

enterprises into our supply chain.

Wildhearts are our stationery

provider and they offer young people

employability skills to address social

mobility in the UK.

Recycling Lives provides the safe and

sustainable disposal of our uniforms

and personal protective equipment,

and reduces reoffending through

rehabilitating offenders, supporting

homeless men and food distribution

to vulnerable people.

Ethstat provided our branded

merchandise as part of our values

launch; the profits from our trading

fund community solutions to local

problems, ranging from ending

homelessness to supporting families

with dementia.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Developing

our people

2022

138

2021

201

2020

339

2022

18%

2021

22%

2020

23%

2022

2021

2020

233

2022

2021

157

2020

377

2022

43%

2021

55%

2020

22%

2022

778

2021

912

2020

1,482

2022

86.8%

2021

83.6%

2020

81.3%

2022

13.2%

2021

13.6%

2020

18.7%

2022

64.8

2021

30.9

2020

55.0

2022

2021

2020

Employees with more than five years’ service

% employees with more than five years’ service

Attrition: Leavers within six months of start date

Attrition: Leavers within twelve months of start date

Attrition rate %

Total number of employees

Employees working full-time %

Employees working part-time %

Average hours training per year per employee

Number of apprenticeships

1 Part-time % – also includes those

on zero-hour contracts which have

not previously been included in the

part-time % but feel it’s appropriate to

capture this section of the workforce

and report in this way.

2 Training hours – we were able to

provide training whilst employees were

on furlough so took the opportunity to

do a lot of mandatory and compliance-

related training during this time. We

have also invested heavily in our

apprenticeship programmes this year;

each of the 36 employees registered

on a L3 or L5 programme received 20%

off-the-job training.

Esken Limited Annual Report and Accounts 2022

Sustainability report

continued

Developing

our people

We believe in providing a structure

for career development and have put

in place a development programme

to support our employees from

level 2 through to level 7, providing

progression pathways from basic

compliance training through to

professionally recognised qualifications

and prepares people for current and

future opportunities within Esken.

Over the last two years our

apprenticeship programme has grown

and we now have over 35 apprentices.

We anticipate that this will increase

over the next year as we provide an

increasing number of apprenticeships

for our employees to access.

Our Ascend Management & Leadership

Programme was launched this year,

providing a framework for training

managers at all levels, including:

e-learning through our newly established

learning management system, face-

to-face sessions to embed process

and procedures as well as formal

management qualifications at levels

3, 5 and 7 through our apprenticeship

programme. Partnerships with

specialist organisations offering

Chartered Management Institute (CMI)

accreditation, as well as with universities

such as Imperial College in London for

our level 7 leadership apprenticeship,

providing our learners with a credible

and aspirational programme of study.

Our Esken Management Essentials

programme of short courses aims

to provide core management and

leadership competence across the

business. All managers are now

enrolled on this programme and have

12 months to complete it. They are

supported by internal face-to-face

sessions to discuss the application of

learning and to link to Esken processes

and procedures.

Engage

Manage

Lead

Inspire

CMI Level 3

(Certificate)

Team Leader/

Supervisor or First

Line Managers

Management

essentials

New or refresher

training for

all levels

CMI Level 5

(Diploma)

Mid-level

Managers

CMI Level 6

Chartered

(degree level)

Senior Managers

Executive

coaching

Senior

leadership

talent

Board members

●

Female 17%

●

Male 83%

Executive management

team

●

Female 33%

●

Male 67%

Senior managers

●

Female 30%

●

Male 70%

All other employees

●

Female 30%

●

Male 70%

Total employees

●

Female 31%

●

Male 69%

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

The Esken Learning Hub has been

established and enabled us to provide

mobile training to employees at a

time and place to suit them. We

have developed a suite of reportable

dashboards to manage completion and

compliance, and with the development

of our onboarding and induction

programme, we have launched a Basic

Training programme for all new starters.

All current employees have also been

assigned this training so we can be sure

that everyone has a solid baseline of

compliance training. The Learning Hub

will be further developed to provide

more analytical data on engagement

as well as focusing on providing more

on-demand content for employees

to access outside of their directed

learning programme.

Our performance management process

has been re-written this year to provide

more focus on objectives, talent and

succession, with this being a key focus

of the discussions. The launch of My

Check-In for operational staff will

provide a focused discussion around

current and future roles, training and

development and wellbeing. In fact,

a more formal discussion around

wellbeing has been included in the main

performance management process,

extracted from our newly introduced

SECE Mind-approved Workplace

Action Plan, as we continue to raise

awareness of mental health and provide

support and signposting to support;

there are also numerous signposts to

resources we have included on our

People Hub SharePoint site, supporting

our diversity strategy. We utilise our

HR Self Service system to capture

and report on objectives, and we will

report on how they link to different

areas of the business and to our newly

launched business values. We have also

introduced personal ESG contribution

into our appraisal process so we

can start to track the impact of our

ESG activities.

The implementation of an Applicant

Tracking System has provided visibility

of all vacancies across the business

and a sophisticated tool for hiring

managers to attract, interview and

select talent. With links directly into job

boards, integrated interview scheduling,

blind hiring with anonymised applicant

data, video interviewing, simple

communication, real-time reporting and

analytics and applicant feedback this

is a powerful tool. We will continue to

develop it and plan to upskill managers

to ensure we leverage the capability

fully. Where we do need to utilise

recruitment agencies, we now require

them to sign up to a clear set of Equal

Opportunities principles ensuring

that they will take all possible steps

to ensure a diverse applicant pool is

presented to us, with candidates from

various backgrounds and identities.

We now explicitly require recruitment

partners to ensure they go through a

process which does not discriminate or

seek to exclude (directly or indirectly)

any candidates from minority groups

when dealing with Esken vacancies.

Inclusion and belonging

We have further stepped up our

Diversity & Inclusion Agenda to reflect

modern societal changes and our

approach has developed into that of

inclusion and belonging, both from a

diversity and wellbeing perspective.

We have refreshed the language in

our employee-facing documents to

be more inclusive and remove gender

stereotypes. We now talk about

the ‘primary carer’ in our Maternity

and Adoption Policies for instance,

recognising that society has many

iterations of a family life. In fact, we’ve

overhauled our Family Friendly Policies

this year to modernise and further

support the attraction and retention

of females and all working parents by

providing enhanced payment terms,

and parity for primary and secondary

carers to attend antenatal and

adoption appointments.

Our Esken Gender Agenda forms part of

our wider Diversity & Inclusion Strategy

and not only focuses on providing parity

for women in areas such as reward,

training and promotion opportunities,

but also creating an environment where

women can thrive, recognising that

some areas of our workplace can be

male dominated.

Last year we reported the introduction

of our new Menopause Policy and

we’re proud that we were one of the

first businesses in the UK to have this

in place. To further support our Gender

Agenda this year we commissioned

a Keynote for International Women’s

Day, which, for the first time, was

available to every single employee

in the business to take part in. The

session will now provide a catalyst

for us to signpost female employees

to specialist podcasts and coaching

designed specifically for women in

the workplace.

We have continued to invest in

educating our workforce on all

inclusion-related matters and we

now have over 35 modules on our

Learning Hub dedicated to various

diversity and inclusion topics to help

support our managers to create a fully

inclusive culture for our employees

– and it’s paying dividends; 86% of

our employees told us in our latest

Employee Survey that they agreed

or strongly agreed that they felt

comfortable being themselves at work.

Ethnicity pay gap

Last year we committed to voluntarily

reporting our ethnicity pay gap and

whilst we have faced technology-

based challenges in meeting our

self-imposed deadline, we are still

committed to doing this retrospectively

as soon as is practicable. Nonetheless,

we are committed to providing an

equitable workplace for all and have

recently fed into a government

consultation process led by the

Cabinet Office; this calls to improve

data and transparency on disability

in the workplace, recognising

that reporting on disability allows

businesses to assess the impact

of their inclusive practices on

the recruitment and retention of

disabled people.

Esken Limited Annual Report and Accounts 2022

Over the last year the Risk & Safety

team underwent a full review and

restructure to reposition it from being

a strictly compliance-based team

to providing strategic leadership of

the Group Risk and Safety function.

A vision of good risk management was

created, and a strategy developed to

build a ‘roadmap to excellence’ which

was signed-off by our Executive

management team at our annual

strategy day.

A Target Operating Model was

developed to reflect our strategy, and

produced clear objectives, underpinned

by specific proactive KPIs, agreed and

established at operating division level.

Strategy

The safety and wellbeing of our

people remains a core value in

our business. To implement these

values, we have developed a vision

of safety excellence, underpinned

by a mission to move our risk and

safety culture forward from its

solid base of compliance towards a

more commitment focused future.

Compliance alone is not enough –

it’s merely achieving someone else’s

minimum standard.

A positive safety culture is an ongoing

outcome of a successful people-

orientated business and we need to

create safety, to enhance wellbeing

and make work a positive experience.

Discussing the number of people hurt

in our business on a monthly basis is

not enough.

To achieve this, we have worked

across the operating divisions to agree

a suite of proactive safety KPIs to

deliver against our four key themes

of Culture, Leadership, Risk Process

and Compliance. These have been

designed to enhance our operational risk

literary and transparency, and create the

leadership and behaviours necessary for

our safety culture to mature. The KPIs

have been formally agreed at Board level

and will be a feature of all Board reports

going forwards.

Governance

Each operating company has its

own health and safety function which

implements policy and procedures at

an operational level and carries out

front-line audit functions.

Excelling in health

and wellbeing, safety

and security

Sustainability report

continued

2022

0.44

2021

0.43

2020

0.59

2022

2021

2020

174

2022

2021

2020

2022

2.20

2021

3.64

2020

5.67

2022

56.4%

increase

2021

23.0%

2020

3.2%

RIDDOR accident/incident rate

Number of accidents

Number of RIDDOR classified incidents

Accident frequency rate

Incident reporting

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

The Group Risk & Safety team provides

overall strategic direction and support,

and carries out a ‘second line of

defence’ audit function of operational

systems and processes. Further

assurance is provided by internal

audit, who will this year also audit,

at their own request, the Group Risk

and Safety team.

Across the business there is a clear

escalation of health, safety and

welfare matters from Employee Safety

Committees to Management Safety

Review Boards and finally divisional,

Group and Board meetings, where

risk and safety is always the first

agenda item.

There are monthly meetings of the

Group’s risk and safety professionals

and a formal ESG monthly update.

The Group Head of Risk and Safety is

present at all Board meetings, provides

a consistent overview of operational risk

issues, and submits a formal monthly

report to the Group and Boards.

Performance in the year

The safety performance over the

past year remains reflective of the

pandemic as many of our locations

have not been fully operational. The

safety performance throughout the

divisions has led to an overall decrease

in RIDDOR reportable employee

accidents of 30%, whilst non-RIDDOR

reportable incidents have halved

across all divisions, in the year ended

28 February 2022, compared with the

year ended 28 February 2021.

Employee reported incidents and

near-misses have increased by 32%

and over 400% respectively. This

results from a concerted campaign to

increase reporting and is considered

a positive metric.

COVID-19

The focus of the Risk & Safety team

across all divisions remained delivering

safe working environments during the

COVID-19 pandemic. We supported

our people to work from home and

to maintain our operations safely and

securely. As we emerged out of the

pandemic, in line with the government

roadmap, we supported our people

to return safely to the workplace; we

updated our assessments and guidance

as necessary and completed the CAA

and Public Health Corridor Assessment

Process. As we adjust to ‘living with

COVID-19’, we currently still encourage

and support our people to isolate if

producing a positive PCR test.

Hand Arm Vibration Syndrome (HAVS) is caused from long-term

use of vibrating power tools.

Esken Renewables looked at ways to effectively control

and manage HAVS risks at key locations. The solution was

‘HAVWear’, from a company called Reactec, which they have

implemented within the Vehicle Maintenance Unit.

HAVWear is basically a monitor, worn as a watch on your wrist,

that constantly senses vibration from the use of any power tool

e.g. air gun or grinder. The ‘HAVWear’ monitoring device then

automates the calculation of HAV points, determined by the

regulator, the Health and Safety Executive, and displays alerts

of exposure in a clear red, amber, green metric.

This simple device replaces a previously complex system of

calculation, that depended on employees logging tools’ use and

aggregating exposure from different sources.

By measuring exposure to the individual rather than tool by

tool, the HAVWear makes compliance very simple and removes

barriers to employee compliance.

Hand Arm Vibration

Syndrome

Esken Limited Annual Report and Accounts 2022

Sustainability report

continued

Near-miss

reporting

ICAO Global

reporting format

As part of the Group-wide drive to improve near-miss

reporting, all stations within Star Handling (formerly

Stobart Aviation Services) were challenged with

entering three near-miss observation reports per day

for 2021.

Increased near-miss reporting improves visibility of

site events, engages the workforce, and improves the

quality and knowledge of safety issues.

Leaflets and PowerPoint presentations were used to

educate employees on the difference between near-

miss reports and safe observations, posters were

produced and circulated to all stations, and Yammer

was used for guidance. The KPI was introduced

after all stations had confirmed they understood

the requirements.

Station management then undertook and recorded

safety walks, to talk to staff and gather information

for reports. Detailed feedback was given to reporters

throughout.

Stations were challenged on any shortfalls of the ‘three

reports per day’ KPI each week at a weekly review

meeting and examples of good reports and advice

were shared.

The ‘three per day’ KPI is still in place, but future

focus will be on quality and issues resolved.

The International Civil Aviation Organization (ICAO)

is a specialised agency of the United Nations.

It changes the principles and techniques of

international air navigation and fosters the planning

and development of international air transport to

ensure safe and orderly growth.

The ICAO Global Reporting Format for runway

surface conditions mitigates the risk of ‘runway

excursions’ (an inappropriate exit from the runway),

by enabling a harmonised assessment and reporting

of runway surface conditions, and an improved

flight crew assessment of take-off and landing

performance.

In 2021 ICAO changed its reporting format,

necessitating a major project within the aviation team

to ensure a smooth transition by the implementation

date of 4 November 2021.

Risk assessments and procedures were established

in line with the updated ICAO regulation. This

enabled a bespoke training package for Air Traffic

Control (ATC) and Airside Operations (AOPS) to

be created.

The reporting system, via tablet from AOPS to ATC,

allows the user to accurately report surface conditions

on the runway. The entire AOPS team were trained to

conduct inspections, however, only Watch Managers

are authorised to report conditions to ATC.

Relevant members of ATC were also trained to

understand the information received from AOPS.

Excelling in health

and wellbeing, safety

and security

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Wellbeing

Eric is a driver who has been employed in Esken

Renewables for nearly 12 years and suffers with

peripheral vascular disease (hardening of the

arteries). Eric had a triple heart bypass 15 years ago

although his problems are mobility issues due to

the disease and injuries received whilst serving in

HM Forces during the Falklands Conflict in 1982. As

Eric has got older and his mobility issues increased

he approached the Company as he was finding it

more painful to climb up and down the ladder on

his trailer numerous times during his working day.

After meeting with his manager and occupational

health to assess his needs, a trailer with a hydraulic

roof was sourced. This has improved Eric’s working

environment greatly.

He says life is much easier now and adds employees

shouldn’t be afraid to ask for help from their employer

for fear of retribution, or thinking their jobs could be

at risk because management might think they are

not capable of doing their job. Everyone needs

to be safe and not put themselves or others

at risk of injury, either physically or mentally.

It is imperative that employees speak

up if they need help or advice.

Our brand-new Workplace Adjustments Guide for Managers provides support on a whole host

of issues their employees may face from managing neurodiverse employees, right through to

long-term health conditions such as cancer. Driver Eric Drinkwater tells us how he was helped

when he needed a workplace adjustment due to an ongoing health condition.

Esken Limited Annual Report and Accounts 2022

Sustainability report

continued

Taking climate

action

Introduction

This year, as the UK Government

hosted the UN Climate Change

Conference, COP26, attention was

drawn to issues of climate change for

countries, business and individuals.

Esken Group and each of its divisions

is committed to decarbonisation and

supporting the UK Government’s 2050

Net Zero target. We have focused this

year on gathering the data to inform

our own future Net Zero plans; our

ambition is to produce our roadmap

and have this verified before we

publish our plans.

Governance

At Esken we have established a

robust governance structure which

has oversight of all our environmental

risks and opportunities. We have

established working groups which

comprise of representatives of each

business division and focus on the

areas of environmental data collection;

carbon, energy, air quality, waste and

water. The purpose of these working

groups is to inform our environmental

strategy, development of the ‘Roadmap

to Net Zero’ and implementation of

various programmes and initiatives.

The output from the working groups

is reported up to the Steering Group.

The Steering Group is comprised

of representatives from across our

divisions and key Group functions. The

activity of the working group includes

oversight, monitoring and reviewing

data, to harness opportunities and

mitigate risk, along with any changes

to government policy, legislation and

regulations. The Steering Group is the

accountable body for decision-making

and ensures the business is compliant

across the environmental and social

agenda; it is chaired by Nick Dilworth,

Chief Operating Officer, as Executive

ESG sponsor.

The Board has oversight of

environmental, social and governance

matters across the business. Board

members receive monthly updates

which provide an overview of the ESG

programme, which is reported to Ginny

Pulbrook, ESG Board sponsor, who then

provides updates to the Audit Committee

and Renumeration Committee.

The Board received quarterly ESG

updates which provided progress

on the development of strategy, the

risk register, the budget aligned to

business plans, and KPIs, which have

been developed over the past year

through the governance structure.

Strategy

Esken’s Environmental, Social and

Governance Strategy has been

developed having undertaken a

materiality assessment which the

business remains committed to

keeping up-to-date. The ESG Five-

Pillar Framework includes a focus on

‘Taking Climate Action’; the purpose

of this pillar is to set out the measures

we are taking to mitigate our climate

impacts, manage climate-related risks

and provide information on our climate

and energy performance.

This year we have continued to evolve

our climate related strategy, we have

embedded a governance structure,

established a risk management

process, and developed metrics to

report progress. As we further develop

the strategy, we have taken into

consideration the financial impact

on our specific business sectors, our

products and services, and the impact

of changes to legislation and regulation

on our assets and infrastructure.

Through our responsible procurement

programme, we are developing our

environmental impact assessment on

capital expenditure and are working

with partners like Business in the

Community to support our carbon

reduction ambitions.

We have evolved our governance

structure to include a finance

representative for the coming year;

this will further progress how we

address areas including access to

capital, operating costs and revenue,

acquisitions and divestments, and

capital and expenditure and capital

allocation. It will also help us identify

the inter-dependencies which will

affect our required spend to positively

impact the elimination of carbon from

our operations.

Esken has recently become a member

of Business in the Community and

will be undertaking the responsible

business tracker to offer the peer

benchmarking and external verification

on our progress; this will support with

the short, medium and long-term plan.

The business is also committed to

moving to science-based targets to

verify our Roadmap to Net Zero.

2022

25%

2021

22%

2020

19%

2022

1333

2021

198

2020

147

% electricity from renewable sources

Tonnes CO

e per £m of revenue

1 This year’s total includes Scope 3 emissions

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Risk management

The nature of the risks we face from

climate change arise from both the

physical aspects of climate change

itself, and also the potential for

regulatory and commercial changes in

the markets in which we operate.

We have created an ESG Committee,

as a sub-committee of the Board.

Its terms of reference incorporate

the responsibility to ensure that

sustainability risks are identified,

assessed and managed in line with

the Group’s relevant frameworks.

We have taken steps to integrate the

consideration and evaluation of climate

change risk within the Groupwide

risk management process, through:

• Development of a governance

structure which supports us in the

delivery of our strategy to manage

the impact of climate change on

the business, and to manage the

business’s impact on climate change;

• Inclusion of climate change risks

within our corporate risk register; it is

one of the Group’s principal risks, our

overall approach to risk management

and a summary of our principal risks

can be found from page 69;

• Development of a specific, detailed

risk register relating to our ESG

ambitions, the risks we face in

their delivery, and our strategy for

mitigation of those risks; with regular

updates to the Board and the ESG

Committee, which is a subcommittee

of the Board;

• Considering climate change

impacts in our regular divisional

and functional risk reviews; and

• Ensuring we have engagement

from all levels of staff, through

the structure of working groups in

place across the business, helping

us to identify potential risks and

develop solutions.

The diagram below summarises the

information flows and integration

of ESG risk with the Group’s risk

management process.

The Board

Audit

Committee

EMB and Divisional Boards

Corporate, divisional and

functional risk registers

Corporate risk

management process

Principal and corporate

risk information

Activity and risk information

ESG activity information, including

risks and mitigations

Divisions and Group functions

ESG working groups

ESG

Committee

ESG Steering Group

ESG risk register

Esken Limited Annual Report and Accounts 2022

Sustainability report

continued

Taking climate

action

Identifying climate change risk

We have built our climate change

expertise through the recruitment

of an experienced ESG Manager

during the year, and have engaged

Business in the Community as

external advisers to provide

additional support and guidance.

Our structure of business-led working

groups; reporting to an ESG Steering

Group, and then to the ESG Committee,

provides detailed knowledge and

expertise in each area, ensuring that they

are best placed to identify both physical

and transitional risks and develop their

workstream plans and activities. The

reporting lines ensure that those risk-

led plans developed by the working

groups are subject to effective review

and challenge, prior to their submission

to the ESG Committee for agreement.

There is an ESG risk register, which

has been prepared in accordance

with the requirements of the Group’s

corporate risk management process,

which includes high-level risks for the

Group, and project and delivery risks

for each workstream.

Addressing climate change risk

The business led working groups

have developed plans for a range of

activities under our ESG banner, with

a particular focus on climate change.

A range of focused plans have been

developed to reduce our impact on

the environment, and to mitigate the

potential risk to the business from the

physical risks of climate change.

Metrics and targets

Since FY19 we have collected and

reported our Scope 1 and 2 emissions,

which has provided our baseline data.

We have identified any risks associated

with data collection and reporting as

part of our risk register. As we further

develop our Roadmap to Net Zero,

using the previous year’s data and

identifying trends, we will begin to

identify our reduction targets across

energy, air quality, water and waste.

We have developed KPIs across our

ESG programme and an element of the

Executive Directors bonus targets will

be based on the achievement of the

ESG KPIs.

The business-led working

groups have developed plans

for a range of activities under

our ESG banner, with a particular

focus on climate change.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

To support our carbon reduction we

have invested in our public affairs

monitoring so we can prepare for any

regulation and public policy changes.

Our carbon data reporting

methodology

In FY22 Esken had emissions of 35,132

tonnes of carbon dioxide equivalent

(tCO

e) which is an increase of 8,641

tCO

e against the baseline year of FY19.

The intensity ratio that we report is tCO

emissions per £m revenue (tCO

e/£m)

and this ratio saw a 33% increase

compared to our baseline year, due to

reporting Scope 3 emissions data.

We have continued to illustrate our

year-on-year comparison beginning

with the benchmark year of FY19

total gross emissions data, to include

all Scope 1 and Scope 2 emissions,

and this year we will include Scope 3

emissions.

Our carbon data reporting

methodology

The methodology used to prepare

Esken’s carbon data calculation has

been detailed below:

• Based on DEFRA and BEIS,

Environmental Reporting Guidelines

(March 2021).

• We use the intensity metric of

GHG total emissions per £m

revenue (tCO

e/£m) for normalising

emissions.

• All Scope 1-3 emission sources

estimated to be greater than

1% have been deemed material and

are included.

• Scope 1-3 data is all collected from

within the UK.

• Includes emissions that Esken

is responsible for, based on an

operational control approach.

• The baseline year is FY19 and

compared to the current reporting

year of FY22.

Operational control

The operational control approach

accounts for Esken’s Scope 1-3

emissions from all its operations. This

includes all sites that are operated

by Esken whether they are owned or

leased. This approach to consolidation

is different to the financial control

basis that is used to compile the

Company accounts.

Definition of operational control

The definition of operational control

is one where Esken is deemed to

have operational control. The Group

or one of its subsidiaries has the full

authority to introduce and implement

its operating policies at each

individual site.

Scope 3 emissions

This year we have voluntarily disclosed

our Scope 3 emissions. Our Scope 3

emissions were 119,447 tCO

Data from the following operational divisions were captured within the FY22

reporting year:

Company divisions

Division Under Company operational control

Aviation London Southend Airport

London Southend Jet Centre

Solar Farm

Holiday Inn Southend

Star Handling (formerly Stobart Aviation

Services)

Renewables Esken Renewables

GHG emission source

FY19 FY20 FY21 FY22

Total change*

baseline FY19

tCO

e tCO

Scope 1

(fuels, business travel,

refrigerant) 23,523 23,987 19,623 17,234 (6,289)

Scope 2

(electricity) 2,968 2,420 3,353 2,765 (202)

Scope 3

(water, aviation fuel,

business travel, fuel,

materials used, waste) – – – 119,447 119,447

Esken Limited Annual Report and Accounts 2022

Sustainability report

continued

Minimising our

environmental impact

2022

2021

2020

2022

78.0%

2021

71.4%

2020

83.0%

2022

1.2

2021

1.0

2020

1.2

2022

1.5

2021

1.4

2020

1.4

2022

99.5%

2021

99.5%

2020

99.5%

Reportable environmental incidents

Volume and % of recovered waste used for energy feedstock by Esken Renewables

Waste diverted from landfill to turn into fuel (tonnes)

Total waste

Group waste recycled or converted into energy

Overview

We remain committed to minimising

our impact on the environment.

Through our governance structure we

established working groups focused

on energy, air quality, noise, waste and

water; the aim being to monitor, report

and establish methods for reduction.

We have established a certification

working group to help externally verify

our programmes and we will report

against these external metrics.

Carbon emissions

At the beginning of the year Esken

Renewables signed a two-year deal

to become commercial fleet partners

with Bridgestone. The Esken

Renewables fleet will be exclusively

running on Bridgestone Duravis R002

tyres which is designed to lower

operational costs through tyre wear

performance and fuel efficiency.

Bridgestone actively seeks to re-

tread all worn tyres. The process

vulcanises new treads to the old

tyres and can provide second and

third lives in appropriate conditions.

Re-treading requires no more than a

third of the oil and energy needed to

manufacture a new tyre. In providing

extra life, the need for recycling or

final disposal is reduced. Where

tyres can no longer be re-treaded,

Bridgestone is active in pursuing

civil engineering applications versus

disposal. These applications include

coastal protection, erosion barriers,

road embankments, sound barriers

and insulation. Tyres can also be

shredded and are notably used as

foundations for roads and railways,

as backfill for walls and bridges,

and as subgrade insulation for

roads. Beyond this, tyres may be

crumbed and powdered and used to

manufacture moulded objects, sports

facility and games area flooring,

as well as flexible parts for the

car industry.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Energy efficiencies

As part of our overall carbon reduction

plans we have monitored and reported

our Scope 2 emissions, and we

remain committed to considering and

implementing the recommendations

of the Energy Saving Opportunity

Scheme where appropriate. We are

also looking to introduce new software

to increase our renewable energy

consumption at the airport, and overall

we are developing plans to move our

energy tariff to a renewable contract.

Esken Renewables plays a vital role in

delivering the UK’s renewable energy

targets, with biomass power plants

throughout the UK. By supplying

renewable biomass products to

supply chain customers and partners,

Esken Renewables enables the

production of low carbon energy for

use by homes and businesses. Esken

Renewables’ customers in FY22

used the total of 1,477,000 tonnes

of biomass, supplied by Esken, to

generate an estimated 1,880,000 MWh

of electricity, which is sufficient to

power around 650,000 homes. Esken

Renewables also use some waste heat

from a biomass customer for waste

drying at the Widnes site, saving up

to 12,000 tonnes of CO

per year,

equivalent to over 60% of Esken’s own

GHG footprint.

Managing noise

We responsibly manage noise across

all our operations and minimise the

impact on the communities living close

to all our operational sites.

All Esken Renewables processing

plants undertake an independent noise

assessment to ensure they meet the

required standards as set by local

planning authorities. We continue

to invest in the latest models of

processing equipment and vehicles,

which helps to minimises the noise

impact from our operations.

Our airport operations continue to

work in partnership with our airlines,

ground handlers, and regulators to

reduce noise.

We proactively engage with our

communities and residents to

carefully manage noise complaints,

monitoring and management system

to improve our policies, procedures

and performance. This year we

have introduced a number of new

initiatives to support our noise

monitoring, resident engagement

and airline engagement.

As part of a major upgrade to the

airport’s Noise Complaints Handling

Service the airport launched a new

online self-service system called

WebTrak; this enables local residents

to view all aircraft movements in the

vicinity of the airport. It is the easiest,

quickest, and most efficient way of

registering a noise complaint, whilst

allowing users to view all aircraft

movements around the airport.

The airport has established a new,

independent Community Noise Forum

to engage with the local community

on noise concerns. Members of the

forum are representatives of the

local communities from which noise

complaints have been received.

Meetings are led by an independent

Chair with a clear agenda to discuss

local noise concerns, provide

transparency on airport controls

and operations, and identify where

noise abatement measures could

be improved.

Through engagement with our airlines,

the airport has introduced a new

tariff incentivising the use of quieter

and cleaner aircraft. The new noise

surcharges, that include significantly

higher fees relating to night-time

operations, will help encourage

the use of quieter planes and

daytime operations.

The airport has proactively engaged

with airport noise specialists,

Andersons Acoustics, to measure our

performance against the International

Civil Aviation Organisation Balance

Approach and establish ways to

improve our noise management.

We remain

committed to

considering and

implementing the

recommendations

of the Energy

Saving Opportunity

Scheme where

appropriate.

Esken Limited Annual Report and Accounts 2022

Sustainability report

continued

Minimising our

environmental impact

Promoting a circular economy

Esken Renewables’ operation is a vital

part of the circular economy within

the waste wood sector. Our facilities

produce biomass fuel products,

previously destined for landfill and

deliver them as a vital energy source of

energy from waste plants. By the very

nature of the business we enable the

circular economy. We offer a full waste

management solution and strive to

improve the social and environmental

credentials of the products and

services we source.

Sustainable forest management

At Esken Renewables we ensure that

the forest biomass we use is sourced

from sustainably managed UK forests.

We source material produced from

forestry practices that are certified

against sustainable forest management

standards. Esken Renewables has a

Forestry Certification Scheme, where

customer driven requirements for virgin

material are met under the Forest

Stewardship Council (FSC) Chain of

Custody Standard. This allows Esken

Renewables to transfer claims for

various types of FSC material from

the source to the customer.

Protecting air quality

We aim to protect and maintain

clean, healthy air for our colleagues

and communities at all our operation

sites. We have robust monitoring in

place to ensure we remain within the

government guidelines and identify

and establish mitigation programmes.

Esken Renewables have trialled dust

suppression equipment at operational

sites which has significantly reduced

the potential for off-site impacts. At

London Southend Airport with the

introduction of the new tariff, the

airport has also introduced charging to

encourage cleaner aircraft with a NOx

Emission Surcharge of £3.50 per kg

NOx per movement.

For the second year we have run the

‘Cycle2Work’ scheme. It is an annual

scheme to encourage our colleagues

to travel to and from the office through

more sustainable modes of transport,

as well as to improve colleagues’

health and wellbeing.

Protecting biodiversity

Throughout our planning and

management of our operations we

protect biodiversity. We identify

important biodiversity that may be

impacted by our operations and

establish management plans to

control and mitigate our impacts.

At Esken Renewables, through the

formal planning, permitting and

licensing of our operations, we have

undertaken impact assessments and

we minimise any potential adverse

impacts on the local ecosystem.

As part of our trial employee

volunteering day, colleagues

volunteered at Runcorn Local

Natural, a Halton Borough Council site.

The day consisted of a tree clearing

exercise on an area of shrub land,

with a series of endangered shrubs

in place. Our assistance ensured that

native shrublands were maintained and

not lost as a result of non-native tree

growth in the area.

Conserving water

We aim to continuously improve

our water consumption and drive

efficiency and reduce our water

footprint across all our operations.

We prioritise minimising our

environmental impact by preventing

pollution and limiting discharge.

Managing waste

Our mission is to eliminate waste from

our operation, and where possible

send zero waste to landfill. Across

our business divisions we seek to

minimise waste and to manage waste

generated as a resource, across all

our operations. The airport has a

number of initiatives to reduce waste

input and increase waste to recycling,

through partnership with a local, fully

optioned recycling company, which

generates energy from the remaining

non-recyclable waste, delivering zero

waste to landfill. Esken Renewables

ensures that all residual waste streams

arising from biomass fuel production

and office-based activities are sent for

further treatment and recycling.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Non-financial information statement

In line with the Non-Financial Reporting Directive, we have set out below

where relevant information we need to report on can be found.

Reporting requirement Policies and standards Reference in Annual Report

1. Environmental

matters

• ESG Policy General Statement

• ESG Framework

• Group Environmental Policy

• Sustainable Procurement Policy

• Our story page 4

• Sustainability report

pages 36 to 58

• Stakeholder engagement

and s172 pages 60 to 68

• Key performance indicators

pages 26 to 27

• Principal risks and mitigations

pages 72 to 76

2. Employees

• Recruitment Policy

• Group Risk & Safety Policy

• Equality, Diversity &

Inclusion Policy

• Our story page 4

• Developing our people

pages 45 to 47

• Stakeholder engagement

and s172 pages 60 to 68

• Excelling in health and wellbeing,

safety and security page 48 to 51

3. Human rights

• Modern Slavery Statement

• Modern Slavery & Human

Trafficking Policy

• Dignity at Work Policy

• Data Protection Policy

• Safeguarding Policy

• Supporting sustainable

communities pages 40 to 44

• Stakeholder engagement and

s172 pages 60 to 68

4. Social matters

• Sustainability report

pages 36 to 58

• Principal risks and mitigations

pages 72 to 76

• Stakeholder engagement

and s172 pages 60 to 68

5. Anti-corruption

& anti-bribery

• Anti-Bribery & Corruption Policy

• Whistleblowing Policy

• Ethics & Business Integrity Policy

• Stakeholder engagement

and s172 pages 60 to 68

• Principal risks and mitigations

pages 69 to 76

6. Business model

• Business model, page 10

7. Principal risks

• Risk management and our

principal risks, pages 72 to 76

8. Non-financial KPIs

• Key performance indicators,

pages 26 to 27

Esken Limited Annual Report and Accounts 2022

●

Positive

●

Neutral

●

Negative

Stakeholder engagement

We have set out below information

regarding examples of who our

stakeholders are and how we engage

with them; we have regard to their

interests when exercising our duty to

promote the success of the Company

under s172(1) of the 2006 Act.

When making decisions in our

business, the Board takes into account

(amongst other issues):

• the likely long-term consequences

of any decisions we make;

• the interests of our employees;

• the need to foster our business

relationships with suppliers,

customers and others;

• the impact of our operations on

the community and environment;

• our desire to maintain a reputation

for high standards of business

conduct; and

• the need to act fairly, as

between members.

These factors are also borne in

mind when developing our strategic

priorities, our policies, and in guiding

our behaviours and values.

The Board has always considered

all stakeholder interests as being a

fundamental element in its decision-

making. With the recent most

challenging environment brought about

by the COVID-19 pandemic, it has been

even more crucial to have effective

and meaningful engagement, to enable

us to support our stakeholders in

managing the continuing impact of the

virus on the business environment.

With the development of our new

ESG Framework, which sets out

our ambitions on social impact and

environmental mitigation, the Board

are committed to decision-making

that supports our commitments to

our people and planet. Details of our

ESG programme can be found on page

36. By positively engaging with our

stakeholders, we are able to prepare

for policy changes, reduce risk and

enhance collaborative projects.

Our Executive Chairman, together with

the Company Secretary, produces an

agenda for each Board meeting that

ensures the requirements of s172 are

always met and addressed.

For example:

• We have standing items on agendas

for meetings where the Executive

Directors present and update the

Board on our strategic progress,

business development, financial

performance and risk management.

Reports on corporate governance

and ‘horizon scanning’ are

also included.

• Papers presented to the Board

are required to address relevant

stakeholder interests as appropriate.

• Regular presentations and reports

to the Board are made on matters

such as health and safety, our

ESG framework, risks and risk

management. The Board also

considers regularly our competitors

and the wider industries in which our

businesses operate.

• Our Board minutes detail decisions

that the Board has made, and the

relevant factors that the Board has

taken into account when reaching

those decisions.

Employees

We recognise that as we embark

upon ‘the new normal’, we are facing

what has been coined, ‘The Great

Resignation’, with many employees

wanting to work more flexibly than ever

before, and demanding that employers

put their health and wellbeing front

and centre of the people agendas.

Creating a great employee experience

and attractive place to work has never

been more important.

What have we done:

We felt strongly that we wanted to

survey our employees after we came

out of the final lockdown to understand

what was important to them following

the pandemic.

In their discussions and decisions during the year ended

28 February 2022, the Directors of the Company have acted

in the way that 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 (having regard to stakeholders

and the matters set out in subsections 172(1)(a)-(f) of the

Companies Act 2006 (the 2006 Act).

75%

Engagement

score

18%

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

What our employees told us:

• Engagement has remained in-line

with our last survey in 2019 with a

three percentage point increase in

colleagues caring about the future

of the business.

• Of the 13 like-for-like questions

from 2019, ten show improvements

indicating we are heading in the

right direction.

• Employee engagement is positively

influenced by the ability to get

on and do their job, supported by

managers who are generally doing

what is expected of them and are

available when needed.

• Results suggest the demands

of the job are reasonable and as

expected, with job roles having

little impact on employee’s

mental health.

• We have an inclusive environment

where colleagues feel comfortable

to be themselves at work.

• Generally speaking, colleagues

have a good day at work.

• Colleagues have good levels of

autonomy in their role and can

cope with the demands of the job.

• Managers are generally doing

enough of the right things and

are available when needed.

Our 2022/2023 corporate actions from the survey are:

Day-to-day experience, culture and ways of working

Senior leadership communications

Line manager support and guidance

In order for colleagues to have a good day at work and feel a greater sense

of pride, we need to focus on:

• Supporting our employees to look after their health and wellbeing.

• Break down the communication siloes between different teams and

departments, especially where the effective performance of duties is

dependent on others.

• Employees have little concern about coming to work and being their true

self, but they do think their division can be more proactive in ensuring the

fair, equal, respectful and dignified treatment of all.

– We will leverage the values of Take Care and Stay Connected by outlining

the expected behaviours.

– Drive a stronger culture of inclusion, by raising awareness, education,

and role modelling.

• Help contribute to employees sense of value through the celebration of shared

and individual achievements.

• Provide more clarity on the future direction and strategy of the division as well

as the Group to enhance trust.

– Create openness and honesty in communications. In 2021 we have seen the

emergence of the human and empathetic leader in response to the difficult

circumstances in and out of work.

– When communicating changes, clearly spell out the thinking behind the

decisions. Employees want to know the reasons why and how changes

will be made in addition to what the changes are.

• Employees, like in other organisations, want to feel a greater sense

of involvement with the business, especially when it comes to change.

They want to have the opportunity to speak up and be heard, and know

their opinions are valued e.g. closing the loop.

• We have an opportunity to drive engagement by being more

environmentally and socially conscious. It’s important to employees

and could help drive pride.

• Line managers are on the front line of helping colleagues to feel appreciated.

There’s a need to:

– Help employees recognise how the work they do contributes to their

division and Esken’s success.

– Thank employees for a job well done and discretionary effort displayed.

• Employees feel they could be better supported in their performance

and growth:

– Provide better performance feedback so that employees feel they

are learning.

– Help direct employees to training and follow up.

– A greater focus on development and job enrichment conversations, so

that employees feel they have opportunities to learn and/or progress, if

they want to. This will help utilise their untapped skills and capabilities.

– Ensure managers have the necessary skills and capabilities to do this.

Esken Limited Annual Report and Accounts 2022

Stakeholder engagement

continued

The lifting of lockdown measures

has allowed me to meet face-to-

face with employees from all parts

of the business via a series of

Listening Groups. The over-arching

impression I have got from these

sessions is how committed Esken’s

employees are to the business

and engaged, with suggestions as

to how they actively can help the

business perform even better and

be a great place to work.

I was delighted to be the Board

sponsor for our most recent employee

survey which, this year, took on a

shorter, more ‘pulse’ approach than

previous years. The survey enabled

us to do a post-COVID-19 check

with our employees, recognising the

industry challenges experienced

over the past two years, the external

context surrounding the pandemic,

and the significant organisational

changes undertaken. Significantly

23 out of the 25 questions that we

asked were directly related to the

employee experience here at Esken,

and I’m pleased to report that our

engagement score was 75%, just

three percentage points lower than

our pre-pandemic score.

I continue to provide my Board

colleagues with feedback and

insights on a regular basis to ensure

that all our employees’ views are

regularly voiced at Board level,

assessed and, where relevant, can

be incorporated into the Board’s

decision-making processes.

A message from

Ginny Pulbrook

Partners,

customers

and suppliers

Maintaining strong and

respectful relationships

with our business

partners, customers

and suppliers is key to

our long-term success

in developing valuable

growth from our assets.

Regular communication with our

customers enables us to better

understand their needs, expectations

and priorities. We have a central

procurement function to help us

formalise our engagements with

suppliers and strategic partners

as we recognise the benefits that

this can bring to our business. Our

approach is to engage with and

develop relationships with sustainable

suppliers wherever possible.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

How did we engage them?

• Suppliers are currently engaged on an

individual basis via our procurement

function and with colleagues within

the divisions;

• We hold quarterly reviews with our

strategic partners and framework

suppliers – these are usually face to

face but over the past year these have

been held online wherever possible;

• We attend supplier forums and

networking events;

• We implement supplier onboarding

processes where appropriate; and

• We have adopted a new supplier

code of conduct.

What did we talk about?

• Our business recovery strategy

following on from COVID-19;

• Our need for personal protective

equipment (PPE) and sanitary supplies

to help keep our colleagues and

customers safe – this was particularly

important whilst we were still operating

at all our national locations;

• Our business performance;

• Our supplier onboarding process;

• We shared our expectations in terms of

supplier conduct and ways of working

and implemented our Sustainable

Procurement Policy; and

• The shutdown of the construction

industry and the closure of Household

Waste Recycling Centres.

How did we respond?

• Over the course of the year the strong

strategic relationship between Esken

Renewables and our customers formed

the foundation for a flexible and

dynamic approach which enabled us

to secure fuel supply in different ways.

• This included:

– optimising the utilisation of our

strategic infrastructure such as

our Pollington Storage Facility;

– identifying alternative domestic

feedstock; and

– securing strategic imports

from Europe;

• We have developed our Supplier Code

of Conduct and embedded it within

the business;

• We have been open and transparent

about our procurement challenges

and what our business priorities are,

whilst being sensitive to the impact

of the pandemic on our suppliers’

own businesses. This approach

has been met with understanding

and respect from our suppliers and

has strengthened our business

relationships;

• We have engaged with social

enterprise organisations to support our

sustainable procurement aspirations.

Working in partnership

with our clients

How did we engage?

At the Port of Tilbury on the edge

of London, Esken Renewables and

Tilbury Green Power (TGP) are

working in partnership to decarbonise

the UK grid, together we play a

key part helping the UK reduce its

dependence on fossil fuel, reduce

waste, and provide energy security.

Esken Renewables supplies around

270,000 tonnes of waste wood

derived renewable biomass fuel to

TGP’s biomass power plant each year.

The facility generates around 300

GWh of green electricity per year

enough to power 70,000 homes.

We engaged with TGP in a variety

of ways including regular contract

management meetings, operational

meeting at site, tender meetings, a

weekly scheduling email with the

customer, real time service updates

with day to day contact with the

power plant operations team.

What did we talk about?

In the last year, we discussed a

variety of operational issues with TGP,

including how to optimise ash offtake

services as the plant produces

c.15,000 tonnes of ash each year.

We also discussed how to optimise

operations to minimise vehicle

movements on a busy power plant

but ensure the right level of service.

We discussed ways of joint working

on a shared site, how to identify

better commercial options for the

customer, how to produce more

efficient compliance paperwork

and invoicing process and how to

ensure flexible but safe operation

at all times.

How did we respond?

Esken Renewables was successful

in retaining the Incinerator Bottom

Ash treatment contract with a new

transport and treatment solution

following a competitive procurement

process. We were able to implement

a number of other operational

improvements improvements as

a result of our strong working

relationship with the TGP including:

• Dedicated ash haulage equipment

being deployed;

• A dedicated ash treatment

driver team;

• Reduced and eliminated reliance

on sub-contract haulage improving

service resilience;

• Deployed weekend stand trailers

as added contingency for

the customer;

• Provided a contingency loading

service for the customer when

required;

• Improved communications

and planning eliminated late

notice cancellation charges to

the customer;

• Renegotiated and changed

treatment outlets to provide more

contingency options for weekends

and Bank Holidays.

Esken Limited Annual Report and Accounts 2022

Stakeholder engagement

continued

The communities

in which we

operate

We recognise the

importance of

contributing to, and

working with, the

communities in which

we operate and seek

to do this through a

range of activities such

as volunteering and

community forums.

How did we engage them?

• Social media channels and via

our website.

• Airport Consultative Committee

meetings.

• Independent focus group forums

on noise and accessibility.

What did we talk about?

• Over the past 12 months, we have

significantly increased community

engagement at London Southend

Airport (LSA) on issues such as

noise, employability and social

support. We have established an

Independent Community Noise

Forum, only the fourth in the UK,

inviting representatives from all

Southend city postcodes. We

commissioned and reported on

a full report into our management

of aircraft noise, in line with the

ICAO Balanced Approach. We have

attended events at local schools and

colleges, supporting the introduction

of young people to the world of

work. We established a partnership

with the South East and Central

Essex Mind (SECE Mind) charity,

running events for our own staff

and enabling support for the wider

community, providing volunteers for

an SECE Mind charity project and

generating donations through staff

and wider community activities.

• At both London Southend and

Carlisle Lake District airports, we

continued to provide car parking

space for NHS COVID-19 testing

facilities. We also provided property

at LSA for a private testing facility.

• On a local level, we asked our

communities how we could support

them with the challenges of COVID-19.

• Local employment and procurement

opportunities.

• The closure of the passenger

terminal at LSA and other sites

across the Group.

• The targets and initiatives we have

aimed at reducing the impact of our

operations on the local environment.

How did we respond?

• We closed the passenger terminal at

the airport in line with government

advice whilst we readied a COVID-19

safe passenger experience.

• We collected food for local food banks.

• Our enhanced passenger experience

at LSA includes plans to allow more

space for post-COVID-19 travel and

keep our passengers, workforce and

airport crew safe.

• We held a Passenger of Reduced

Mobility forum in late 2020 and the

feedback from this session is still

shaping our decisions throughout

2021 in readiness for the 2022

re-start of operations at LSA.

• We updated our website to explain

safety at the airport in light of

the pandemic, linking to the UK

Government website for up-to-date

guidance and information on how

to book COVID-19 tests.

• The Board is now more frequently

updated on the impact of our

activities on the communities in

which we operate and established

a new ESG Sub-Committee to

focus on environmental, social

and governance matters.

For more on our communities

see case study on page 42

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

We feel that maintaining a positive

dialogue helps us to share our

vision for our business and provides

reassurance that we recognise the

importance of excellent standards of

business conduct and wish to retain

our reputation in this regard.

How did we engage them?

During the year we undertook

another redundancy programme.

We carried out a union-led collective

redundancy consultation with our

unionised employees. This required

us to work very closely with Union

representatives, in an open and

transparent manner in order to

manage this difficult situation as

efficiently and carefully as possible.

A lot of time was spent during the year

liaising with the UK Government on the

impact of the pandemic on the aviation

industry. Our Aviation division has also

fed in to the Department of Transport

study on the impact of the airport.

Regulators,

government

bodies and unions

We strive to

create positive

and constructive

relationships with

regulators and other

bodies that authorise

and regulate our

business activities

or the industries in

which we operate.

What did we talk about?

• Esken Renewables actively

engaged with the Environment

Agency (EA) with site visits and trials

to assess improvements in storage

and fire controls at our processing

sites in the UK at both national

and local levels.

• Positively engaged with Public

Health England (Halton area)

with regards to COVID-19

lockdown processes.

• Engaged with the EA on a Best

Available Technique review on

all our operations.

• LSA engaged with its local councils

to update on future plans, with

specific regard to night flying and

environmental matters as part of

its regular cycle of discussions.

• We maintained our lobbying of

central government for a safe return

to flying with the lowest safe level

of conditions and costs, through our

trade bodies and in national media.

We also continued to make the case

for continued government support

for the aviation sector.

• We continued to work with our

regulator, the Civil Aviation Authority,

on both immediate issues such as

COVID-19 safety measures and

longer-term issues such as air

space change proposals.

• Public health.

• Compliance with applicable laws,

regulations and licence conditions.

• The shutdown of the passenger

terminal at LSA in response to

government COVID-19 regulations

and the impact of Ryanair closing

its base at the airport.

• Government policies around

movement within and between

nations, evolving quarantine

conditions, virus testing and

passenger safety.

• The decrease in passenger traffic

due to UK and EU government

lockdowns and travel restrictions.

• The application of the Airport and

Ground Operations Support Scheme.

• Negotiation of collective

redundancies.

How did we respond?

• We agreed changes to our storage

and fire controls in conjunction

with EA.

• A large number of employees were

placed on furlough, utilising the

government support package, and

subsequently welcomed back to

work from August 2021 onwards.

• We re-deployed employees where

possible and engaged some on

more flexible contract arrangements,

allowing them to seek employment

elsewhere during the pandemic but still

retain employment within the Group.

• At LSA, we ended our use of

furlough slightly before the scheme

ended, in order to prepare our teams

fully for the return to operations

in Spring 2023. We used the time

available to us as a result of lower

levels of flying to cross-train

employees for flexible deployment,

for example in security.

• We continued to engage with local

government and Local Enterprise

Partnerships around mutual support

for our airports and their regions,

as we continued to navigate the

pandemic and its impacts.

• We have now made substantial

progress in understanding the

impact of airport noise, particularly

night noise, on neighbours, having

commissioned and shared with

stakeholders a detailed review and

report from Anderson Acoustics. The

key recommendation was greater

community engagement, which we

are delivering in large part through

the newly established Community

Noise Forum. Our CEO at LSA

has escalated our commitment to

navigating a return to safe travel via

local and national media.

• We provided unused car parking

space at LSA for a NHS COVID-19

testing site and unused car park

at Carlisle Lake District Airport

and terminal space at LSA for

private testing facilities on

a not

for-profit basis.

Esken Limited Annual Report and Accounts 2022

Stakeholder engagement

continued

Shareholders and

banking partners

Esken’s Board is

committed to two-

way communication

with its shareholders

and banking partners.

The benefits of

this approach were

particularly apparent

during the challenges

brought about by

the global pandemic.

Our open and

transparent approach

to engagement helped

us secure the support

we needed during this

difficult time in order to

protect our long-term

growth aspirations.

How did we engage them?

The Executive Chairman and Chief

Financial Officer regularly engaged

with shareholders throughout the

year in order to keep them informed

of the steps we were taking to

manage the impacts of the pandemic.

This engagement ultimately helped

shareholders and banking partners

understand our position as we sought

to renew our banking facilities, and

secure a £125m investment in LSA via

a convertible loan and £55m equity

fund raising.

We also sought to update our

shareholders on material events and

activities such as our efforts to dispose

of Stobart Air and its subsequent

liquidation, as well as the news that

Ryanair was closing its base at LSA.

We also discussed the steps we were

taking to restructure our Executive

leadership team after the departure

of our former Chief Executive Officer

in June 2021. In order to maintain

strong corporate governance, David

Blackwood became Deputy Chairman

and Senior Independent Director so

that the Board and shareholders have

a point of reference independent from

the Chairman.

Investor presentations were carried out

to accompany the results and we held

a number of live broadcasts during the

year to engage with retail investors

and potential new investors regarding

our business strategy and business

model. We also held an information day

for investors in order to help people

better understand Esken Renewables’

business model, which included a visit

to our storage and processing site

in Tilbury.

What did we talk about?

• The impact of COVID-19 on our

operations;

• The shutdown of LSA and the

impact of Ryanair closing its

base at the airport;

• Our strategy and how we

are performing against it;

• The financial and operational

performance of the business;

• The liquidation of Stobart Air;

• Our capital raise and the

reasons for it;

• The £125m investment in LSA

and the reasons for it;

• Climate change;

• Our stakeholders and how we

engage with them;

• The macroeconomic climate;

• Changes to our Executive

leadership structure;

• Industrial relations.

How did we respond?

• We have sought feedback from our

shareholders following the major

announcements we have made;

• We have worked hard during the

pandemic to keep our shareholders

updated with our progress against

plans and how our business

operations have been affected by

the global crisis;

• We worked closely with our major

shareholders, and new investors to

structure and complete our £55m

equity fundraising and the £125m

investment in LSA – there were

overwhelming shareholder votes in

favour of both projects;

• We have restructured our Executive

leadership team after consultation

with shareholders;

• We held our AGM and the EGM to

approve the fundraising initiatives as

closed meetings, in accordance with

government guidelines and to ensure

the safety of our colleagues and

those who would usually attend, and

encouraged shareholders to provide

questions in advance for the Board

to respond to;

• We will continue to hold webcasts

to engage with retail investors as

this method of communication

was well received;

• We are currently considering what

other ways we can engage with our

investor base and banking partners.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Effect and impact – example Board decisions and how the Board considered

stakeholder views.

The following are some of the decisions made by the Board this year which demonstrate how colleagues’ interests, the need

to foster business relationships with other key stakeholders, and other section 172 matters have been taken into account in

discussions and decision-making:

Decision to conduct a Firm Placing and Placing and Open Offer

Decisions considered

by the Board

Stakeholders

considered

How did we engage

and deliberate

Effect of

engagement

The decision to

recommend for approval

to the shareholders

that the Company raise

£55m by way of a Firm

Placing and Placing and

Open Offer.

Shareholders: the Board

met regularly to discuss the

avenues it had to raise the

finance, as a combination

of factors had accelerated

the need for refinancing

and additional liquidity both

to fund the Group’s short-

term requirements and to

enable it to build a strong

foundation from which it

can return the business

to growth and deliver on

its longer-term strategic

ambitions for the Group’s

core operations.

Employees: the Board was

cognisant that securing

the long-term future

for the business would

benefit its workforce, with

increased job security and

also provide a platform for

growth for the businesses in

which they work.

Communities: the Board

wished to continue the

work of the Group as an

important local employer

in its key markets, and

to continue that in to

the future through the

development of LSA as

a strategic asset in the

London airport market and

its renewables business, as

part of the ongoing energy

supply chain.

The Group spoke with all

of its major shareholders

as part of the fundraising

process to discuss the need

for additional finance, the

appetite for each of them

to invest further in the

Group as part of the capital

raise, and the structure

and implementation of the

capital raise.

The senior management

teams from all of our

businesses and key

functions participated in

the fundraising process and

worked diligently to bring

the various elements to a

successful completion.

The Group completed the

capital raise, raising net

proceeds of £52.3m. The

Board is of the view that the

success of the engagement

was positively reflected in

the capital raise exercise.

The use of a Firm Placing

and Placing and Open Offer

allowed the Group to be

fair amongst its members

whilst raising the required

finance in an efficient and

successful way. It also

allowed the Group to attract

a number of new investors

into the business, providing

further diversity and

strength for the future.

Esken Limited Annual Report and Accounts 2022

Stakeholder engagement

continued

Hold closed AGM and EGM in July 2021

Decisions considered

by the Board

Stakeholders

considered

How did we engage

and deliberate

Effect of

engagement

The Board decided

to hold a closed AGM

and EGM due to the

risks associated with

COVID-19.

Shareholders: would

usually have the ability

to attend in person

via electronic means

and hold the Board to

account through Q&A

and discussion.

Employees: concerns

around health and safety if

AGM went ahead as normal.

Following UK Government

guidance to hold closed

meetings, we arranged for

shareholders to attend the

meeting virtually.

Shareholders were

encouraged to submit

questions in advance of

the meeting and vote via

proxy forms.

The AGM and EGM went

ahead with minimal risk to

health and safety.

Shareholders were able to

ask questions (in advance)

but were not able to ask

questions on the day.

Investment in LSA

Decisions considered

by the Board

Stakeholders

considered

How did we engage

and deliberate

Effect of

engagement

To pursue the investment

of £125m by Carlyle

Global Infrastructure

Fund (CGI) in LSA.

Employees: direct impact

on employees retaining

their jobs and improving

the remaining employees’

motivation and morale.

The communities in which

we operate: will benefit

from continued investment

in LSA as a major local

employer.

Customers and suppliers:

the aim of the investment

was to secure the funds

necessary to sustain and

develop a key asset in the

London aviation market

for the benefit of both

our airline and passenger

customers, and for the

many businesses that

supply the airport.

Shareholders: the Board

was cognisant that

investment in LSA would

secure its long-term future

for the benefit of the Group

as a whole, but also that

a convertible loan would,

in time, give a significant

ownership interest in this

key asset to CGI.

Due to the nature of the

process to be followed to

secure this investment,

it was not possible to

consult with employees,

communities, customers

and suppliers ahead of

agreeing the investment

and announcing it ahead of

requesting approval for it by

shareholders.

Major shareholders were

consulted about the

size and nature of the

investment in advance of

it being agreed (as part of

the overall fundraising being

conducted by the Group)

and were eventually asked

to approve the investment in

a shareholder meeting.

The investment was

agreed and approved by

shareholders. The Group

raised a considerable

amount of financing and, in

the short term, was able to

repay a significant amount

of its debt and secure

additional liquidity. This was

used to fund the Group’s

short-term requirements

and to enable it to build

a strong foundation from

which it can return the

business to growth and

deliver on its longer-term

strategic ambitions for the

Group’s core operations,

allowing it to meet certain

of its residual legacy

obligations in respect

of Stobart Air (and its

liquidation) and Propius,

and underpin the business

plan for Esken Renewables.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Risk management and our principal risks

We face a variety of risks and uncertainties,

some arising within the Group, and others

caused by external factors.

Overview

Risks can be mitigated or managed

in some cases, and in others we

have developed plans to manage

the consequences.

The Group’s financial and operational

performance and reputation is

subject to several potential risks and

uncertainties. These risks could, either

separately or in combination, have a

material impact on our performance,

customers, suppliers, employees,

partners, the environment and

shareholder returns.

Our approach – the risk framework

The Board has overall responsibility

for ensuring the Group has robust

risk identification and management

procedures, and has put in place a

risk framework to facilitate this. The

framework sets out how we identify,

evaluate and report on our current

and emerging risks, and includes

the assessment of the controls and

mitigation strategies we have in place

for each documented risk.

Responsibility for risk management

is delegated to the level that is most

appropriately placed to oversee and

manage each risk, with oversight of

the process as a whole being the

responsibility of the Audit Committee.

Our principal and corporate risks

are documented in a format which

includes a comprehensive overview of

the key controls in place to mitigate

the risk and the potential impact.

Changes to the principal risks can only

be made with approval from the Audit

Committee or Board.

The Board undertakes a full review of

the corporate and principal risks on an

annual basis, and they are reviewed

by the Audit Committee at each of

its meetings.

The Group’s corporate risk register is

reviewed and updated by the Esken

Management Board each month, with

detailed consideration of any changes

in risk – be that emerging, additional or

deleted risks, changes to the controls

in place, or changes to the evaluation

of our exposure to that risk. The

Management Board review includes

consideration of any significant risks

identified in the underlying business

or functional risk registers, to decide

whether these need to be escalated to

the corporate risk register. The Audit

Committee also receives presentations

from senior managers and external

advisers and assurance providers,

to ensure that its members have a

comprehensive understanding of the

risks facing the business, and the

mitigation strategies implemented.

This regular review and challenge of

risk information ensures that there is

robust and regular consideration of

the principal risks facing the Group

by the Directors, taking into account

the risks that could threaten our

business model, future performance,

solvency or liquidity, or the Group’s

strategic objectives.

There were no significant weaknesses

identified in the risk management

process during the year, and no

changes were made to the framework

by either the senior management team

or the Audit Committee.

Board risk management objectives

The Group’s risk management

objectives, as set out through the

risk framework, are:

• Robust and well defined processes

for the identification and evaluation of

current and emerging risks;

• Consistent analysis and evaluation of

the likelihood and impact of key risks;

• Proactive consideration of risk within

key decision-making processes;

• Awareness of the risks that could

prevent Esken from delivering its

strategic objectives;

• Risk awareness promoted as a key

part of our culture, with everyone

associated with our business

recognising that the management of

risk is part of their day job; and

• A proportionate approach to the

management of risk, which balances

the requirement to document risk

and control decisions with processes

which are not overly bureaucratic.

Overall, our risk management

processes are designed to ensure that

the Board is aware of the key risks

affecting the Group, has information

available to monitor the positions

taken, and has the opportunity

to challenge the approach taken

to mitigation.

Risk management process

across the Group

The Group maintains a corporate risk

risks and other high-level and strategic

risks. The Audit Committee receives

and reviews information relating to

these corporate and principal risks,

together with details of actions taken

and relevant mitigating controls, prior

to advising the Board in this regard.

Within divisions and Group functions,

significant business risks are identified

and reviewed at Director level, with

results reported at Divisional Board

meetings. Business managers across

the Group own and manage these risks,

with regular reports designed to keep

the Board fully appraised of all current

and emerging risks within the business.

Information from the risk process

is used to prioritise and plan focus

areas for the completion of assurance

work, which is also reported to the

Audit Committee.

Esken Limited Annual Report and Accounts 2022

Risk management and our principal risks

continued

ESG risk

Esken Group takes its ESG

responsibilities seriously, investing

time and resources during the year

to enhance knowledge and skills

within the Group. A specialist ESG

Manager was recruited to develop and

coordinate plans in each area, upskill

our teams, and bring together people

across the business to deliver positive

changes and benefits across the

three pillars.

We have ESG and climate change risks

included in our corporate and business

risk registers, and have developed a

separate ESG risk register to integrate

ESG ambitions and risks within the

Group’s normal risk management

processes. Key information on our

ESG plans and progress are included

in this report on pages 36 to 58.

Within the overall focus on ESG

initiatives, climate change risk remains

one of the Group’s principal risks, as

we seek to both reduce our impact

on the environment, and the impact

of climate change on our activities,

assets and finances.

Potential impacts include:

• A reduction in demand for flights;

• Changes in demand or regulation

around the sustainable

energy market;

• Higher costs:

– for goods and services,

e.g. utilities, insurances;

– where changes in regulation or

standards dictate the use of

more expensive working methods

or materials;

• An increasing regulatory burden,

as governments use regulation

to drive change;

• Supply chain challenges – with

potential delays and shortages

in supply;

• Increasingly severe and/or frequent

adverse weather events, causing

for example flooding, disruption or

damage to properties; and

• Reduced investor interest, if we are

not seen to be taking appropriate

action in relation to climate

change initiatives.

Risk management framework

Board

Audit Committee

Corporate

risk register

Divisional MDs/CEOs and Group Senior Managers

Risk owners

Head of

Internal Audit

Executive

Management

Internal

Audit

Aviation Renewables

Aviation

Services

Group

Central

Other

assurance

activities

e.g.

H&S audits,

regulatory

compliance

inspections

Risk information

Management

assurance

Risk information

Risk

information

Independent

assurance

Risk

information

Independent

assurance

Management

assurance

Group registers include:

Finance, People, IT, ESG, Procurement,

Legal, Risk & Safety, Communications

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Emerging risks

In addition to the principal risks

identified below, the Group has also

assessed risks that are emerging

and will need to be monitored and

managed. They include:

• Cost inflation – is presenting an

increasing risk for the Group. We

are seeing increases in the direct

cost of goods and services for the

Group, and also anticipate that

rising living costs have the potential

to drive up employee costs and

demands. Balancing these input cost

increases with our ability to control

customer pricing and revenues will

be a challenge.

• Supply chain risk – in addition

to the inflationary cost increases

referred to above, we have noted an

emerging risk relating to disruption

in the supply chain, which may

impact on our ability to procure

essential supplies, in particular

relating to the fleet management

and plant maintenance for the

renewables business.

• Interest rate rises – interest rates

are rising, and we expect this to

continue during FY23 and beyond.

Significant increases could impact

on our financial performance and

ability to finance operations.

• Difficulties recruiting and retaining

staff – particularly in the Aviation

sector, where the COVID-19

shutdown has impacted on the

attractiveness of the sector to

potential employees, and the time

required to recruit and onboard staff

is longer because of the need for

enhanced security checks.

Principal risks

Principal risks are those which are

considered material to the Group’s

development, performance, position

or future prospects.

The principal risks are captured in

the Corporate Risk Register and are

reviewed by the Board and Audit

Committee, who consider:

• Any substantial changes to

principal risks;

• Material changes to control

frameworks in place;

• Changes in risk scores;

• Changes in tolerance to risk;

• Any significant risk incidents

arising; and

• Progress with any additional

mitigating actions which have

been agreed.

Changes in principal risk

during the year

We consider that our principal risks

have remained the same during the

year, with no new principal risks

identified, or risks deleted from the

principal risk register by the Board.

However, the evaluation of exposure

to some of our principal risks has

changed during the year, as business

pressures have changed.

Principal risk heat map as at 28 February 2022

All risks are evaluated on a consistent basis across the Group, which includes both the likelihood of the risk crystallising and

the potential impact. Our model evaluates both inherent exposure (i.e. before any mitigating controls or actions) and residual,

or current, exposure (i.e. after controls and mitigations). This assessment allows us to see the positive impact of control on

the underlying inherent risk.

The heat map summarises current principal risk residual exposures.

Impact

Likelihood

2 41 3 5

1 Impact of the COVID-19 pandemic

2 Liquidity shortage, loss of banking support

3 Passenger numbers at LSA fail to increase

4 Significant breach of key legislation

5 Cyber crime, significant data loss or breach

6 Failure of plant with which the renewables

business has a long-term supply arrangement

7 Impact of climate change

8 Impact of parent company guarantees/other

guarantees

9 Loss of significant customer

10 Significant breach of customer-related

regulatory or licence conditions

11 Major aircraft incident at one of our

operated or service airports

12 Disruption to operations, through

environmental protests or loss of

access to or use of infrastructure

Esken Limited Annual Report and Accounts 2022

Principal risks and mitigations

Potential impact Risk mitigation Direction of risk

Business area – Groupwide

1. COVID-19 pandemic

The pandemic impacted on the delivery

of our ambitions, as the resulting

commercial, liquidity and funding

challenges had a significant impact

on the business.

The pandemic shutdown lasted

significantly longer than had been

anticipated, and its impact particularly

across the aviation industry continues

to present challenges, impacting on

our ambitions for business growth.

However, as the lockdown has now

been lifted, we are working with airlines

to agree operating arrangements and

activities going forward.

Each division implemented mitigation plans,

including the reduction of activities and

costs, furloughing of staff, contractual reviews

and additional cash monitoring reviews.

Group functions supported the operating

divisions to maintain operations where possible,

to manage cash and debt positions, and to

support the workforce with appropriate and

safe working conditions.

As we now look to move on from the

restrictions of the pandemic, we have work

underway to ensure that as activity levels rise,

we have the necessary resources in place to

deliver effectively.

The majority of business

restrictions in the UK have

now been relaxed, along

with travel restrictions both

in the UK and overseas.

We have therefore reduced

our evaluation of this risk

accordingly.

Business area – Groupwide

2. Liquidity shortage, loss of funding support

We are reliant on funding support from

our banking partners, and this reliance

increased through the COVID-19

pandemic, which impacted our ability

to generate revenues and profits.

Cash shortages impact on our ability

to invest in the business and deliver

on our strategy and business plans.

We obtained funding from a range of

sources during 2021, but these will

require renegotiation in future years.

The CFO and Group Treasurer work with

Divisional Finance Directors to closely monitor

and forecast cash requirements. We use the

Anaplan system across the Group to produce

high quality forecasts and projections. There

is a strong governance framework for the

management of cash and commitments,

with clearly delegated levels of authority.

We are in regular contact with our banking

partners, to ensure they are fully informed of

relevant activities and issues, and we operate

in compliance with their requirements.

Some elements of the funding negotiated

during 2021 require additional reporting and

communication, and we have enhanced our

routines to deliver this.

No change.

Business area – Aviation

3. Passenger numbers at LSA fail to recover

Flight operations from LSA were

significantly impacted by the COVID-19

pandemic, both by the restrictions

on travel, and subsequently by the

reduction in flights operating from

the airport by our airline partners.

If activities do not recover as anticipated

the airport may not deliver the revenues

budgeted by the Group in the short

term, or on its overall growth ambitions

in the medium to long term.

We are working closely with our partner

airlines to understand their plans, and to

accurately forecast activity.

We are confident that

the demand for flights

will increase, now the

uncertainties arising

from the changing travel

restrictions during the

COVID-19 pandemic have

been removed. Discussions

with airline partners have

been positive.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Potential impact Risk mitigation Direction of risk

Business area – Groupwide

4. Significant breach of key legislation

We operate in highly regulated

environments, and a significant breach

of legislation could lead to prosecution,

fines, costly remediation and reputation

damage for the Group.

In some circumstances, operational

activities could be suspended where

remedial actions are implemented to

address significant breaches or reduce

the likelihood of future breaches arising.

We have an experienced team, with good

knowledge of the operational and legislative

requirements in each area of business.

The Group and each division have documented

systems in place in key areas, which include

procedures designed to ensure legal compliance.

Documentation is supported by detailed training

for staff, monitoring and reporting routines, key

risk analysis and internal and external inspections

and audits.

We have little tolerance to risks in these areas,

and seek to meet the highest standards, with

close management attention, and a culture of

compliance across the Group.

We have no tolerance towards health and safety

risks for our staff, customers, or other third

parties. We have dedicated health and safety

functions in each division, and a Group function

providing assurance and oversight, and have

increased the resources dedicated to these

during the year. Any incidents or near misses

are recorded, escalated and reviewed, and

where necessary appropriate steps are taken

to mitigate the risk going forward.

We acknowledge our environmental

responsibilities, and have processes in place to

ensure that we meet all appropriate standards,

and the conditions of any licences or permits

which relate to our operations. In addition to

internal reviews, we are subject to external

inspections by the relevant regulatory bodies.

No change.

Business area – Groupwide

5. Cyber crime attack, data loss or breach

We rely on our technology solutions and

strong information security to deliver

business across the Group.

A significant cyber crime incident, for

example, a ransomware attack impacting

on key systems, could impact on our

ability to operate for a period of time.

A significant data breach or loss

could impact on the Group’s ability

to deliver its business, and could

also result in investigation by the

Information Commissioner’s Office,

with the potential for fines and costs

for remedial action.

We continuously monitor and invest in our

information security framework.

Our data and systems are now primarily

cloud-based, where the providers specialise in

providing secure, robust data storage facilities

and tools, and have the ability to invest heavily

in security routines and resources.

Staff training is provided to enhance awareness

of the risks, and we have a suite of policies in

place, governing the use and management of

data and information technology resources.

The majority of data we process is not sensitive,

and we do not hold detailed financial or similar

information about our customers or suppliers.

No change.

Esken Limited Annual Report and Accounts 2022

Principal risks and mitigations

continued

Potential impact Risk mitigation Direction of risk

Business area – Renewables

6. Failure of plant with which we have long-term supply

arrangements

We have supply contracts with a number

of energy plants/customers.

A significant proportion of revenues are

generated from a relatively small number

of customers and, therefore, should

the demand from one or more of these

significant customers reduce, there

would be a twofold impact:

• Revenues would be reduced; and

• There may be additional operational

costs arising from the need to manage

excess stock.

Contracts with significant customers include

‘Take or pay’ clauses, which are typically set

at 80% of contractual volume. However, whilst

these offer a degree of security, because of the

commercial nature of some of our customers, it is

possible that some costs could not be recovered.

We have flexibility around the operation of

processing sites and our transport fleet to switch

supply/logistics to other fuel supply contracts,

and we have increased the amount of storage

capacity available, to enable peaks and troughs

in demand to be smoothed.

We increased the

evaluation of risk slightly,

because of the reliance

we have on a small number

of customers.

Business area – Groupwide

7. Impact of climate change

Climate change may have an increasing

impact across the business, which

could include:

• Reduction in demand for flights,

impacting on Aviation and Aviation

Services;

• Increasing regulatory burden;

• Increasing costs;

• Adverse weather events impacting

on operations;

• Poor publicity or reputational damage;

• Reductions in asset values;

• Investor relations impacted negatively.

We are investing significantly in the Group’s

approach to delivering its ESG ambitions.

We have a dedicated ESG Manager, a Board

level Steering Group, and working groups

in place across each area of the business.

A comprehensive ESG strategy is being

developed, with supporting plans to deliver

on the different elements and activities in all

areas of the business.

We have brought in additional expertise

through external consultants, to help us

ensure that we have the right plan of action

across each of the ESG pillars.

Data collection and reporting has been

significantly enhanced during the year.

The main opportunities will arise from our ability

to adapt and respond to risks appropriately, so

energy efficiency, for example in buildings and

vehicles, plus efficient operations planning and

management of plant and site equipment will

be key. Please refer to the ESG sections of this

report for further information on our intentions

and achievements.

No change.

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Potential impact Risk mitigation Direction of risk

Business area – Groupwide

8. Parent company guarantees

The Group has given parent company

guarantees for potential liabilities

associated with some activities of

the Group.

The most significant of these relate to

commitments made in relation to Stobart

Air and Propius, and we are working

through the closure of those, following

the liquidation of the airline.

Other guarantees relate to the

Renewables business customers, and

there are some longstanding guarantees

relating to rent and rates for buildings

previously occupied by businesses

which are no longer part of the Group.

If these guarantees are called on, this

could impact on our ability to fund and

deliver business plans.

The position in relation to the

guarantees is continuously monitored.

The liquidation of the airline

crystallised a number

of the risks, which have

therefore been recognised

in our financial plans, and

the position on others has

reduced during the year,

as they are time limited.

Business area – all operating divisions

9. Loss of significant customer

In some areas of the Group there is

reliance on a small number of customers.

Loss of a significant customer would

impact on revenues and profits, and

challenge cost models.

Whilst in the Renewables division our

more significant customers have been

operating for some time and are likely to

have resilience in their operations this is

counter-balanced by the key customer

concentration in the Aviation division.

There are strategies in place to secure additional

customers in key areas to dilute the share of

business represented.

Relationship management of significant

customers remains a priority, with both divisional

and Group senior management closely involved.

No change.

Esken Limited Annual Report and Accounts 2022

Potential impact Risk mitigation Direction of risk

Business area – all operating divisions

10. Significant breach of customer licence or regulatory conditions

Our businesses operate in complex

areas, with a number of regulatory

bodies, from the Civil Aviation Authority,

to the EA and Department for Transport,

having frameworks that we must

adhere to.

A significant breach to the conditions

of licence, regulatory or operating

requirements could lead to the loss

of operating licences or approvals.

This could have a significant impact

on the Group’s revenues and profits,

if activities were curtailed whilst

remedial actions were taken.

Significant breaches could also

impact on the business’s reputation,

with regulators, customers or the

wider public.

We have experienced management teams, with

business systems in place designed to ensure

that licence and regulatory requirements are

recognised and fully addressed. These include

appropriate induction, training and oversight

arrangements.

Responsibilities are clearly allocated within the

Group and divisional structure.

There are oversight arrangements, including

an operational audit programme, undertaken

by a central Group team.

No change.

Business area – Aviation and Aviation Services

11. Major aircraft incident at our operated airports

An incident (related to a Group activity)

resulting in the loss of an aircraft and/

or passenger, or which rendered the

airport out-of-use for a significant period

of time.

Activities are undertaken in compliance with

the requirements of the Civil Aviation Authority

(CAA) and other appropriate regulations, with

comprehensive operational arrangements

in place to ensure activities are carried out

appropriately and to a consistently high standard.

We have competent and experienced

management and operational teams in place,

with compliance monitoring routines, checking

against our documented, standard, operating

procedures.

We have regular programmes of internal

inspections, and are subject to external

reviews by the relevant regulators.

No change.

Business area – all operating divisions

12. Disruption to operations, or loss of access to/use

of infrastructure

Loss of access to, or use of, facilities, for

example, through significant fire or flood

on a site or at a nearby location, or from

demonstrations, drones or significant

system failure.

The resulting impact on operational

activities, could have an impact on the

Group’s reputation and revenues.

Crisis management arrangements and

contingency plans have been developed

for each key area of the business.

Where appropriate these have been agreed with

the relevant regulatory body, such as the CAA,

Border Force, and police.

We work closely with local businesses sharing

information, resources and planning, and also

share and gather information through trade

and other sector related organisations.

Resilience is built into key systems and

equipment where this is possible.

No change.

Principal risks and mitigations

continued

Strategic Report Corporate Governance Financial Statements

Esken Limited Annual Report and Accounts 2022

Viability statement

for the year ended 28 February 2022

Based on this assessment, the Directors have a reasonable expectation that the Group will be able to continue in

operation and meet its liabilities as they fall due over the period, subject to the assumption that the material uncertainty

regarding funding, that is more fully explained in the basis of preparation in respect of going concern on page 124, is

satisfactorily resolved.

In making this statement, the Directors have considered the resilience of the Group, taking account of its current position,

including reliance on the fundraising in excess of £100m required over the going concern period to May 2024, in one or two

tranches as detailed in the basis of preparation in respect of going concern. This funding will support the Group in clearing

all legacy Propius aircraft lease and maintenance reserve obligations, (£44.7m of net liabilities included in the consolidated

balance sheet as at 28 February 2022), in addition to the settlement of the exchangeable bond. The principal risks facing the

business in the severe but plausible scenarios and the effectiveness of any mitigating actions, including the reduced growth

of passengers and cargo operation at London Southend Airport (LSA), following the COVID-19 pandemic, and reduced

energy plant availability and reduction in volumes supplied, have also been taken into account. The severe but plausible

scenarios do not currently include non-core asset disposal proceeds, of which there is potential to raise approximately

£39.7m based on current book values. This robust assessment has considered the potential impacts of these risks on the

business model, future performance, solvency and liquidity over the period to May 2025.

The Group will have a base case headroom of c.£19m at May 2025, before mitigating actions, and c.£2m under a severe but

plausible scenario at the same date, including the assumption that funding in excess of £100m is raised. In addition to the

assumptions described in the basis of preparation in respect of going concern, this assumes that by FY25:

• the Renewables business continues its post-COVID recovery and increases volume to 1.9m tonnes per annum; and

• LSA volume increases towards pre-COVID passenger levels.

The Directors have determined that the three-year period from date of signing to May 2025 is an appropriate period over

which to provide its Viability Statement as this period in the business plan covers all known significant events impacting

liquidity, including the settlement of all liabilities in relation to Propius leased aircraft and maturity of the exchangeable bond

in May 2024, whilst still providing an appropriate long-term outlook. Whilst the reviews performed do not consider all of the

risks that the Group may face, the Directors consider that the scenario-based assessment prepared of the Group’s prospects

is reasonable in the circumstances. The Directors have a reasonable expectation that the Group will be able to continue to

meet liabilities as they fall due over the coming three-year period. However, as described above, and more fully in the basis

of preparation, there is a material uncertainty regarding the funding required during the going concern period.

The Directors have assessed the viability of the Group over a three-year period

from the date of signing to May 2025, considering the Group’s current position and

the potential impact of the principal risks documented in the principal risks and

mitigation controls section.

Esken Limited Annual Report and Accounts 2022

Board of Directors

David Shearer

Executive Chairman

Lewis Girdwood

Chief Financial Officer

Executive Director – Aviation

Nick Dilworth

Chief Operating Officer

Executive Director –

Renewables

David Blackwood

Deputy Chairman and Senior

Independent Director

John Coombs

Non-Executive Director

Ginny Pulbrook

Non-Executive Director

Clive Condie

Non-Executive Director

Appointment

to the Board

1 June 2019 1 April 2019 1 September 2018 1 March 2019 1 July 2014 1 October 2018 1 July 2020

Background/

experience

David joined the Board on

1 June 2019 and was appointed

Non-Executive Chairman on

23 July following the 2019

AGM. He became Executive

Chairman on an interim basis

with effect from 9 February

2021 and this was confirmed as

a permanent appointment with

effect from 3 November 2021.

David is an experienced

independent director, corporate

financier and turnaround

specialist. He is Non-Executive

Chairman of Speedy Hire Plc,

Amber River Group (formerly

Socium Group Holdings

Limited) and the Scottish Edge

Fund. David was previously

the senior partner of Deloitte

LLP for Scotland and Northern

Ireland, and a UK Executive

Board member of the firm

until 2003. Since then, David

has held the positions of

Co-Chairman of Martin Currie

(Holdings) Limited, Chairman of

Mouchel Group plc and Crest

Nicholson plc and a Non-

Executive Director of City Inn

Limited, in each case standing

down after completing the

successful restructuring of

these businesses.

David was also Non-Executive

Chairman of Aberdeen New

Dawn Investment Trust plc,

Liberty Living Group plc and

Liberty Living Finance plc,

Senior Independent Director

of Renold plc, STV Group plc

and Superglass Holdings plc

and a Non-Executive Director

of Mithras Investment Trust plc

and a Governor of The Glasgow

School of Art.

Lewis was appointed Chief

Financial Officer on 1 April 2019

and became Executive Director

– Aviation with effect from

3 November 2021.

Lewis previously served as

Chief Financial Officer to IAG

Cargo Limited, which provides

global cargo services to

British Airways, Iberia, Aer

Lingus and other IAG airlines.

Prior to that, he was Head of

Financial Planning and Analysis

at easyJet, responsible for

financial business partnering

across the airline.

Lewis has also held senior

finance roles at Premier Foods

PLC, British Bakeries Ltd

and Racal Electronics Group

International.

He is also a member of

the Audit Committee of

charity Tommy’s.

Nick was appointed Chief

Operating Officer in September

2018, having worked as

Group Commercial Director

since October 2017, and

became Executive Director –

Renewables with effect from

3 November 2021.

Nick previously worked for

BES Utilities, where he was

Managing Director. He has also

previously occupied a number

of leadership roles at Practice

Plan Limited and Medenta

Finance and has a strong

commercial background.

Nick qualified as a Chartered

Accountant with BDO LLP

before joining Grant Thornton

as a corporate financier.

He is currently a Non-Executive

Director of AirPortr Ltd.

David has significant

experience at senior levels

of finance, audit and risk. He

is currently Non-Executive

Chairman of Smith’s News plc

and an Independent Non-

Executive Director and Senior

Independent Director of The

Go-Ahead Group PLC and

has previously been Audit

Committee Chairman and

Senior Independent Director

of Scapa plc and Dignity plc.

Previously, David was the Chief

Financial Officer of Synthomer

plc, where he served for seven

years until 2015, prior to which

he held a number of senior

roles with ICI plc.

David has previously served

as a member of the Cabinet

Office Audit and Risk

Committee and the Board

for Actuarial Standards. He

is a member of the Institute

of Chartered Accountants

in England and Wales and a

Fellow of the Association of

Corporate Treasurers.

David was appointed as Senior

Independent Director with

effect from 1 November 2020

and Deputy Chairman with

effect from 3 November 2021.

In 2018, John stepped down,

after 16 years, from the position

of Managing Director of

Unilever Ventures Ltd, during

which time he chaired the

Investment Committee and

made investments in 50 early-

stage businesses in the UK,

US and Europe.

He has sat on the Boards of

20 companies, including five

as Chairman.

Currently, John also serves

as Non-Executive Chairman of

The Co-op’s Federal Retail and

Trading Services Limited, which

coordinates purchasing for

Cooperative retailers in the UK.

John will step down from

the Board of Esken at the

upcoming AGM.

With a background in

investment banking and

financial public relations, Ginny

brings more than 30 years’

experience as a board-level

adviser to quoted companies

in the infrastructure, industrial

and support services sectors.

Her specific areas of expertise

include high-profile capital

markets transactions, ESG

and change management.

Ginny is currently a partner at

Capital Market Communications

(Camarco) and is Vice Chair

and Chair of the Nomination

Committee of Carers UK,

the leading charity for

unpaid carers.

Previous positions include

Co-Founder and Director of

Citigate Dewe Rogerson, and

Chair, Patrons’ Programme and

Development Council Member

of the Natural History Museum.

Ginny is the designated Non-

Executive Director for People

Engagement within Esken and

the Chair of its ESG Committee.

Clive was Chairman of London

Luton Airport until June 2018, a

position he held for almost five

years. Besides being Chairman,

he was Interim CEO during

2014. Clive was also a director

of Exolum Pipeline System

Ltd (formerly CLH-PS Ltd),

the owner and operator of the

UK’s largest fuel pipeline and

storage facility until resigning

in March 2021.

Clive has 40 years’ experience

in the aviation industry, having

worked for Manchester Airport

and British Airways amongst

others. Clive has also served

on the Boards of a number

of airports, including London

Luton Airport some 20 years

ago, Lima in Peru and Curacao

in the Dutch Antilles.

Clive is a fellow of the Royal

Aeronautical Society.

Committee

membership

Chairman of the Nomination

Committee.

Member of the Environmental,

Social and Governance (ESG)

Committee and Executive

Sponsor for ESG.

Chairman of the Audit

Committee and member of the

Remuneration and Nomination

Committees.

Chairman of the Remuneration

Committee and member of

the Audit and Nomination

Committees.

Member of the Remuneration,

Nomination and Audit

Committees and Chair of

the ESG Committee.

Member of the Remuneration,

Nomination and Audit

Committees. Chairman-

designate of the Remuneration

Committee.

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

David Shearer

Executive Chairman

Lewis Girdwood

Chief Financial Officer

Executive Director – Aviation

Nick Dilworth

Chief Operating Officer

Executive Director –

Renewables

David Blackwood

Deputy Chairman and Senior

Independent Director

John Coombs

Non-Executive Director

Ginny Pulbrook

Non-Executive Director

Clive Condie

Non-Executive Director

Appointment

to the Board

1 June 2019 1 April 2019 1 September 2018 1 March 2019 1 July 2014 1 October 2018 1 July 2020

Background/

experience

David joined the Board on

1 June 2019 and was appointed

Non-Executive Chairman on

23 July following the 2019

AGM. He became Executive

Chairman on an interim basis

with effect from 9 February

2021 and this was confirmed as

a permanent appointment with

effect from 3 November 2021.

David is an experienced

independent director, corporate

financier and turnaround

specialist. He is Non-Executive

Chairman of Speedy Hire Plc,

Amber River Group (formerly

Socium Group Holdings

Limited) and the Scottish Edge

Fund. David was previously

the senior partner of Deloitte

LLP for Scotland and Northern

Ireland, and a UK Executive

Board member of the firm

until 2003. Since then, David

has held the positions of

Co-Chairman of Martin Currie

(Holdings) Limited, Chairman of

Mouchel Group plc and Crest

Nicholson plc and a Non-

Executive Director of City Inn

Limited, in each case standing

down after completing the

successful restructuring of

these businesses.

David was also Non-Executive

Chairman of Aberdeen New

Dawn Investment Trust plc,

Liberty Living Group plc and

Liberty Living Finance plc,

Senior Independent Director

of Renold plc, STV Group plc

and Superglass Holdings plc

and a Non-Executive Director

of Mithras Investment Trust plc

and a Governor of The Glasgow

School of Art.

Lewis was appointed Chief

Financial Officer on 1 April 2019

and became Executive Director

– Aviation with effect from

3 November 2021.

Lewis previously served as

Chief Financial Officer to IAG

Cargo Limited, which provides

global cargo services to

British Airways, Iberia, Aer

Lingus and other IAG airlines.

Prior to that, he was Head of

Financial Planning and Analysis

at easyJet, responsible for

financial business partnering

across the airline.

Lewis has also held senior

finance roles at Premier Foods

PLC, British Bakeries Ltd

and Racal Electronics Group

International.

He is also a member of

the Audit Committee of

charity Tommy’s.

Nick was appointed Chief

Operating Officer in September

2018, having worked as

Group Commercial Director

since October 2017, and

became Executive Director –

Renewables with effect from

3 November 2021.

Nick previously worked for

BES Utilities, where he was

Managing Director. He has also

previously occupied a number

of leadership roles at Practice

Plan Limited and Medenta

Finance and has a strong

commercial background.

Nick qualified as a Chartered

Accountant with BDO LLP

before joining Grant Thornton

as a corporate financier.

He is currently a Non-Executive

Director of AirPortr Ltd.

David has significant

experience at senior levels

of finance, audit and risk. He

is currently Non-Executive

Chairman of Smith’s News plc

and an Independent Non-

Executive Director and Senior

Independent Director of The

Go-Ahead Group PLC and

has previously been Audit

Committee Chairman and

Senior Independent Director

of Scapa plc and Dignity plc.

Previously, David was the Chief

Financial Officer of Synthomer

plc, where he served for seven

years until 2015, prior to which

he held a number of senior

roles with ICI plc.

David has previously served

as a member of the Cabinet

Office Audit and Risk

Committee and the Board

for Actuarial Standards. He

is a member of the Institute

of Chartered Accountants

in England and Wales and a

Fellow of the Association of

Corporate Treasurers.

David was appointed as Senior

Independent Director with

effect from 1 November 2020

and Deputy Chairman with

effect from 3 November 2021.

In 2018, John stepped down,

after 16 years, from the position

of Managing Director of

Unilever Ventures Ltd, during

which time he chaired the

Investment Committee and

made investments in 50 early-

stage businesses in the UK,

US and Europe.

He has sat on the Boards of

20 companies, including five

as Chairman.

Currently, John also serves

as Non-Executive Chairman of

The Co-op’s Federal Retail and

Trading Services Limited, which

coordinates purchasing for

Cooperative retailers in the UK.

John will step down from

the Board of Esken at the

upcoming AGM.

With a background in

investment banking and

financial public relations, Ginny

brings more than 30 years’

experience as a board-level

adviser to quoted companies

in the infrastructure, industrial

and support services sectors.

Her specific areas of expertise

include high-profile capital

markets transactions, ESG

and change management.

Ginny is currently a partner at

Capital Market Communications

(Camarco) and is Vice Chair

and Chair of the Nomination

Committee of Carers UK,

the leading charity for

unpaid carers.

Previous positions include

Co-Founder and Director of

Citigate Dewe Rogerson, and

Chair, Patrons’ Programme and

Development Council Member

of the Natural History Museum.

Ginny is the designated Non-

Executive Director for People

Engagement within Esken and

the Chair of its ESG Committee.

Clive was Chairman of London

Luton Airport until June 2018, a

position he held for almost five

years. Besides being Chairman,

he was Interim CEO during

2014. Clive was also a director

of Exolum Pipeline System

Ltd (formerly CLH-PS Ltd),

the owner and operator of the

UK’s largest fuel pipeline and

storage facility until resigning

in March 2021.

Clive has 40 years’ experience

in the aviation industry, having

worked for Manchester Airport

and British Airways amongst

others. Clive has also served

on the Boards of a number

of airports, including London

Luton Airport some 20 years

ago, Lima in Peru and Curacao

in the Dutch Antilles.

Clive is a fellow of the Royal

Aeronautical Society.

Committee

membership

Chairman of the Nomination

Committee.

Member of the Environmental,

Social and Governance (ESG)

Committee and Executive

Sponsor for ESG.

Chairman of the Audit

Committee and member of the

Remuneration and Nomination

Committees.

Chairman of the Remuneration

Committee and member of

the Audit and Nomination

Committees.

Member of the Remuneration,

Nomination and Audit

Committees and Chair of

the ESG Committee.

Member of the Remuneration,

Nomination and Audit

Committees. Chairman-

designate of the Remuneration

Committee.

Warwick Brady resigned as Chief Executive on 9 February 2021 and ceased to be a Director of Esken Limited on 30 April 2021.

Esken Limited Annual Report and Accounts 2022

Seven members Gender split

●

Non-Executive Chairman (1)

●

Executive Directors (2)

●

Non-Executive Directors (4)

●

Male (6)

●

Female (1)

Dear Shareholder

I am pleased to present the Corporate Governance Report

for the year ended 28 February 2022 on behalf of the

Board. In a year that has presented many challenges to our

businesses, we have relied on our governance framework

to provide us with the foundations upon which to increase

our internal reporting and respond to the fast-evolving

pandemic landscape.

We continue to operate in accordance with the revised 2018

UK Corporate Governance Code (the Code) and set out

below further information on how we have applied the Code

to our business.

The UK Corporate Governance Code

This report has been prepared in accordance with the Code

and takes into account other UK regulations that address

governance matters. The Board considers the Company

was in full compliance with the relevant provisions of the

Code throughout the financial year ended 28 February

2022, except where highlighted in this report. I note that

I have acted as an Executive Chairman of Esken since we

announced Warwick Brady’s departure as CEO in February

2021 and more information with regard to my proposed

tenure in that role is given on page 83 of this report.

The Code can be downloaded from the website of the

Financial Reporting Council (www.frc.org.uk).

The Board and Committee evaluations this year have been

undertaken internally and have been thorough. We will give

consideration to an external evaluation of the Board in due

course as our practices develop. Further information in this

regard can be found on page 89 of this report.

Stakeholder engagement

In a year where our ways of working have continued to be

impacted by external factors, the importance of regular

engagement with our stakeholders, and in particular our

employees, cannot be underestimated. We recognise

the importance of incorporating stakeholder views in our

strategic planning and decision-making. Further information

on our stakeholders and our approach to shareholder

engagement can be found on pages 60 to 68.

Corporate governance

The Board’s primary

responsibility is to

ensure that the Group

provides long term and

sustainable growth for

its shareholders.

David Shearer,

Executive Chairman

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

Environmental, social and governance

We recognise the increasing importance of environmental,

social and governance (ESG) as a key area of focus for our

stakeholders, and as a business we are very mindful of the

impact on the environment and the communities in which

we operate. We have set out on pages 36 to 58 how we are

progressing against our strategy in this area.

Opportunities and risks

The consideration of opportunities and risks remains a key

area of focus for the Board. The Board reviews the Group’s

risk appetite annually and regularly considers the principal

and emerging risks relevant to our business, together with

mitigations and controls.

Our Strategic Report sets out in more detail how the Board

assesses and manages risk and we list the Group’s principal

risks and how we seek to mitigate those risks on pages 69

to 76.

Leadership and Board effectiveness

To enable us to deliver sustainable and long-term value to

our shareholders, the Board must function effectively in

supporting, challenging and guiding management to deliver

the Group’s strategy.

The effectiveness of the Board and the effective leadership

of the Executive team has most certainly been under

pressure as we have navigated the continued effects of

the COVID-19 pandemic. I have been impressed with the

determination and resilience that my colleagues have

continued to demonstrate and their significant efforts to

continuously adapt our business in response, whilst also

striving to maintain ‘business as usual’ where possible.

The Non-Executive members of the Board have continued to

commit their time and broad business expertise to support

the Executive through this period. This is a true measure of

Board effectiveness.

Further information in relation to the key areas of focus for

the Board this year and expected areas of focus for next

year are outlined on page 87 of this report.

Board appointments

In 2020, the Board was in the process of recruiting two

additional Non-Executive Directors. However, this process

paused when COVID-19 hit but Clive Condie was appointed

to the Board on 1 July 2020 as Non-Executive Director.

We are not currently intending to resume the search for

that second Non-Executive Director, even though John

Coombs will step down from the Board later this year ahead

of our AGM. We feel that a Board of six directors, of whom

three are independent, provides the right mix of skills and

experience and is sufficient for the needs of the business at

the present time.

Warwick Brady resigned in February 2021 and stepped down

as Chief Executive and as a member of the Board on 30 April

2021. I assumed the role of Executive Chairman, initially on

an interim basis, to support Esken as it continued to navigate

the impact of the pandemic. Whilst in principle this goes

against the provision 9 of the Code, this decision was taken

in exceptional circumstances and we consulted with major

shareholders regarding our decision on announcement of the

Chief Executive’s resignation.

In November 2021, we announced that the Board had

carefully considered the leadership requirements of the

business, given the simplified structure of the Group with

two core operating divisions, and had further consulted with

a number of its major shareholders, and that it was decided

to retain the existing structure with some amendment

to responsibilities. I remain as Executive Chairman with

responsibility for stakeholder management, execution of

strategy and Executive leadership. Lewis Girdwood, CFO,

took on the additional role as Executive Director – Aviation

with main Board responsibility for that division. Nick

Dilworth, COO, took on the additional role of Executive

Director – Renewable with main Board responsibility for that

business, in addition to his Executive responsibility for ESG.

The changes have the support of major shareholders and

the Board believe it is in the best interests of investors in

terms of a streamlined structure and minimising cost to the

business. In order to maintain strong corporate governance,

David Blackwood became Deputy Chairman and Senior

Independent Director so that the Board and shareholders

have a point of reference independent from the Chairman.

This leadership structure will remain in place for the

foreseeable future. The Board will review this structure on

an annual basis and seek input from its major shareholders

as the business evolves.

As is set out elsewhere in this report, John Coombs,

who has served as a Non-Executive Director since 2014,

will step down from the Board with effect from the AGM.

We will not replace John immediately as we feel a Board

with six members is sufficient for our purposes for now, in

view of the reduction in scale of the Group’s operations and

the fact that we are still in the recovery phase following

the pandemic. We will keep the position under review and

ensure that we take steps to provide adequately for Board

succession at the point when this becomes an issue. While

recognising that the Board does not meet the expected

target for diversity and that this will now not change in the

short term, at present it is right not to add additional cost

into the business. However, it is our longer-term intention to

recruit a further Non-Executive Director in due course. We

have asked Clive Condie to assume the role of chairing the

Remuneration Committee as a successor to John. I would

like to offer my thanks, on behalf of the Board, to John for

his service to the Group over the last several years and

we wish him well with his future endeavours.

The Board has worked especially hard during the year

to support our business operations and colleagues in

navigating the continued sustained level of uncertainty

that has resulted from the pandemic and I would like

to extend my thanks to my Board colleagues for their

ongoing commitment.

AGM

We will notify shareholders about our AGM in due course,

with our intention being that it will be held in person for

the first time since 2019 on 13 July 2022. For further details

please refer to the AGM Notice that will be sent out to

shareholders under separate cover.

David Shearer

Executive Chairman

24 May 2022

Esken Limited Annual Report and Accounts 2022

Corporate governance continued

Governance framework

The Board is structured to allow for focus on business strategy, as well as monitoring performance of the Group and regular

review of controls and risks across the business.

The key features of the Group’s governance structure are shown in the schematic below:

Shareholders

Executive Chairman

Responsible for leadership of the Board and ensuring that it operates effectively

Board of Directors

Responsible for effective leadership, setting the business strategy and overseeing

delivery of the strategy in order to obtain long-term growth for shareholders

Board Committees

Support the Board in its work with specific areas of review and oversight

Group management team

Implementation of the Group policies

Esken Management Board

Policies and procedures

Divisional leaders

Divisional teams

Functional leaders

Functional teams

Executive Chairman

The Executive Chairman has responsibility for setting the strategy which is agreed

and overseen by the Board and for managing the business

Nomination Committee

The Nomination Committee

takes the lead role in

evaluating the Board of

Directors by examining the

skills and characteristics

required for performance.

This includes making

recommendations to the

Board regarding structure,

size and composition,

succession planning

and appointments.

Remuneration Committee

The Remuneration

Committee supports the

Board in determining and

agreeing remuneration

policy to ensure

appropriate incentives are

available to encourage

enhanced performance

and fair and responsible

rewards for individual

contributions towards

the Group’s success.

Audit Committee

The Audit Committee

oversees the review and

monitoring of the integrity

of financial information

provided to shareholders,

the Group’s internal and

external audit processes,

and ensuring compliance

with laws, regulations and

ethical codes of practice.

ESG Committee

This newly-constituted

committee oversees

the development and

recommendation of

the Group’s strategy on

environmental, social

and governance issues.

This includes setting

our ESG KPIs, which

are set out elsewhere

in this document.

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

Responsibilities of the Board

The Board is collectively responsible for the long-term

success of the Company, including the effective oversight

of the Group and its businesses. The Board’s primary

responsibility is to set the Company’s strategic objectives

and ensure that these are monitored and resources are

available (both financial and human resources) to meet

them. As part of the Board’s oversight of operations, it also

ensures maintenance of a sound system of internal control

and risk management.

In accordance with the Code, the Board has a formal

schedule of matters that are reserved for its consideration,

including significant investments of capital expenditure,

dividend policy and changes to Group capital structure.

The Board’s main areas of focus during the year are set out

on page 86.

Board composition and independence

The Board continues to have an effective balance of

Executive and Non-Executive Directors. As at 28 February

2022, the Board consisted of seven individuals: an Executive

Chairman, four independent Non-Executive Directors

and two Executive Directors. Warwick Brady resigned in

February 2021 and stepped down as Chief Executive and

as a member of the Board on 30 April 2021. John Coombs

is stepping down from the Board at the upcoming AGM and

will not be replaced in the immediate future.

Following the resignation of Warwick Brady as CEO,

announced on 9 February 2021, David Shearer assumed the

role of Executive Chairman with immediate effect to provide

stability and continuity to the Board and the business. His

position as Executive Chairman will now continue for the

foreseeable future and be subject to an annual review by

the Board.

The Board believes that it has an appropriate composition

and blend of backgrounds, skills and experience to fulfil

its duties effectively and, importantly, to comply with

the Code. However, the Board continues to keep its

membership, and that of its Committees, under review, to

ensure that an acceptable balance is maintained, and that

the collective skills and experience of its members continue

to be refreshed.

The Board is satisfied that all Directors have sufficient time

to devote to their roles and that undue reliance is not placed

on any individual.

Board Committees

As set out in the diagram opposite, the Board has

established Committees to carry out certain aspects of its

duties. Each is chaired by a Non-Executive member of the

Board and has written terms of reference which are available

on the Esken website www.esken.co.uk

The Chair of each Committee reports regularly to the Board

as to how that Committee has discharged its responsibilities.

Esken Limited Annual Report and Accounts 2022

The Board held seven scheduled meetings during the course of the year. In response to the pandemic and in light of

ongoing financing requirements, the Board also held regular meetings during the first half of 2021, primarily to allow the

Board to consider the impact of the pandemic on its business operations and financial performance, and agree necessary

actions in response, particularly with regard to the withdrawal of financial support from Stobart Air, the fundraising

transactions announced in mid 2021 and the investment in London Southend Airport (LSA). The Audit, Nomination and

Remuneration Committees held five, four and seven scheduled meetings respectively. The ESG Committee was formally

established following the end of the year and although its members held meetings during the years as they continued to be

responsible for the Group’s ESG strategy and its implementation through the wider ESG governance structure. The Board and

Committees also meet as required on an ad hoc basis to deal with urgent business, including the consideration and approval

of transactions that are reserved for the Board.

The table above shows the Directors’ attendance at the scheduled Board and Committee meetings during the year ended

28 February 2022. Each meeting was attended by every Board member eligible to attend, other than where noted.

The agenda and relevant briefing papers are distributed by the Company Secretary on a timely basis, usually one week

in advance of each Board and Committee meeting, via board portal software. This allows Directors secure access to the

Board and Committee papers they need before, during and after meetings and facilitates better Board communications for

increased engagement and effective decision-making while enhancing corporate governance.

Board meetings are an opportunity for the Non-Executive Directors to challenge the performance of the various divisions

against strategic objectives and key performance indicators (KPIs), to review transactions which have taken place since the

preceding meeting and to receive reports from the Board’s Committees.

All meetings of the Board and its Committees have minutes recorded by the Company Secretary. Board minutes are reviewed

and approved by the Chairman in the first instance, circulated to the Board for further comments and tabled at the next

Board meeting for approval. Committee minutes are also reviewed by the Chairman of that meeting and then tabled for

approval at the next meeting. Any concerns raised by Directors are clearly recorded in the minutes of each meeting.

As the ESG Committee was only constituted formally after the end of the last financial year, no formal meetings of the

Committee were held, although its members met regularly to continue the work which the committee now has formally

assigned to it and the effect of their work can be seen elsewhere in this report, most notably in the Sustainability report

on pages 36 to 58. The ESG Committee is scheduled to meet at least three times a year. The terms of reference for the

Committee can now be found on our website at www.esken.com. The ESG Committee shall have overall responsibility:

(a) to recommend the Group’s ESG strategy for adoption by the Board and ensure that it remains fit for purpose

and consistent with the Company’s purpose, culture and values whilst supporting the Company’s long-term

sustainable success;

(b) to ensure that short and long-term objectives for the Company’s ESG activities are in place;

Climate-Related Financial Disclosures (TCFD) and to approve any relevant disclosures mandated thereby under the

Listing Rules;

(d) to ensure that ESG risks (including those mandated by the TCFD) are identified, assessed and managed in line with the

Group’s relevant risk mitigation framework;

(e) to recommend ESG KPIs for adoption by the Group, including for use by the Group in incentive schemes and annual

bonus schemes;

(f) to monitor and review the overall implementation of the Company’s ESG strategy;

(g) to monitor, review and consider all recommendations in response to ESG issues raised and review the execution and

implementation of plans previously approved by the Committee including recommending corrective actions, where applicable;

(h) to monitor, review and consider stakeholder engagement in ESG activities and review key external disclosures.

Corporate governance continued

Audit Committee

4 meetings

Nomination Committee

2 meetings

Remuneration Committee

6 meetings

Scheduled Board

7 meetings

7/7

2/2

–

1/7

–

7/7

–

7/7

–

7/7

2/2

4/4

6/6

6/7

2/2

4/4

6/6

7/7

2/2

4/4

6/6

7/7

2/2

4/4

6/6

David

Shearer

Warwick

Brady

Lewis

Girdwood

Nick

Dilworth

John

Coombs

Ginny

Pulbrook

Clive

Condie

David

Blackwood

1 Warwick Brady ceased to be a Director on 30 April 2021.

Board attendance

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

Individual Directors’ key responsibilities

The key responsibilities of individual Directors are set out below.

Title Responsibility

Executive Chairman and

Deputy Chairman

The positions of Chairman and Chief Executive have been held by the same individual in the

position of Executive Chairman. In discharging his role as Chairman of the Board, the Executive

Chairman is responsible for leading the Board, ensuring its effectiveness and looking after the

interests of shareholders as a whole. The Deputy Chairman deputises for the Executive Chairman

where necessary, particularly with regard to matters affecting the Executive Chairman personally

and to provide a point of contact for shareholders independent from the Chairman. At Esken, the

role of Deputy Chairman and Senior Independent Director are combined.

Executive Directors

The Group does not have a Chief Executive. The Executive Chairman has responsibility for

stakeholder management, execution of strategy and executive leadership. The other Executive

Directors are responsible for the day-to-day management of the business alongside the

Executive Chairman. They are, together, accountable for developing the Group’s strategy and

budget for Board approval and for monitoring the financial, operational and service performance

of the Group. Lewis Girdwood, CFO, has the additional role as Executive Director – Aviation

with main Board responsibility for that division. Nick Dilworth, COO, has the additional role of

Executive Director – Renewables with main Board responsibility for that business, in addition to

his Executive responsibility for ESG.

The Esken Group Management Board (the Company’s senior leadership team) comprises the

Executive Chairman, the two other Executive Directors, Group People Director, Group General

Counsel and Company Secretary, and the Managing Directors of the Group’s key operating

divisions. Meetings of this group are held monthly to discuss general business activity and also

to discuss strategic issues in the business. Senior management from across the divisions will

also attend the Esken Group Management Board meetings by invitation.

Chief Operating Officer

The Chief Operating Officer is responsible for all operational matters affecting the Group. Nick

Dilworth, COO, has the additional role of Executive Director – Renewables with main Board

responsibility for that business, in addition to his Executive responsibility for ESG.

Chief Financial Officer

The Chief Financial Officer is responsible for ensuring sound financial management of the Group’s

business and providing strategic and financial guidance to ensure that the Company’s financial

commitments are met. Lewis Girdwood, CFO, has the additional role as Executive Director –

Aviation with main Board responsibility for that division.

Senior Independent

Director

At Esken, the role of Deputy Chairman and Senior Independent Director (SID) are combined. In

addition to the role as a Non-Executive Director, the role of the SID is to provide a sounding board

for the Executive Chairman and to serve as an intermediary for other Directors where necessary.

The SID makes himself available to shareholders if they have concerns which cannot be dealt with

by the Executive Chairman, and also makes himself available to other Directors if they have any

concerns regarding the Executive Chairman. The SID meets with Non-Executive members of the

Board at least once a year without the Executive Chairman being present, or the other Executive

Directors, in order to review the Executive Chairman’s performance in his role.

The Board considers this role and the role of Deputy Chairman to be of particular importance

gven that David Shearer carries out the role of Executive Chairman.

Non-Executive Directors

The Non-Executive Directors provide a breadth of experience and independent judgement

to Board discussions. Their role is to challenge and support the Executive team whilst being

ultimately responsible for overseeing corporate governance and protecting shareholder interests.

Each Director has specialist knowledge that helps provide the Board with valuable insights and,

in some situations, key contacts in related industries.

The appointment letters of the Non-Executive Directors are available for inspection at each AGM,

and at the Company’s registered office during normal business hours.

Company Secretary

The Company Secretary’s role is to act as adviser to the Board on matters relating to corporate

governance and, in conjunction with the Executive Chairman, to ensure good information flows

between the Board, its various Committees, the Non-Executive and Executive Directors and the

Esken Management Board.

The Non-Executive Directors have access to the Company Secretary’s advice and services in

addition to independent, professional advice if required (at the Group’s expense).

Esken Limited Annual Report and Accounts 2022

Corporate governance continued

Activity in year

Governance

and risk

• Received regular updates on the impact of COVID-19 on business operations and determined

strategies to manage impact;

• Discussed outcomes/themes from the internal Board effectiveness review;

• Received training and updates on relevant new laws and regulations, corporate governance,

Directors’ responsibilities, and whistleblowing;

• Considered the arrangements in place for the position of Executive Chairman and Deputy

Chairman and the enhanced role of the CFO and COO; and

• Approved the formation of the ESG Committee and set its terms of reference.

Strategy

• Board Strategy Day held to discuss and review the implementation of strategy;

• Monitored performance against strategic objectives;

• Reviewed and adapted business priorities as the COVID-19 pandemic evolved;

• Approved the prospective sale of both Stobart Air and Carlisle Lake District Airport and the

subsequent withdrawal of financial support from Stobart Air;

• Oversaw and monitored plans to achieve the investment in LSA by Carlyle Global

Infrastructure Fund; and

• Approved the arrangements for refinancing the Group by way of the equity fundraising and

banking facilities.

Leadership and

a responsible

business

• Agreed and implemented a new Executive leadership structure for the Group;

• Kept under review the level and impact of health and safety incidents and near-misses and

restructured the Group’s management of health and safety;

• Monitored level and content of communication to employees across the Group, focusing in

particular on wellbeing;

• Adapted the Group’s COVID-19 management policies and practices; and

• Implemented a revised structure for personal data management and GDPR responsiveness.

Financial

performance

and stewardship

• Approved the annual operating and capital expenditure budgets;

• Reviewed monthly business performance reports against budget and forecast;

• Reviewed and approved the half-year and full-year results and related announcements;

• Implemented robust cash controls to manage liquidity;

• Reviewed and negotiated revised credit facility;

• Implemented capital raise resulting in gross proceeds of £55m; and

• Implemented a £125m investment by way of convertible loan in to LSA.

Shareholder

engagement

• Undertook a major roadshow to inform and consult with key investors on the Group’s

strategic financing initiatives during the year;

• Keeping major shareholders appraised of our response to the COVID-19 pandemic;

• Reviewed feedback from roadshows and presentations to shareholders;

• Approved Annual Report and Accounts and information to shareholders for the AGM; and

• Consulted shareholders over changes to the Executive leadership structure of the Group.

COVID-19

• Sought and received support under the UK Government furlough scheme;

• Kept under review the Company’s going concern and viability position;

• Determined that no dividends would be payable during the year;

• Held additional Board meetings to consider the impact of COVID-19 on the business

and agreed contingency plans; and

• Agreed that there would be no pay awards or bonuses payable to Executive Directors.

Experience of the Board

The members of the Board maintain the appropriate balance

of status, experience, independence and knowledge of

the Company to enable them to discharge their respective

duties and responsibilities and to ensure that the

requirements of the business can be met. This will continue

to be the case after John Coombs steps down at the

upcoming AGM.

The experience which each member of the Board brings to

their role is outlined in the Board biographies on pages 78

and 79.

Directors’ terms of appointment

Further details of the Directors’ service contracts and letters

of appointment are set out in the Directors’ Remuneration

Report on page 105.

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

Expected Board focus for next year

At the date of writing this Annual Report, the COVID-19 crisis

continues to have an unprecedented impact on our business.

The Board has spent significant time during the financial

year focusing on the impact of the COVID-19 situation upon

the business and it will continue to do so whilst planning for

operations and business beyond COVID-19.

It is anticipated that the following areas will also receive focus

by the Board during the year ending 28 February 2023:

• Review strategy for the Group as a more

focused business;

• Senior leadership roles, capabilities and requirements;

• ESG;

• Any new major projects arising in the year;

• Succession planning.

Information, induction and professional development

The Executive Chairman is responsible for ensuring all

Directors receive comprehensive information on a regular

basis to enable them to perform their duties properly.

Updates, where necessary, are provided at Board meetings

and governance updates are provided to keep all Directors

up to date with regulatory requirements.

New Directors receive an appropriate induction on joining

the Board, typically including meeting members of the

senior management team and visits to operational sites.

All Directors have access to the advice and services of the

Company Secretary, who is responsible to the Board for

ensuring that Board procedures are complied with.

Non-Executive Director site visits

Due to the ongoing COVID-19 pandemic, site visits by

Board members have been limited during the year ended

28 February 2022. It is intended that these resume during

the new financial year.

ESG Policy

Our approach to issues regarding sustainability is

continuously evolving and we anticipate further focus on this

in future Annual Reports. More information about the Group’s

approach to ESG matters can be found on pages 36 to 58.

Whistleblowing Policy

The Group’s Whistleblowing Policy sets out procedures

to enable all employees to report any concerns about

wrongdoing or dangers in the workplace such as theft,

fraud or malpractice. The Group has an independently-

run, confidential hotline where any such concerns can be

reported. The Directors and Audit Committee consider that all

whistleblowing allegations have been appropriately dealt with.

The Whistleblowing Policy can be found on the Group’s

website and via Sharepoint.

Internal control and risk management

The Directors’ responsibilities in connection with the

financial statements are set out in the Directors’ Report

on page 110. The Board, through the Audit Committee, is

responsible for the Group’s system of internal control and for

reviewing its effectiveness.

The Board considers risk assessment, implementation of

mitigating actions and internal control to be fundamental

to delivering the Group’s strategy. Internal control gives

the Board reasonable but not absolute assurance.

The Board has an ongoing process for identifying, evaluating

and managing the principal risks faced by the Group and

maintains a risk register.

The system of internal control is based upon:

• The Board’s overall responsibility;

• The Group’s organisational structure, with established

lines of accountability, as well as clearly defined levels

of authority;

• Regular review by the Board and the Audit Committee;

• Support by Company policies in other areas, such

as finance; and

• Management rather than elimination of the risk of failure

to achieve strategic objectives. Systems of internal control

can only provide reasonable and not absolute assurance

against material misstatement or loss.

The Audit Committee and the Board have reviewed the

effectiveness of internal control (including financial,

operational and compliance controls together with risk

management in accordance with the Code) over the period

of this report, and to the date of its publication. Systems

compliance and confirmation of corrective actions are the

subject of a detailed report which is submitted to the Board

at each meeting.

The Audit Committee reviews the independence of the

auditor at the interim stage and at year end. The Audit

Committee has a policy of reviewing the status of the

auditing firm and its lead engagement partner after five

years from initial appointment, and each year thereafter.

The Group has a business systems internal audit function

which reviews performance against the agreed policies and

procedures. The Board agreed an internal audit programme

for the year ended 28 February 2022 to cover financial

controls and procedures.

Shareholder relations

The Company is committed to maintaining good

communications with its shareholders and engaging regularly.

Senior Executives, including the Executive Chairman and CFO,

have had ongoing dialogue during the year with individual

institutional shareholders in order to develop an understanding

of their views. These views are periodically fed back to the

Board to ensure that all of the Directors, in particular the

Non-Executive Directors, develop an understanding of the

views of major shareholders about the Company.

During the year, shareholders are kept informed of

the progress of the Group through regular corporate

communications: the annual results announcement; the

interim statement; trading updates and press releases

regarding other important developments as well as the

distribution of regulated information.

Twice a year, general presentations are given to analysts

and investors covering the annual and half-year results.

In addition, members of the Board meet with institutional

investors and analysts on a periodic basis.

The Company Secretary generally deals with enquiries

from individual shareholders. The website www.esken.com

contains published information and press releases.

Further information on how Esken engages with shareholders

and other stakeholders can be found on pages 60 to 68.

Esken Limited Annual Report and Accounts 2022

Nomination Committee Report

I am pleased to present

the Nomination

Committee Report

for the year ended

28 February 2022 and

to provide shareholders

with an overview of the

work carried out during

the period under review.

David Shearer,

Chairman of the Nomination Committee

Dear Shareholder

I am pleased to present the Nomination Committee Report

for the year ended 28 February 2022 and to provide

shareholders with an overview of the work carried out

during the period under review.

Role of the Committee

The Nomination Committee is required to meet at least

once a year, or more often if so required, to carry out its key

functions and duties. These include:

• To regularly review the structure, size and composition

(including the skills, knowledge, experience and diversity)

of the Board and make recommendations to the Board

with regard to any changes;

• To ensure plans are in place for orderly succession to

Board and senior management positions, and oversee the

development of a diverse pipeline for succession, taking

into account the challenges and opportunities facing the

Company, and the skills and expertise needed on the

Board in the future;

• To be responsible for identifying and nominating for the

approval of the Board, candidates to fill Board vacancies

as and when they arise;

• To review the results of the Board performance evaluation

process that relate to the composition of the Board and

succession planning; and

• To recommend the re-election of Directors under the

annual re-election provisions of the Code.

Attendance

The Nomination Committee met twice during the year.

Details of individual attendance by its members is shown

in the chart on page 84.

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

Board appointments

Due to the ongoing pandemic and the impact on the Group,

the Committee continued to pause the recruitment of a

second Non-Executive Director following the appointment

of Clive Condie in July 2020, on which it had reported

previously. Although John Coombs will leave the Board in

July 2022, the Nominations Committee and the Board as

a whole believe that a Board comprising six Directors is

appropriate given the reduced size of or the Group, and will

not be looking to recruit a further Director at this stage.The

Committee recommended the appointment of Clive Condie

to take over the role as Chairman of the Remuneration

Committee with effect from the conclusion of the AGM,

and also approved Ginny Pulbrook to take on the role of

Chair of the ESG Committee with effect from 1 March 2022

along with her role as the Designated People Director. David

Blackwood also became Deputy Chairman during the year.

During the year, the Committee reviewed and approved the

decision to retain David Shearer as Executive Chairman on

a permanent basis, and to augment the roles of CFO and

COO with responsibility, respectively, for the Aviation and

Renewables divisions as outlined elsewhere in this report.

The Committee also recommended the initial membership of

the new ESG Committee and for Ginny Pulbrook to act as its

Chair; these recommendations were approved by the Board.

Further information on how the views of employees and

other stakeholders are taken into account by the Board

in their decision-making can be found in our report on

stakeholder engagement, starting on page 60.

Board evaluation

An internal Board evaluation was undertaken during the

year. A questionnaire was circulated to all Board members

and used as an aide-memoire for the Company Secretary to

hold one-to-one discussions with each Director to consider

the performance of the Board as a whole. The results of

the evaluation were reviewed in March 2022. Separately,

the Senior Independent Director met with Board members

to discuss the Executive Chairman’s performance during

the year.

Discussions from the Board evaluation were focused on

risk management, Group strategy, financial monitoring and

performance as well as the overall performance of the Board

and each of its Committees. The review, together with

further discussions held during the year, highlighted that the

Board continues to operate effectively, particularly during

the challenges of the pandemic, and offers strong support

to management. Areas identified as opportunities to develop

the Board’s effectiveness further include:

• Clear communication from the Board on revised

strategic objectives;

• Enhanced Board reporting with enhanced external market

insights; and

• Establishing a clear statement of risk appetite.

Further steps are being taken based on the most recent

review, but the Company believes that the actions taken

during 2021 significantly improved the operation of the

Board and governance structures.

In addition to evaluation of the Board as a whole, separate

appraisals are held for individual Directors. The Executive

Chairman conducts annual appraisals with the other

Executive Directors and has regular one-to-one discussions

with them about their performance.

Diversity

All new appointments to the Board are made on merit, taking

into account the specific skills, knowledge and experience

of candidates and are made irrespective of personal

characteristics such as ethnicity, religion or gender. The

appointment of additional Non-Executive Directors will be

used as an opportunity to further increase the diversity of

the Board.

More widely, the Group continues the development of its

Equality, Diversity and Inclusion strategy which is reported

upon in detail on page 47 of this Annual Report. For the

year ended 28 February 2022, the gender split at Board

level was 13% women and 87% men. Women represented

30% of senior management and their direct reports across

the Group.

The Board recognises that the level of diversity at Board

level is below that which it would typically expect. However,

given the difficult position which the Group has been in

during the pandemic and the financial constraints which it

has faced, it is not considered appropriate at this time to

enlarge the Board for the sole purpose of addressing this

matter. As and when the Company recovers from the effects

of the pandemic this position will be rectified.

Esken Limited Annual Report and Accounts 2022

Succession planning

Succession planning has not been a principal area of

focus for the Committee during the year as Committee

members have instead focused their time and effort in

supporting the business in its response to the pandemic

and its ongoing financing requirements. Despite those

responsibilities, the Company did discuss and implement

its new structure for Executive leadership through the

appointment of David Shearer to the position of Executive

Chairman on a permanent basis, and the enhancement of

the responsibilities for the CFO and COO. In addition, there

have been considerable levels of change in the Operating

Boards for each of the Company’s divisions and so the need

for immediate successors for several key positions was

reviewed and changes implemented through a combination

of external hiring and internal promotion.

The Committee plans to review its approach to succession

planning during the new financial year, to ensure that

our approach to Board recruitment and composition

continues to allow for the development of a diverse

pipeline for succession, taking into account the challenges

and opportunities facing the Company, and the skills

and expertise needed on the Board to support the

Esken strategy.

The Committee has recommended the re-election of all

Directors at the AGM in 2022, save that John Coombs will

stand down at that AGM. The Committee recommended

that Clive Condie be appointed Chair of the Remuneration

Committee and that Ginny Pulbrook be made Chair of the

ESG Committee.

David Shearer

Chairman of the Nomination Committee

24 May 2022

Nomination Committee Report continued

Nomination Committee membership

– David Shearer, Executive Chairman

– John Coombs, Non-Executive Director

– Ginny Pulbrook, Non-Executive Director

– David Blackwood, Non-Executive Director

– Clive Condie, Non-Executive Director

The Chairman may also invite others to attend

meetings of the Committee as required, such

as the other Executive Directors and the Group

People Director.

Key activities during the year

– Consideration of Non-Executive and Executive

leadership roles in the Group.

– Creation of role of Deputy Chairman.

– Re-appointment of Senior Independent Director.

– Appointment of new Remuneration

Committee Chair.

– Appointment of Chair of ESG Committee.

– Board evaluation.

– Re-election of Directors.

– Approval of several key senior Executive

replacements in all of the Group’s divisions.

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

Audit Committee Report

On behalf of the Audit

Committee I am pleased

to present our Audit

Committee Report

for the year ended

28 February 2022.

David Blackwood,

Chairman of the Audit Committee

Dear Shareholder

Having conducted careful reviews, the Audit Committee

(Committee) concluded that the 2022 Annual Report

is fair, balanced and understandable and advised the

Board accordingly.

Other Directors, including the Executive Chairman, Chief

Operating Officer and Chief Financial Officer, the Group

Financial Controller and the Group’s internal and external

auditors attend meetings by invitation. As Chairman, I also

meet independently with the external auditor, internal

auditor and Chief Financial Officer. I have an open and

professional relationship with each of them and I am

confident in their capabilities and the level of assurance

that they provide.

Details of the membership of the Committee, the key

activities of the Committee during the year, the matters

related to the engagement of the external auditor and

an overview of our risk management and internal control

framework are set out in this report. Also included are

details of the significant accounting matters and judgements

considered by the Committee and how these have been

addressed during the year.

The Committee terms of reference are available

on the Group’s website at www.esken.com.

David Blackwood

Chairman of the Audit Committee

24 May 2022

Esken Limited Annual Report and Accounts 2022

Audit Committee Report continued

Audit Committee membership during the year

The members of the Committee and their meeting

attendance during the year are set out below. All members

of the Committee are independent Non-Executive

Directors. The Company Secretary acts as the Committee’s

secretary. David Blackwood, Committee Chairman, is a

qualified accountant and is considered by the Board and

the Nomination Committee to hold the requisite recent and

relevant financial experience for the purposes of the UK

Corporate Governance Code and competence in accounting

or audit for the purposes of DTR 7.1.

Committee member

Meeting

attendance

David Blackwood 4/4

Ginny Pulbrook 4/4

Clive Condie 4/4

John Coombs 4/4

Fair, balanced and understandable information

The Committee acknowledges that, as a whole, the Annual

Report needs to be fair, balanced and understandable in

order to provide the information necessary for shareholders

to assess the Group’s position and performance, business

model and strategy. The Committee advises the Board

on whether it believes that the Annual Report meets this

requirement. In order for the Committee to make this

assessment it considers reports from management that

monitor financial performance, received during the year

and at year end in support of the financial statements, and

also reports from the external auditor on the findings of its

annual audit.

Formal review processes are in place to ensure that the

Annual Report is factually accurate. Following a detailed

review, the Committee concluded that the Annual Report

is fair, balanced and understandable and advised the

Board accordingly.

The responsibility statement of the Directors in respect of

the Annual Report is on page 111.

Engagement of the external auditor

The external auditor is engaged to express an opinion on the

Group’s financial statements. The audit includes the review

and testing of the systems of internal financial control and

the data contained in the financial statements, to the extent

necessary for expressing an audit opinion on the truth and

fairness of the financial statements.

KPMG LLP (KPMG) has been the Group’s auditor since

September 2012, following the last audit tender conducted.

KPMG provides the Committee with relevant reports,

reviews and advice throughout the year, as set out in

their terms of engagement.

In accordance with UK regulations, the Company’s auditor

adheres to a lead partner rotation policy every five years.

The lead partner remains as Michael Froom and this

will be his second year. The Group is in the process of

tendering for the year ending 28 February 2023 as required

by the Financial Reporting Council ten-year mandatory

tenure requirement.

Audit Committee membership

– David Blackwood, Audit Committee Chairman

– Ginny Pulbrook, Non-Executive Director

– Clive Condie, Non-Executive Director

– John Coombs, Non-Executive Director

Key activities during the year

– Ensuring the Annual Report is fair, balanced and

understandable.

– Reviewing significant judgements and estimates

applied in the preparation of the interim review

and Annual Report.

– Review of the impact of COVID-19 on the

financial statements, especially in relation to the

going concern disclosures.

– Review the Viability Statement.

– Impairments and asset carrying values review.

– Review of the liquidation of Stobart Air.

– Funding package review for equity raise,

convertible debt and Revolving Credit Facility

(RCF).

– Confirmation of external auditor independence.

– Approval of the external audit plan and strategy

for the year ended 28 February 2022.

– Approve the internal audit plan for the year

ended 28 February 2022.

– Review the external audit findings for the year

ended 28 February 2021.

– Review of the findings from the external

review conducted by the auditor for the interim

period to 31 August 2021.

– Review the findings from internal audits

conducted during the year.

– Committee terms of reference review.

– Consider and review the activity and

effectiveness of the Whistleblowing Policy.

The Committee terms of reference are available on

the Group’s website at www.esken.com

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

During the year, the performance of the auditor and

effectiveness of the audit process was formally assessed

by the Committee, in conjunction with the management

team. In making this assessment the Committee focused

on the robustness of the audit, the quality of delivery

of audit services and the quality of the auditor’s staff.

The Committee is satisfied that the audit continues to

be effective and provides an appropriate independent

challenge of the Group’s management.

The Committee has adopted a policy which sets out a

framework for determining whether it is appropriate to

engage the Group’s auditor for non-audit services and for

pre-approving non-audit fees. A full copy of this policy is

available on the Group’s website.

The overall objective of the policy is to ensure that the

provision of non-audit services does not impair the external

auditor’s independence or objectivity. This includes, but is

not limited to, assessing:

• The scope of the work to be undertaken;

• Any threats to independence and objectivity resulting

from the provision of such services;

• Whether the skills and experience of the audit firm make it

a suitable supplier of the non-audit service;

• Whether there are safeguards in place to ensure that

there is no threat to objectivity and independence in the

conduct of the audit resulting from the provision of such

non-audit services by the external auditor, the nature of

the non-audit services, the related fee levels and the fee

levels individually and in aggregate, relative to the audit

fee; and

• The criteria which govern the compensation of the

individuals performing the audit.

Non-audit fees charged by the auditor in the year were

£470,000 compared to an audit fee of £1,065,000.

The non-audit fees relate to the half-year review and

reporting accountant work in relation to the fundraising

that completed in August 2021. The objectivity and

independence of the auditor has been reviewed and

considered to be safeguarded.

Internal audit

The Group’s Risk & Safety team performs audits against

documented processes. Reports summarising findings

and key actions are discussed at each Board meeting

and circulated to the Executive Directors and divisional

management.

The Group has a dedicated internal financial audit function

which is operated by an independent external firm. The

scope of these audits is prepared by the Chief Financial

Officer and approved by the Committee at the beginning

of the financial year.

There were three projects completed during the year and

reports were produced summarising the findings and

recommendations. Significant issues identified within these

reports are considered in detail along with the mitigation

plans to resolve them. The Committee is provided with a

summary of the reports and an update is provided at each

meeting on the progress of any ongoing or planned projects.

Significant accounting matters

As part of monitoring the integrity of the financial

statements, the Committee reviews whether suitable

accounting policies have been adopted and whether

management has made appropriate judgements and

estimates. The Committee seeks support from the

external auditor as part of its review.

The main items reviewed for the year ended 28 February 2022 are set out below:

COVID-19

COVID-19 continues to impact the aviation industry. London Southend Airport (LSA) has served minimal

passenger numbers as the airport has largely remained closed during the Summer and Winter periods.

However, the partnership with our global logistics partner operating at LSA has performed well, which

along with tight cost-control and marketing cost savings has minimised losses in the Aviation division.

The Renewables division has seen trade return to more normal levels and has benefited from higher

gate fee income.

The impact of COVID-19 has not been presented separately as it is not possible to reliably calculate the

cost of the pandemic on the business. The Committee has reviewed this treatment and is satisfied that

this is the correct approach.

Going concern and

funding

Cash forecasts have been prepared to May 2024 and sensitivity analysis has been performed to

include a severe but plausible downside set of assumptions. This shows that a refinancing or significant

asset disposals will need to be completed at a sufficient level, prior to the expiration of the RCF and

exchangeable bond that mature in February 2023 and May 2024 respectively, otherwise the Group may

not be able to continue trading.

The reasonableness of the Directors in assuming funds will be received is a significant judgement and

consequently there is a material uncertainty in respect of securing the necessary funds.

Despite these challenges, the Directors are satisfied that the Group will have sufficient funds to

continue to meet its liabilities as they fall due to May 2024, and therefore the financial statements have

been prepared on a going concern basis.

The Committee is satisfied that although the Group has material uncertainty, it is a going concern and

the Annual Report has been prepared on this basis. The Committee has reviewed the disclosures about

going concern and is satisfied that they are appropriate.

Esken Limited Annual Report and Accounts 2022

Audit Committee Report continued

Maintenance

reserves

The year end maintenance reserve provision is material to the Group and has been constructed in

line with the requirements of the eight ATR leases held. Estimates used in calculating this provision

include the cost of exclusions within engine overhauls, airframe check costs and propeller blade repairs

required. These estimates have been made based on previous overhauls completed and utilising the

extensive knowledge and experience of staff that previously worked for Stobart Air.

The Committee has reviewed the provision and is comfortable with the presentation split between

current and non-current disclosures in relation to the provision estimates and the overall quantum.

Defined benefit

pension surplus/

obligation

An independent actuary calculates the IAS 19 valuation presented in the consolidated statement of

financial position. The data used in the valuation is obtained directly from the administrators of the

scheme and the underlying assumptions are reviewed and signed-off by management. Judgement is

required in preparing the underlying assumptions such as interest rate and inflation. A surplus can only

be recognised where there is a legal right to surplus in the trust deed.

The Committee has considered the carrying values of the surplus/obligation together with the

assumptions underlying the valuation and is satisfied with the valuation and presentation.

LSA convertible

debt and option

valuation

On 26 August 2021, LSA issued a 30% convertible debt instrument (loan) to Carlyle Global Infrastructure

Opportunity Fund for £125m.

The loan includes three derivatives in relation to conversion which have been accounted for as a single

compound derivative (option). The derivative was fair-valued at inception and is revalued at each

reporting date, with any gain or loss recognised in finance costs in the consolidated income statement.

The valuation starts with the underlying equity value of LSA as a whole. Seven scenarios are calculated

above and below the base case cash flows, flexing passenger forecasts, which in turn flexes the opex

and capex cashflows, and a probability is assigned to each scenario. The cash flows are discounted

using the weighted average cost of capital.

The option fair value is the difference between the loan fair value and the fair value of the host contract.

At 28 February 2022, there was no material difference between the option fair value and the fair value

at inception hence no adjustment has been recognised.

The Committee has reviewed the valuation and disclosures and is satisfied that they are appropriate.

Impairment of

property, plant and

equipment and

intangible assets

An independent external valuation was obtained at 28 February 2022 for certain property assets,

namely land at Widnes and Runcorn and Carlisle Lake District Airport. These property assets are carried

at cost less impairment and the valuations were conducted on a fair value less costs to sell basis.

Impairment reviews were carried out for intangible assets and property, plant and equipment within the

Aviation and Renewables divisions. The recoverable amount of all assets subject to impairment review

were above the carrying value of these assets so no impairments were required in the year.

The judgements used in the impairment reviews largely relate to the assumptions underlying the fair

value less costs to sell and value-in-use calculations, primarily the achievability of long-term business

plans and macroeconomic assumptions, together with the appropriateness of the discount factors used.

The Committee has considered the carrying values of the assets together with the assumptions

underlying the impairment reviews and is satisfied that no impairments are required.

Liquidation of

Stobart Air

On 14 June 2021, Stobart Air entered liquidation. The gain on liquidation is presented in discontinued

operations alongside the operating results for Stobart Air and Propius.

The Committee is satisfied with the presentation of Stobart Air and Propius results in the current year,

as well as the disclosures in relation to the liquidation.

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

Directors’ Remuneration Report

On behalf of the

Group’s Remuneration

Committee, I’m happy

to present this year’s

report, for what

has been another

challenging year for

our employees.

John Coombs,

Chairman of the Remuneration Committee

Remuneration Committee members

– John Coombs, Chairman

– Ginny Pulbrook, Non-Executive Director

– David Blackwood, Non-Executive Director

– Clive Condie, Non-Executive Director

Activities during the year

During the year the Committee met six times and

a summary of the main areas dealt with by the

Committee is set out below:

Consideration and decisions on:

• Levels of base salaries for Executive Directors and

other Executives within its remit.

– Executive Directors’ bonus arrangements.

– Performance of Long-Term Incentive Plans

(LTIPs) over the year.

– LTIP grants.

– Directors’ Remuneration Report (DRR).

– Fees for the Executive Chairman.

– Review of the terms of reference of

the Committee.

Contents of the Directors’

Remuneration Report

1.1 Annual Statement by the Remuneration

Committee Chairman

1.2 Remuneration at a glance

1.3 Annual Report on remuneration

The Directors’ Remuneration Report is not subject

to audit.

The Committee has written terms of reference which

are available in the ‘About’ section of the Group’s

website at: www.esken.com

Esken Limited Annual Report and Accounts 2022

Directors’ Remuneration Report continued

1.1 Annual Statement by the

Remuneration Committee

Chairman

Dear Shareholder

On behalf of the Board and as Chairman of the Remuneration

Committee (Committee), I am pleased to present the DRR for

the year ended 28 February 2022. As a Guernsey registered

company, we are not obliged to follow the UK Companies

Act regulations (specifically the Large and Medium sized

Companies and Group (Accounts and Reports) Regulations

2008, as amended) governing Directors’ remuneration

disclosure and voting, but we elect to do so.

Our Directors’ Remuneration Policy, which was supported

by 96% of our shareholders, was approved at the AGM on

30 July 2020 and is available in our 2020 Annual Report

at www.esken.com/investors. The Annual Report on

Remuneration, which provides details of the remuneration

earned by Directors for the year ended February 2022 and

how we intend to apply the Directors’ Remuneration Policy

in the year ending 28 February 2023, is set out on pages

95 to 108 and will be subject to a separate vote at the AGM.

Remuneration decisions during the year

Due to the ongoing and significant impact of COVID-19,

particularly as it affected and continues to affect our

aviation businesses, the Group continued to face significant

financial pressure during the year, and kept in place strict

financial discipline in order to preserve liquidity and protect

operational capability for the long term. You will have read

elsewhere in this report the steps the Group took to achieve

this. A second year of considerable financial and operational

pressures posed significant challenges for our staff and

will continue to do so in the year ahead. From the start of

the initial lockdown in March 2020, Esken utilised the UK

Government’s Job Retention Scheme. Initially, c.50% of the

Group’s 1,500+ employees were furloughed (as of 1 April

2020). The number of affected employees on furlough

reduced over the year, and as at 28 February 2022 there

were no employees who remained on furlough after the

scheme was withdrawn, and in fact we did not make use

of furlough or part-time furlough after the end of August

2021. We have been very mindful this year that our recovery

from the pandemic and our ability to continue to steer the

business through the uncertain landscape ahead would in

part be dependent on our ability to retain our key staff or

replace those who no longer remain with us. Remuneration

has a significant part to play in retaining and recruiting key

Executives and that has been reflected in the work of the

Committee this year.

Given the Group’s assistance from government under the

furlough scheme, no bonus scheme for Executive Directors

was put in place for the year ended 28 February 2021 and

this continued in the year ended 28 February 2022. Cost-

of-living awards usually made for all employees were not

implemented where possible (including for the Executive

Directors) for the year ended 28 February 2022.

The awards granted under the approved 2014 LTIP in

2019 in respect of performance for the three years ending

February 2022 did not vest, as the threshold performance

targets were not met.

During the year, two separate LTIP grants were made

in respect of the years ended 28 February 2021 and

28 February 2022. As noted in the regulatory news

announcement at grant, the LTIP awards in respect of the

year ended 28 February 2021 could not be made during the

year when originally planned, due to the Company being

in possession of inside information at the time it wished to

make the awards. As such, awards of 200% of salary were

made to Nick Dilworth and Lewis Girdwood on 1 September

2021. Although, it was reported in last year’s DRR that the

intention at the time was for performance measures to be

based on adjusted earnings per share and total shareholder

return (TSR), to be equally weighted, the Committee

considered this further and considered a wholly TSR-based

measure would be more closely aligned to shareholder

interests at this time. The performance targets will be

measured over the three financial years to 28 February 2023

and full details of these targets are set out on page 100. On

22 December 2021, awards of 200% of salary were made

to Nick Dilworth and Lewis Girdwood in respect of the year

ended 28 February 2022. As with the awards in respect

of 2021, the Committee approved a wholly TSR-based

performance measure for these awards on the basis that

this remained most closely aligned to shareholder interests.

The performance targets will be measured over the three

financial years to 29 February 2024 and full details of these

targets are set out on page 100.

Warwick Brady, the Group’s former CEO, stepped down from

the Board with effect from 1 May 2021, and he provided

support to Esken on a limited part-time basis until 30 June

2021. Warwick Brady’s salary and benefits were adjusted

on a pro-rata basis to reflect this change and he was

not entitled to participate in any bonus or LTIP scheme

for the period or any other payment relating to termination

of his contract.

Looking forward to the year ending February 2023

Upon Warwick Brady’s resignation from the business, the

Board carefully considered the leadership requirements

of the business, given the simplified structure of the

Group with two core operating divisions, and consulted

with a number of its major shareholders. It was decided

to retain the existing structure with some amendment

to responsibilities. David Shearer remained as Executive

Chairman with responsibility for stakeholder management,

execution of strategy and Executive leadership. Lewis

Girdwood, CFO, took on the additional role as Executive

Director – Aviation with main Board responsibility for

that division. Nick Dilworth, COO, took on the additional

role of Executive Director – Renewables with main Board

responsibility for that business, in addition to his Executive

responsibility for ESG. David Shearer had assumed the

role of Executive Chairman of Esken with effect from 9

February 2021 on an interim basis but from November 2021

that position was made permanent. He was initially paid a

total fee of £350,000 per annum for his Executive duties. In

addition, a fee of £150,000 was paid in respect of advisory

services, relating to the restructuring and refinancing of the

Group, to Buchanan Shearer Associates LLP, in which David

Shearer is a partner up to February 2022. We have agreed

with him that from 10 February 2022, his fees for his role

as Executive Chairman will be increased to £400,000 per

annum. He has declined any entitlement to any benefits

(pensions, car allowance etc) and will not participate in

any bonus scheme, or be eligible for LTIP awards.

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

1.2 Remuneration at a glance

Performance highlights

Adjusted EBITDA Loss before tax

£10.3m (£34.6m)

Aviation – Adjusted EBITDA Renewables – Adjusted EBITDA

(£0.8m) £20.3m

LTIP outcomes Shareholding guidelines

LTIP awards were granted

in July 2019 with vesting

based on Earnings per Share

(EPS) and TSR performance

over a three-year period

ended 28 February 2022.

Performance against those

measures was below threshold

and the awards will not vest.

Purpose:

To align Executive

Directors’ interests

with those of

shareholders

Guidelines for

Executive Directors:

To build up

shareholdings of at

least 200% of salary

Current shareholdings

(percentage of salary):

Nick Dilworth 39%

Lewis Girdwood 97%

Further details on our shareholding guidelines, and how these are affected post-employment, can be found on page 101.

These guidelines do not apply to the Executive Chairman, who does not participate in the Group’s LTIPs.

As a result of these changes, we believe that we have

achieved a significant cost saving when compared to the

previous position of having a separate Non-Executive

Chairman and CEO (although the decision to adopt the new

management structure was not made on cost grounds).

In last year’s Annual Report, we took the view to report on

remuneration for David Shearer as a Non-Executive Director

given that his move to an interim Executive position was

taken so late in the financial year being reported. In this

Annual Report, he is treated as an Executive Director.

As a result of the changes to their Executive duties in

November 2021, the salaries of the CFO and the COO were

increased to £335,000 per annum and no further changes to

those salaries will be implemented in the upcoming year. We are

also cognisant that they had seen no positive changes to their

remuneration over the course of the pandemic. We believe that

recognising their increased responsibilities and re-establishing

our bonus scheme in the year ahead, as well as being able to

make further LTIP awards, will help us to retain these two key

Executives for our challenges ahead. At the same time, Nick

Dilworth’s pension contribution was reduced to 10% of salary to

align more closely to the wider workforce.

This has led to a reduction in the aggregate fixed remuneration

for the Executive Directors. The Executive Chairman also

declined participation in the Company’s variable pay plans

and does not receive other customary benefits, which serves

further to lower the comparable costs. The Company was also

able to avoid considerable recruitment fees in appointing

from within.

The Committee intends to put in place an LTIP scheme

during the year that will be market competitive and aligns

the CFO’s and COO’s interests with those of shareholders.

Whilst these are our intentions, the Committee recognises

that plans may need to change, as we take decisions in

the best interests of all stakeholders having regard to the

continuing impact of COVID-19. This is my final report as

Chairman of the Committee as I will stand down from the

Board at the upcoming AGM. I would like to thank my fellow

members of the Committee for their invaluable support

and advice and our shareholders who have supported

our policy and its implementation these last several years.

With Clive Condie the Committee will be in good hands

for the future.

John Coombs

Chairman of the Remuneration Committee

24 May 2022

Esken Limited Annual Report and Accounts 2022

Policy on service contracts

The service contracts for the Executive Directors are dated as set out in the table below:

Executive Director Position Date of contract Date of commencement

David Shearer Executive Chairman 15 May 2019 1 June 2019

Lewis Girdwood Chief Financial Officer 29 March 2019 1 April 2019

Nick Dilworth Chief Operating Officer 30 October 2017 (amended 16 August 2018) 1 September 2018

The Company’s policy is for service agreements with Executive Directors to be capable of termination by either the

Company or the Executive Director by the giving of six months’ notice in the case of Lewis Girdwood and Nick Dilworth.

David Shearer was originally appointed as a Non-Executive Chairman of the Company and took on Executive responsibilities

from 9 February 2021. His letter of appointment can be terminated on three months’ notice.

Non-Executive Directors are engaged under letters of appointment that set out their duties and responsibilities. Non-Executive

Directors are ordinarily appointed for an initial period of three years, subject to annual shareholder re-election. John Coombs

has been appointed on a rolling letter of appointment with no fixed end date, but subject to annual shareholder re-election. The

continued appointment of each Non-Executive Director is subject to the requirements of the Company’s Articles of Incorporation.

The Non-Executive Directors’ letters of appointment are dated as set out in the table below:

Non-Executive Director Commencement date

David Blackwood 1 March 2019

John Coombs 1 July 2014

Ginny Pulbrook 1 October 2018

Clive Condie 1 July 2020

1.3 Annual Report on Remuneration

The Committee has implemented the Remuneration Policy during the year in accordance with the policy approved by

shareholders at the AGM held in July 2020.

Single figure of total remuneration for Executive Directors

The table below sets out the single figure of total remuneration (and its breakdown into its constituent parts) for each

Executive Director for the years ended 28 February 2022 and 28 February 2021:

£’000

Salary Taxable benefits Pension

Total fixed

remuneration

Bonus

Long-term

incentives vesting

Total variable

remuneration Total remuneration

2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021

Warwick

Brady

95.0 427.6 4.0 23.2 19.0 95.0 118.0 545.8 – – – – – – 118.0 545.8

Nick

Dilworth 292.9 245.3 20.7 20.6 47.5 54.5 361.1 320.4 – – – – – – 361.1 320.4

Lewis

Girdwood 283.5 238.5 20.0 20.0 28.8 26.5 332.3 285.0 – – – – – – 332.3 285.0

David

Shearer

358.8 180.0 – – – – 358.8 180.0 – – – – – – 358.8 180.0

1 The Executive Directors agreed to a 20% reduction in base salary for a six-month period until 30 September 2020. Their salaries returned to their contractual level from

1 October 2020.

2 Warwick Brady resigned as an Executive Director and stepped down from the Board with effect from 30 April 2021.

3 David Shearer was originally appointed as Non-Executive Chairman on terms appropriate to that position. Although being appointed as Executive Chairman he does not

receive any benefits or a pension and does not participate in the Company’s bonus or long-term incentive schemes. His salary was increased to £350,000 per annum

with effect from 9 February 2021. As a result, £8,750 was pad to him during the year ended 28 February 2022 which related to the period at the end of February 2021

but was paid to him following the completion of the previous financial year and was not recorded in the results for that year stated above (which have not been restated

for this purpose).

Directors’ Remuneration Report continued

Financial Statements

Esken Limited Annual Report and Accounts 2022

Strategic Report Corporate Governance

Salary

Due to COVID-19’s impact on the business, the Executive Directors agreed to a 20% pay reduction for the period 1 April 2020

to 30 September 2020. The Executive Chairman’s fee was amended again on his taking on interim Executive responsibilities

from 9 February 2021 and was increased with effect from 10 February 2022, recognising that his responsibilities had

become permanent. The salaries of the CFO and the COO were increased with effect from 3 November 2021 in light of their

enhanced responsibilities from that date. The annual salary of the Executive Directors as at the dates stated were as follows:

Executive Director

Salary effective

1 March

2021

Salary effective

3 November

2021

Salary effective

1 March

2022

Nick Dilworth £272,500 £335,000 £335,000

Lewis Girdwood £265,000 £335,000 £335,000

David Shearer

£350,000 £350,000 £400,000

1 Warwick Brady’s salary remained at the level of £475,087 from 1 March 2021 to 30 June 2021, the date he left the Company, and on a pro-rata basis for one day per

week from 1 May 2021 to 30 June 2021.

2 A fee of £150,000 plus VAT was payable to Buchanan Shearer Associates LLP, an advisory business in which David Shearer is a partner, for services provided in relation

to the restructuring and refinancing of the business during the period 9 February 2021 to 9 February 2022.

We believe that setting pay at its current level for the existing Executive Directors is a key part of our ability to retain the

services of these key individuals in light of the challenges ahead. As noted earlier in this report, following the resignation of

Warwick Brady, the Board reviewed the leadership requirements of the business and decided to retain the existing structure

with some amendment to responsibilities. David Shearer remained as Executive Chairman with responsibility for stakeholder

management, execution of strategy and executive leadership. Lewis Girdwood, CFO, took on the additional role as Executive

Director – Aviation with main Board responsibility for that division. Nick Dilworth, COO, took on the additional role of

Executive Director – Renewables with main Board responsibility for that business, in addition to his Executive responsibility

for ESG. This has led to reduction in the aggregate fixed remuneration for the Executive Board. In addition, the Executive

Chairman will not benefit from variable pay opportunities and received no other benefits beyond his salary. The Company

was also able to avoid considerable recruitment fees by appointing from within.

Benefits

The Company currently provides other benefits which comprise standard executive medical cover and death-in-service

cover to Executive Directors other than the Executive Chairman. Executive Directors (other than the Executive Chairman)

are also entitled to a company car of a size and type deemed appropriate for the proper performance of their duties, or a

cash allowance in lieu. During the period, Nick Dilworth and Lewis Girdwood opted to take an additional salary supplement

of £20,000 in lieu of an equivalent car benefit. Warwick Brady returned his company car midway during the year ended

28 February 2021 and opted for a cash allowance in lieu, to a value of £11,231.

Pension

For the financial year ended 28 February 2022, the Executive Directors (other than the Executive Chairman) received a

pension contribution or a cash supplement in lieu of contributions to a pension plan, or a combination of pension contribution

and cash supplement. Pension contributions are based on salary only. The voluntary 20% reduction in pay for six months

was applied to base salary only and as such, pension contributions or cash supplements in lieu of pension contributions

were unaffected by this reduction. Nick Dilworth’s pension contribution was reduced from 20% of salary to 10% from

1 November 2021.

Annual bonus

On the basis that the Company was in receipt of government support under The Coronavirus Job Retention Scheme,

the Committee decided it was not appropriate to put in place a bonus scheme for the year.

LTIPs for the year ended February 2021 and 2022

No LTIP awards in respect of the year ended 28 February 2021 were granted during that year due to ongoing work taking

place to refinance the business, but were subsequently granted in August 2021, and LTIP awards in respect of the year

ended 28 February 2022 were granted in December 2021. When considering the FY21 and FY22 LTIP awards, the Committee

discussed the proposed quantum in light of the prevailing market conditions and the Company’s share price. Following a

second year of considerable financial and operational pressures, the Committee was also mindful that the recovery from

the pandemic and its ability to continue to steer the business through the uncertain landscape ahead would, in part, be

dependent on its ability to retain key staff or replace those who no longer remained with it. The Committee recognises that

remuneration has a significant part to play in retaining and recruiting key Executives. In view of the significant issues which

the business had faced over the last two years, a number of which were legacy matters, all of the prior year’s LTIPs were

now unlikely to vest. On balance, the Committee did not reduce the LTIP awards for FY21 or FY22. The Committee will revisit

whether this level of award remains appropriate for the FY23 LTIP awards when these are granted.

Esken Limited Annual Report and Accounts 2022

100

The awards made to Nick Dilworth and Lewis Girdwood were as follows:

Date of LTIP grant

Market price on

date of grant

Number of shares

comprised in award

Face value of awards

(% of salary)

Performance

period Vesting/lapse date

Nick Dilworth

23 August 2021 £0.19 2,868,422 200% 3 years 1 March 2023

21 December 2021 £0.139 4,820,144 200% 3 years 1 March 2024

Lewis Girdwood

23 August 2021 £0.19 2,789,474 200% 3 years 1 March 2023

21 December 2021 £0.139 4,820,144 200% 3 years 1 March 2024

It was reported in Esken’s 2020 Annual Report that the intention at the time was for performance measures for the awards

eventually made in August 2021 to be based on adjusted EPS and TSR, equally weighted. The Committee considered this

further at the time these awards were eventually made and approved a wholly TSR-based measure, on the basis that this

would be more closely aligned to shareholder interests at that time. The performance targets attached to these awards

are cumulative three-year TSR measured over the Company’s FY21, FY22 and FY23 financial years (i.e. from 1 March 2020

to 28 February 2023) measured against a price for Esken’s ordinary shares of 19.1p (being the price of 22.2p in the period

leading up to the Committee’s meeting in December 2020 but adjusted to take account of the issue of further shares in the

Firm Placing and Placing and Open Offer concluded on 26 August 2021), subject to a general financial performance underpin,

as set out in the table below:

Vesting Esken’s three-year TSR

Threshold 25% of maximum Compound annual growth rate (CAGR) of 18.6% p.a.

(equating to a share price of 31.9p at vesting)

Target 50% of maximum CAGR of 25.4% p.a. (equating to a share price of 37.7p at vesting)

Stretch 100% of maximum CAGR of 37.1% p.a. (equating to a share price of 49.2p at vesting)

1 Assuming no dividends are paid during the performance period.

In view of the changes in the business and its markets, the Committee decided to set targets based on where the business

is today and would represent a strong return to shareholders whilst being realistically attainable for management within the

timeframe of the awards. As a result, in respect of the awards made in December 2021, the Committee approved a wholly

TSR-based performance measure for these awards on the basis that this would be closely aligned to shareholder interests.

The performance targets attached to these awards are linked to an increase in the price of the Company’s ordinary shares

measured over the Company’s FY22, FY23 and FY24 financial years (i.e. from 1 March 2021 to 28 February 2024), subject to

a general financial performance underpin, as set out in the table below (with straight-line vesting between these points):

Vesting Esken’s share price

25% of maximum A share price of 20.0p at vesting

100% of maximum A share price of 30.0p at vesting

These targets represent a CAGR of c.12.5% p.a. and 25.0% p.a. for threshold and maximum vesting respectively, and the

Committee considers this to be a stretching but attainable target for management and aligned to long-term value creation

for shareholders. In assessing whether or not a particular share price has been achieved the Committee will also take in

to account the ‘per share’ value of any dividend paid on ordinary shares during the performance period, assuming that the

dividend was reinvested into ordinary shares on the ex-dividend date.

Directors’ Remuneration Report continued

Financial Statements

Esken Limited Annual Report and Accounts 2022

101

Strategic Report Corporate Governance

Outstanding share awards

The table below sets out details of Directors’ outstanding share awards held under the LTIP, including those interests

awarded during the financial year.

Type of

award Date of LTIP grant

Market

price on

date of

grant

Number of

performance

shares at

1 March

2021

Granted

during the

year

Vested

during

the year

Lapsed

during

the year

Number of

performance

shares at

28 February

2022

Performance

period

Vesting/

lapse date

Nick

Dilworth

2014

LTIP

20 June 2018 £2.568 52,563 – – 52,563 – 3 years 20 June 2021

2014

LTIP

3 July 2019 £1.883 127,660 127,660 – 3 years 20 June 2021

2014

LTIP

3 July 2019 £1.173 699,735

– – – 699,735 3 years 3 July 2022

2020

LTIP

23 August

2021

£0.19 – 2,868,422 – – 2,868,422 3 years 1 March 2023

2020

LTIP

21 December

2021

£0.139 – 4,820,144 – – 4,820,144 3 years 1 March 2024

879,958 7,688,566 – 180,223 8,388,301

Lewis

Girdwood

2014

LTIP

3 July 2019 £1.173 453,650

– – – 453,650 3 years 3 July 2022

2020

LTIP

23 August

2021

£0.19 – 2,789,474 – – 2,789,474 3 years 1 March 2023

2020

LTIP

21 December

2021

£0.139 – 4,820,144 – – 4,820,144 3 years 1 March 2024

453,650 7,609,618 – – 8,063,268

Warwick

Brady

2014

LTIP

20 June 2018 £2.568 131,408 – – 131,408 – 3 years 20 June 2021

2014

LTIP

3 July 2019 £1.173 303,686 – – 303,686 – 3 years 3 July 2022

435,094 – – 435,094 –

1 The vesting date may be a short period after the end of term date to allow any consideration of discretion by the Committee as well as administrative matters to take place.

2 After adjustment for the impact of the equity fundraising undertaken by the Company in 2020 and 2021.

3 As set out in last year’s Directors’ Remuneration Report, this is the price at the date the Committee agreed to grant the award.

Warwick Brady holds no outstanding LTIP awards after his resignation from the Board during the year and David Shearer

does not participate in the Company’s LTIPs.

Save As You Earn scheme

There were no options granted under a Save As You Earn (SAYE) scheme during the year ended 28 February 2022.

Directors’ shareholding and share interests

Details of the Directors’ interests in shares are shown in the table on page 102

As set out in the Directors’ Remuneration Policy which was approved by shareholders at the AGM in July 2020, Esken has

a formal shareholding requirement whereby Executive Directors are expected to build a shareholding equal to the value of

200% of their annual salary, to be achieved within the later of five years of their appointment to the Board or the introduction

of this guideline on 27 June 2017. This requirement does not apply to the Executive Chairman.

Executive Directors are also subject to the requirement that for 12 months following their cessation as Executive Director, the

relevant Director must retain an equal value of ‘relevant’ shares (as at cessation) as held during service, and 50% of this value

for a further 12 month period. Shares which are purchased by an Executive Director, or which have been acquired pursuant

to share awards granted before this policy was approved by shareholders (such approval was on 30 July 2020), or acquired

pursuant to SAYE scheme options are not ‘relevant’ shares for the purposes of the post-employment requirement.

Based on the share price at 28 February 2022, Nick Dilworth and Lewis Girdwood have yet to meet the full requirement, with

their holdings as a percentage of salary set out on page 97.

Esken Limited Annual Report and Accounts 2022

102

Directors’ Remuneration Report continued

Share interests of Directors and connected persons at 28 February 2022

The following table shows the Directors’ interests in shares as at 28 February 2022 (or the relevant date of cessation

of employment).

Beneficially

owned

Outstanding

under share

award

arrangements

Total interest in

Executive Directors

David Shearer 1,226,785 – 1,226,785

Nick Dilworth 220,735 8,388,301 8,609,036

Lewis Girdwood 585,714 8,063,268 8,648,982

Warwick Brady 404,701 – 404,701

Non-Executive Directors

John Coombs 348,577 – 348,577

Ginny Pulbrook 53,214 – 53,214

David Blackwood 383,818 – 383,818

Clive Condie 327,857 – 327, 857

1 Executive Directors’ outstanding share awards are under the LTIP or the SAYE scheme. Awards under the LTIP are subject to performance conditions as set out in

detail for each grant in the Annual Report on Remuneration for the year in respect of which the award was granted. Awards under the SAYE scheme are not subject to

performance conditions.

There have been no changes in the holdings of the Directors between 28 February 2022 and 24 May 2022.

Percentage change in the remuneration in Director and employee remuneration

2020/2021 2021/2022

Base salary

Taxable benefits

Annual bonus

Base salary

Taxable benefits

Annual bonus

Executive Directors

Warwick Brady

(10%) (29.3%) – (77.8%) (82.8%) –

David Shearer

20% – – 85.4% – –

Nick Dilworth (8.3%) – – 19.4% 0.5% –

Lewis Girdwood (1.8%) 9.3% – 18.9% - –

Non-Executive Directors

John Coombs (8.5%) – – 9.3% – –

Ginny Pulbrook (6.0%) – – 16.6% – –

David Blackwood 3.9% – – 19.6% – –

Clive Condie

– – – 50.0% – –

Employee population

16.4% (28.1%) – (18%) (2.04%) –

1 Warwick Brady left employment in June 2021 and his salary and benefits were commensurately lower than for the previous full year although his rate of pay remained

unchanged.

2 David Shearer joined the Board after the beginning of the financial year ended 29 February 2020 (appointed with effect 1 June 2019). He assumed additional Executive

responsibilities as a result of Warwick Brady leaving employment with the Group. The increase between 2021 and 2022 has been calculated on the basis that the

£8,750 paid in respect of the period 9 February 2021 to 28 February 2021 had been paid in the year ended 28 February 2021.

3 Clive Condie was appointed to the Board on 1 July 2020. On this basis there is no comparable data to calculate any change in remuneration for 2020/2021. The

comparative increase in his remuneration between 2021 and 2022 was a result of comparing a full year of pay to a part year. The base fees payable to all of the Non-

Executive Directors remained constant between 2021 and 2022 with any differences in overall pay relating to changes in duties and/or the pay cuts assumed voluntarily

during 2020.

4 As a result of the liquidation of Stobart Air, employees within that business have not been included in this calculation.

The above table shows the percentage year-on-year change in salary, benefits and bonus earned between the year ended

29 February 2020 and 28 February 2021 and the year ended 28 February 2021 and 28 February 2022 for all Directors and

for the average of all other employees in the Group. Warwick Brady left employment in June 2021.

Employee average remuneration has been calculated on a median basis. Employees working part-time have had their

remuneration grossed up to full-time for the purpose of the calculation. Employees on zero-hour contracts and those identified

as being under the furlough scheme during the year have had their remuneration included at actual rates in the calculation.

Financial Statements

Esken Limited Annual Report and Accounts 2022

103

Strategic Report Corporate Governance

Employees across the Group have been chosen as the comparator, as the Committee felt that the relatively small number

of colleagues employed by Esken Limited (5% of overall employee population) would not be representative of the employee

population across the wider group.

The percentage change table reflects a reduction in the employee population from 912 on 28 February 2021 to 778

at 28 February 2022, an ongoing reliance on the government job protection scheme to the end of September 2021,

a pay freeze for most employees in 2021, and a rise in employees working part-time.

Payments for Directors’ loss of office

There were no payments in relation to loss of office during the year. Warwick Brady did not receive any payments from

the Company in relation to his loss of office from 30 April 2021.

Payments to past Directors

There were no payments of money or other assets to former Directors during the year.

Historical TSR performance chart

The chart below shows the TSR performance of Esken against the FTSE 250 and FTSE SmallCap for the last ten years.

Esken has been a member of both the FTSE 250 and FTSE SmallCap during the period shown.

Feb 2012 Feb 2013 Feb 2014 Feb 2015 Feb 2016 Feb 2017 Feb 2020

Feb 2021 Feb 2022

Feb 2019Feb 2018

Esken Group FTSE 250 (excl. Investment Trusts) FTSE SmallCap (excl. Investment Trusts)

300

350

250

200

150

100

Chief Executive remuneration outcomes

The table below shows the total remuneration figure for the Chief Executive for the last ten years. The total remuneration

figure includes the annual bonus and any long-term incentives which vested based on performance in those years.

Chief Executive

For the year ended 28/29 February

Andrew Tinkler Warwick Brady

David

Shearer

2012 2013 2014 2015 2016 2017 2018

2018

2019 2020 2021 2022

2022

Chief Executive’s

total single figure

of remuneration

£’000 253.6 259.9 251.2 1,309.3 931.3 951.1 235.3 648.8 915.8 601.5 545.8 118.0 358.8

Bonus paid %

of maximum – – – 76.3% 96.6% 97.0% 91.0% 91.0% 73.0% – – - N/A

LTIP vesting %

of maximum – – – – – – 100% – – – – - N/A

1 Andrew Tinkler stepped down from the position of Chief Executive on 30 June 2017. The remuneration figure used represents one-third of his single figure

remuneration and takes account of the alterations made to his level of remuneration for the year, as explained in the notes to the single figure table on page 61 of the

Directors’ Remuneration Report in the 2019 Annual Report.

2 Warwick Brady was appointed as Chief Executive on 1 July 2017. The remuneration figure used represents the total single figure remuneration.

3 In the year ended 28 February 2022, Warwick Brady was employed by the Company until 30 April 2021 and David Shearer was Executive Chairman for the whole year.

Chief Executive pay ratio

The following table compares the Chief Executive Officer single total figure remuneration (as set out on page 98), with the

total remuneration of the Group’s employees, paid at the 25th, 50th and 75th percentiles. The figure used is a combination of

the remuneration for Warwick Brady and David Shearer in respect of 2021/2022.

Esken Limited Annual Report and Accounts 2022

104

Directors’ Remuneration Report continued

Pay ratios have been calculated using Option A as this is considered to be the most statistically accurate. Under Option A,

we determined the total full-time equivalent remuneration for all our UK employees, ranked those employees based on their

full-time equivalent remuneration and then identified the lower quartile, median and upper quartile employees based on this

ranking. The employees were identified by reference to their remuneration as at 28 February 2021, in respect of 2020/2021,

and 28 February 2022, in respect of 2021/2022. Employees working part-time have had their remuneration grossed up for the

purpose of this calculation. Zero-hour contract and furloughed employees’ remuneration is included at the actual rate of pay.

Year Methodology 25th percentile

50th percentile

(median) 75th percentile

2021/2022 Option A 1:17 1:13 1:10

2020/2021 Option A 1:25 1:19 1:13

The Committee considers that the median pay ratio for the year ended 28 February 2022 is consistent with the pay, reward

and progression on policies for the Group’s UK employees taken as a whole. The most significant reason for the change in

the ratios compared to the previous year is the reduction in remuneration for the Chief Executive as a result of the change

in leadership structure during the year.

We have set out below further detail of the base salary and total remuneration received by employees during the year used

for the calculation above. Total remuneration was calculated on the same basis as the Chief Executive Officer single figure

table set out on page 98 (save that, for the year ended 28 February 2021, the £8,750 paid to David Shearer in respect of

the period 9 February to 28 February 2021 referred to in footnote 3 to that table has been discounted and in the year ended

28 February 2022 the total remuneration figure was for Warwick Brady for March and April 2021 and for David Shearer for

the remainder of the period). As a result of the liquidation of Stobart Air, employees within that business have not been

included in the calculation below and the ‘relative importance of spend on pay’ calculation.

25th percentile

50th percentile

(median) 75th percentile

Base salary £21,000 £28,272 £37,672

Total remuneration £22,334 £28,927 £39,762

Relative importance of spend on pay

The table below shows the year-on-year change in losses, staff costs and distributions to shareholders.

2022 2021 % change

Remuneration paid to or receivable by all employees of the Group

(including Directors) £28.4m £34.0m (16.5%)

Distributions to shareholders nil nil 0%

Loss for the year from continuing operations (£24.7m) (£37.1m) 33.4%

Single figure of total remuneration for Non-Executive Directors

The table below sets out the single figure of total remuneration (and its breakdown into its constituent parts) for each Non-

Executive Director. All Directors (Executive and Non-Executive), with the exception of Clive Condie, voluntarily agreed to a

20% reduction in their salary or fee for the period 1 April 2020 to 30 September 2020. This reduction is reflected in the table

below. Clive Condie joined the Board on 1 July 2020 and it was agreed by the Committee that due to his start date in the

year and the support offered to the Aviation division, it would not be appropriate to immediately reduce his fee.

Non-Executive Director

Fees Taxable benefits Total

2022 2021 2022 2021 2022 2021

John Coombs

62.5 57.2 – – 62.5 57.2

Ginny Pulbrook

57.5 49.3 – – 57.5 49.3

David Blackwood

72.5 60.6 – – 72.5 60.6

Clive Condie

52.5 35.0 – – 52.5 35.0

1 Includes base fee of £52,500 plus additional fees of £10,000 for chairing the Remuneration Committee.

2 Include base fee of £52,500 plus additional fees of £5,000 for acting as Designated Non-Executive Director with effect from 1 October 2020.

3 Includes base fee of £52,500 plus additional fees of £10,000 for chairing the Audit Committee and fulfilling the role of Senior Independent Director with effect from

1 November 2020.

4 Clive Condie’s fee is based on his commencement date of 1 July 2020.

Financial Statements

Esken Limited Annual Report and Accounts 2022

105

Strategic Report Corporate Governance

Non-Executive Directors’ fees for the year ended 28 February 2022

As indicated above, there was a reduction in fees of 20% for the period 1 April 2020 to 30 September 2020 for all Non-

Executive Directors, other than Clive Condie. There were no changes to Non-Executive Director fees in the year ended

28 February 2022.

External appointments

During the year, no Executive Director (other than the Executive Chairman) had an external appointment for which he

was remunerated.

Service contracts and letters of appointment

The terms and conditions of appointment of Non-Executive Directors and the service contracts of the Executive Directors

are available for inspection at the Company’s registered office during normal business hours.

Non-Executive Directors are engaged under letters of appointment that set out their duties and responsibilities and are

subject to annual shareholder re-election.

Name Commencement Notice period

Nick Dilworth

1 September 2018 6 months

Lewis Girdwood 1 April 2019 6 months

David Shearer

1 June 2019 3 months

John Coombs 1 July 2014 3 months

Ginny Pulbrook 1 October 2018 3 months

David Blackwood 1 March 2019 3 months

Clive Condie 1 July 2020 3 months

1 Notice periods apply in the same manner for both Directors and the Company.

2 Nick Dilworth’s contract was varied with effect from 1 September 2018 on his appointment to the Board.

3 Service contracts on a rolling basis with no defined expiry date.

4 David Shearer’s terms of appointment have been amended with effect from 9 February 2021 to reflect his role as Executive Chairman.

Implementation of the Policy for the year ending 28 February 2023

This section provides a summary of how the Committee intend to implement the Directors’ Remuneration Policy in the financial

year ending 28 February 2023. Due to the continued uncertainty around the impact of COVID-19 and expectations that the

business will recover during the course of the year, the position set out below will be subject to review by the Committee.

Salary

It was agreed during the year that the salaries for the Executive Directors would be as set out below in recognition of

their enhanced duties further to the Company’s announcement in that regard on 3 November 2021 – the increases for

Lewis Girdwood and Nick Dilworth taking effect from 3 November 2021 and that for David Shearer from 10 February 2022

– but there will be no further increases in the upcoming financial year.

Executive Director Salary

David Shearer £400,000

Nick Dilworth £335,000

Lewis Girdwood £335,000

Benefits

The Group does not currently envisage any adjustments to benefits for the year ending 28 February 2023, except as

necessary to reflect the market cost of providing the benefits described.

Pension

No changes in pension are proposed for the year ending 28 February 2023. Company contributions to a pension

plan will remain at 10% for the Chief Financial Officer and the Chief Operating Officer. No pension contribution is paid

to David Shearer. As set out in the Directors’ Remuneration Policy any new Executive Director will receive a pension

contribution not exceeding the percentage applicable to the majority of the Group’s workforce. This principle will apply

to any new Executive appointments.

Esken Limited Annual Report and Accounts 2022

106

Directors’ Remuneration Report continued

Annual bonuses

The Committee determined that it was not appropriate to approve a bonus scheme for the Executive Directors for the year

ended 28 February 2022 at this time, in light of the Company’s continued receipt of government support via the furlough

scheme. As that support has now ended, the Committee has put in place a bonus plan for the Executive Directors (other than

the Executive Chairman), based on key performance targets of the Group for the year ending 28 February 2023. Full details

of the bonus plan and the outcomes will be disclosed in next year’s remuneration report.

LTIP

LTIPs for the year ending 28 February 2023 have been considered, and are likely to be made to the Chief Financial Officer

and the Chief Operating Officer in accordance with policy, immediately following announcement of the Group’s results for

the year ended 28 February 2022. The full details of those awards will be announced when they are made and will also

be disclosed in full in next year’s Annual Report.

Non-Executive Directors’ fees

For the financial year ending 28 February 2023, the Non-Executive Director fees remain unchanged and will therefore

be as set out below.

Fee

Non-Executive base fee £52,500

Additional fees

Committee Chair

£10,000

Deputy Chairman and Senior Independent Director £10,000

Designated Non-Executive Director for People Engagement £5,000

1 Ginny Pulbrook receives a combined fee of £10,000 for acting as Chair of the ESG Committee and her role as the designated Non-Executive Director for employee

engagement, increased from £5,000 with effect from 1 March 2022, upon the formation of the ESG Committee.

The Remuneration Committee

Remuneration Committee members

During the year, the Committee comprised the following independent Non-Executive Directors:

John Coombs, Committee Chairman

Ginny Pulbrook

David Blackwood

Clive Condie

Attendance at Committee meetings is shown on page 84. While no others have rights of attendance or voting, the Committee

may invite the Executive Chairman, external advisers and others holding key positions to attend some or all of its meetings.

No individual was present when their own remuneration was being discussed. The Company Secretary attended meetings as

secretary to the Committee.

Overview and role of the Committee

The role of the Committee is to determine and recommend to the Board a fair and responsible remuneration framework

for ensuring that the Company’s Executive Directors and designated senior management are appropriately rewarded and

incentivised for their contribution to Group performance.

The Committee determines Executive Director remuneration, reviews and approves remuneration for other senior Executives,

and oversees the remuneration policy for the broader workforce. The remuneration of Non-Executive Directors is decided by

the Board, on the recommendation of the Chairman of the Board and the Executive Directors, and is determined within the

limits set out in the Company’s Articles of Association and the Directors’ Remuneration Policy.

Committee membership

The membership of the Committee is determined by the Group Board and is confined to independent Non-Executive

Directors, with the Company Secretary acting as secretary to the Committee.

External advisers

During the year ended 28 February 2022, the Committee received external advice from Deloitte LLP who were appointed as

independent advisers to the Committee in January 2019. Deloitte LLP is a founding member of the Remuneration Consultants’

Group and as such voluntarily operates under a code of conduct in relation to executive remuneration consulting in the UK.

Fees of £17,325 were paid in respect of remuneration services during the year which included advising on best practice, the

impact of COVID-19 on remuneration matters, updates on legislative requirements and fees for the Executive Chairman.

Financial Statements

Esken Limited Annual Report and Accounts 2022

107

Strategic Report Corporate Governance

Committee activities during the year

During the year, the Committee met six times and a summary of the main activities and decisions dealt with by the

Committee are set out below:

• Level of base salaries for Executive Directors and other Executives within its remit.

• Bonus arrangements for Executive Directors for the year ending 28 February 2023.

• Performance of LTIPs over the year.

• LTIP grants.

• Directors’ Remuneration Report.

• Fees for the Chairman and his role as Executive Chairman.

• Review of the Terms of Reference of the Committee.

All members of the Committee are independent Non-Executive Directors, as defined under the UK Corporate Governance Code.

Committee attendance for the year ended 28 February 2022:

Number of meetings Meetings attended

John Coombs 6 6

Ginny Pulbrook 6 6

David Blackwood 6 6

Clive Condie 6 6

Under its Terms of Reference, the Committee shall have a Chairman and at least two members, all of whom shall be independent.

Statement of shareholder voting

At last year’s AGM on 17 August 2021, the Directors’ Remuneration Report received the following votes:

AGM Item for approval

Votes for

(% total votes cast)

Votes against

(% total votes cast) Votes withheld

17 August 2021 Approval of the Directors’ Remuneration Report 99.18% 0.82% 476,305

Our approach to remuneration

We are required by the Code to report to you on various

matters relating to remuneration, and in particular with

regard to those matters set out in provisions 40 and 41

of the Code. These matters are as follows:

The strategic rationale for Executive Directors’

remuneration policies, structures and any performance

metrics:

The key principles that underpin the design of our

Remuneration Policy for Executive Directors, including the

structure of remuneration, are to:

• Attract, retain and motivate high-calibre talent to ensure

continued growth and success of the Group;

• Recognise and reward stretching performance taking into

account the skills and experience of the Directors and the

nature and complexities of their responsibilities;

• Encourage and support an entrepreneurial and high

performance culture, providing incentives that promote

the delivery of sustainable growth and are aligned to

medium and longer-term business strategy;

• Align the interests of the Executive Directors, senior

management and employees with those of shareholders;

• Ensure that remuneration and incentives adhere to the

principles of good corporate governance, support good

risk management practice and promote sustainable Group

performance; and

• Have a competitive mix of fixed remuneration and short-

term and long-term incentives, with an appropriate

proportion of the package determined by stretching

targets linked to the Group’s performance.

The reasons why the remuneration is appropriate using

internal and external measures, including pay ratios and

pay gaps:

We regularly review the remuneration of our Executive

Directors to align it to the strategy and results of the Group,

to remuneration in our industry more generally and for senior

executives of the type and quality we wish to employ, and

we remain cognisant of the relative pay of our employees.

We believe that our remuneration structures reflect these

requirements and benchmarks, but we are conscious that

remuneration and our ability to pay bonuses and make long

term incentive awards has been impacted by the pandemic

and will need to be addressed during FY23, as the aviation

industry in particular seeks to return to a greater level

of activity. We are also conscious that the impact of the

COVID-19 pandemic on our business, particularly through the

measures we have deployed to control costs partly through a

hiring freeze and pay restraint in the year, have impacted our

ability to adjust relative pay across the Group.

A description, with examples of how the Remuneration

Committee has addressed the factors in Provision 40 of

the Code, which are as follows:

a. Clarity – we believe our remuneration arrangements

are transparent and promote effective engagement

with shareholders and the workforce. We report in

full on Executive Director remuneration in our Annual

Report and we engage regularly with our workforce

on many matters, including Executive pay. We have a

Board member, Ginny Pulbrook, who acts as a direct link

with our employees and we use our various employee

engagement forums to ensure we are aware of the

diverse view of our employees;

Esken Limited Annual Report and Accounts 2022

108

Directors’ Remuneration Report continued

b. Simplicity – we believe that our base remuneration,

bonus and long-term incentive awards are simple and

easy for stakeholders to understand, avoid complexity

and their rationale and operation are easy to understand.

Our Remuneration Policy was supported by our

shareholders at 2020’s AGM, after consultation with

them, and we continue to implement our policy in all

of our considerations with regard to remuneration;

c. Risk – we strive to ensure that our remuneration

arrangements avoid reputational and other risks from

excessive rewards, and behavioural risks that can arise

from target-based incentive plans, and that possible

risks are identified and mitigated. We have robust

clawback arrangements in our incentive structures

and require holding periods for shares issued under

LTIP awards and bonuses. We closely monitor the

assessment of performance against targets set, and our

Audit Committee provides a robust check and challenge

with regards to the assessment of the Group’s financial

performance and systems of financial control and

risk management;

d. Predictability – the range of possible values of rewards

to individual Directors and any other limits or discretions

have been identified and explained at the time of

approving the policy by shareholders in 2020. We review

the likely outcome of remuneration structures against the

Group’s projected financial performance but also strive

to ensure that the elements of remuneration incentivise

recipients to deliver exceptional performance;

e. Proportionality – we believe that the link between

individual awards, the delivery of strategy and the

long-term performance of the Company is clear

(rewards are geared to the generation of long-term

value for shareholders and appropriately reference

performance of the business over both the short and

longer-term via the balance between annual bonus

and long-term incentive awards) and we do not believe

that outcomes should reward poor performance. The

Committee retains a discretion over bonuses and vesting

of awards in circumstances where the financial position

of the Group is not reflected in the outcome of individual

award criteria. We took action during the previous year

to reduce base remuneration to reflect the effects of

the pandemic and the receipt of government funding

and delayed the annual bonus scheme and the award

of LTIPs; and

f. Alignment to culture – incentive schemes should drive

behaviours consistent with the Company’s purpose,

values and strategy. Esken has a clear strategy to

develop valuable growth assets from aviation and energy

from waste. We believe that our remuneration structures

are clearly dedicated to rewarding our Executives

for the development of long-term value via our LTIP

awards (which reward performance based on stretching

financial performance targets, including TSR) whilst also

motivating good performance in the short term via the

annual bonus scheme. We believe this growth will come

as we create smarter experiences that connect the

world around us in fulfilment of our purpose.

An assessment of whether the remuneration policy

has operated as intended in terms of performance

and quantum:

We believe that the remuneration policy has operated as

intended in terms of Company performance and quantum,

whilst recognising that FY22 was a particularly challenging

year for the Group, as it was the second year in a row in

which remuneration outcomes were challenged by the

ongoing business environment associated with COVID-19.

We also recognise that the Company needs to return to a

position where it offers competitive salaries, a bonus scheme

and long-term incentive awards in order to be able to retain

its key Executives.

The Company’s engagement with shareholders and the

impact this has had on policy and outcomes with regard

to remuneration:

Details on how we engaged with our shareholders during

the year is set out on pages 66 to 68. We consulted widely

with them in 2020 in relation to setting our remuneration

policy, which was subsequently approved by shareholders

at our 2020 AGM, but our engagement with them during

FY22 was more limited. We did, however, consult with them

over the change to the Executive leadership team and the

continued combination of the Chairman and Chief Executive

responsibilities.

The Company’s engagement with the workforce to explain

executive remuneration and how it aligns with wider

Company pay policy:

The extent of our engagement with the workforce is set out on

pages 60 to 62 of this report. We engage with them directly

via our People Forums and via their union representatives. In

our Aviation Services division, we have consulted extensively

on pay and conditions with UNITE, the union, and employees

directly. In May 2021, we finalised negotiations and issued

new terms and conditions across all employees to come

into effect from June 2021. This was so that our contracts

were sustainable and robust enough to see us through the

COVID-19 pandemic and allow for the recovery and growth

strategy to follow this. In January 2022, we consulted with

UNITE once again on the annual employee cost of living

award. This resulted in hourly-paid employees within the

collective bargaining units receiving a 10% uplift in base pay.

The discretion applied to remuneration outcomes

and why:

We applied discretion to remuneration during the year by not

making general cost-of-living increases to base salaries and

delaying the regular implementation of variable pay awards

in the form of bonuses for the year ended 28 February 2022

and LTIPs. The Committee and the Board as a whole felt that

this was necessary in light of the impact of the pandemic

on the Group’s financial position, our receipt of considerable

government support via the furlough scheme and the uncertain

economic environment which persisted for much of the year.

Approval

The Directors’ Remuneration Report has been approved by

the Board of Directors.

Signed on behalf of the Board of Directors.

John Coombs

Chairman of the Remuneration Committee

24 May 2022

Financial Statements

Esken Limited Annual Report and Accounts 2022

109

Strategic Report Corporate Governance

Directors’ Report

Introduction

As a Guernsey registered Company, we are not obliged to

follow the UK Companies Act 2006 but we choose to do

so as indicated in relevant places in the Directors’ Report.

The Directors’ Report also sets out certain information in

accordance with the requirements of the Financial Conduct

Authority’s Listing Rules and Disclosure and Transparency

Rules (DTR).

The Directors’ Report should be read in conjunction with

the Strategic Report (pages 5 to 77) and Governance

(pages 78 to 111) which are incorporated by reference

into the Directors’ Report.

Results and dividends

The financial statements set out the results of the Group

for the year ended 28 February 2022 and are shown on

pages 119 to 172.

There were no dividends paid in respect of the year ended

28 February 2022.

Directors’ and Officers’ insurance and indemnities

The Group maintains an appropriate level of Directors’

and Officers’ insurance whereby Directors are indemnified

against liabilities to third parties to the extent permitted

by Guernsey company law.

The Group also, in addition to the indemnity granted

to the Directors under the Articles of Incorporation,

entered into instruments of indemnity with each Director.

These instruments of indemnity contain provisions that

are permitted by the director liability provisions of the

Companies Act 2006 (in accordance with the Listing Rules),

The Companies (Guernsey) Law, 2008 and the Articles

of Incorporation and remain in force as at the date of

this report.

Directors’ interests

No Director had any interests in contracts of significance

in relation to the Company’s business during the year.

Political donations

No donations were made for political purposes during the

year in question.

Share capital

Details of the authorised and issued share capital and

reserves of the Company are shown in note 30 to the

financial statements.

During the year ended 28 February 2022, the Company

issued 394,410,618 ordinary shares on 26 August 2021 in

connection with the Firm Placing and Placing and Open

Offer announced on 27 July 2021.

As at 28 February 2022, the Company held no

treasury shares.

The share capital of Esken Limited at 28 February 2022

was made up of 1,025,336,741 ordinary shares of 10p and

the total number of voting rights was 1,025,336,741. The

ordinary shares are listed on the London Stock Exchange.

Shareholdings, voting rights and Articles of

Incorporation

The Board has absolute discretion to decline to register

any transfer of any share which is not a fully paid share or

on which the Company has a lien, provided that this would

not prevent dealings in the share from taking place on an

open and proper basis on the London Stock Exchange

(if applicable).

The Articles also provide that the Board may decline to

(a) In relation to a share in a certified form, if evidence on

title cannot be provided;

(b) It is in respect of more than one class of share; or

(d) It is in favour of any Non-Qualified Holder (as defined

in the Articles).

Registration of a transfer of an uncertified share may only

be refused in the circumstances set out in the rules and

regulations applicable to CREST and where, in the case of a

transfer to joint holders, the number of joint holders to whom

the uncertified shares is to be transferred exceeds four.

The Board, under the Articles of Incorporation, may appoint

a Director but any such Director must stand for election

at the next General Meeting. Directors are elected or re-

elected by ordinary resolution at a General Meeting. Under

the Articles, Directors retire and offer themselves for re-

election annually. The Articles of Incorporation may only be

amended by a special resolution.

Substantial shareholdings

The table below sets outs, as at 29 April 2022 those

shareholders who owned 3% or more of the issued ordinary

shares of the Company.

Name

Number of

ordinary shares

29 April 2022 %

Toscafund Asset Management 285,077,383 27.80

Strategic Value Partners 94,101,386 9.18

Harwood Capital Mgt Group 81,870,883 7.98

Schroders 57,279,110 5.59

Cyrus Capital Partners 53,763,529 5.24

Invesco 39,460,550 3.85

Hargreaves Lansdown PLC 36,850,510 3.59

Mr Richard Griffiths 33,807,667 3.30

Tetragon Financial Group Limited 33,170,440 3.24

Royal London Mutual Assurance

Society 30,755,391 3.00

Esken Limited Annual Report and Accounts 2022

110

Other information

The Company has chosen to set out in the Strategic Report certain information which would be required under Section 414C

(11) of the Companies Act 2006 (if that Act were to apply to the Company) to be contained in the Directors’ Report. That

information, together with other disclosures required by the Companies Act 2006 (as if that Act applied to the Company)

and the DTR, can be found on the pages listed below.

Corporate governance DTR 7.2.1R to DTR 7.2.11R Pages 78 to 111

Directors’ biographical details

and dates of appointment

Companies Act 2006 Section 416(1)(a)

Pages 78 to 79

Directors’ interests in shares Page 97

Diversity DTR 7.2.8AR Page 47

Employment of disabled persons Paragraph 10, Schedule 7, Large and Medium-sized Companies

and Group (Accounts and Reports) Regulations 2008

(2008 Regulations)

Page 47

Engaging with stakeholders Paragraphs 11B and 11C, Schedule 7, 2008 Regulations

Pages 60 to 68

Employee engagement Companies (Miscellaneous Reporting) Regulations 2018 Pages 60 to 61

Future developments in the business Paragraphs 7(1)(a) and 7(2), Schedule 7, 2008 Regulations

Pages 24 to 27

Greenhouse gas (GHG) emissions Paragraphs 15,-20 Schedule 7, 2008 Regulations

Pages 14 to 15

Energy and carbon information Companies (Directors’ Report) and Limited Liability

Partnerships (Energy and Carbon Report) Regulations 2018

Pages 54 to 58

Risk management and internal control:

How the business manages risk

Paragraph 6, Schedule 7, 2008 Regulations and DTR 4.1.11R(6)

Pages 69 to 76

1 As if the Companies Act 2006 and the 2008 Regulations applied to the Company.

Going concern

Directors’ Report continued

The Group’s business activities, together with factors likely

to affect its future performance and position, are set out

in the Chairman’s statement on pages 20 to 25 and the

financial position of the Group, its cash flows and funding

are set out in the Financial Review on pages 28 to 31.

For detailed going concern disclosures, please refer to note 1

on page 124.

Directors’ responsibilities

The Directors are responsible for preparing the annual financial

statements in accordance with Companies (Guernsey) Law

2008 and UK-adopted international accounting standards.

Our Guernsey registration dates back to January 2002,

the days of the Westbury Property Fund. We have looked

at options to re-register in the UK and have found it to be

too complicated and costly to enact at this time. Guernsey

company law requires the Directors to prepare Group financial

statements for each financial year.

Under that law they have elected to prepare the Group

financial statements in accordance with UK-adopted

international accounting standards and applicable law.

Under common law, the Directors must not approve the

financial statements unless they are satisfied that they give

a true and fair view of the state of affairs of the Company

and of its profit or loss for that period.

In preparing those financial statements, the Directors are

required to:

• Select suitable accounting policies and apply them

consistently.

• Make judgements and estimates that are reasonable,

relevant and reliable.

• State whether they have been prepared in accordance

with UK-adopted international accounting standards.

• Assess the Group’s ability to continue as a going concern,

disclosing, as applicable, matters related to going concern.

• Use the going concern basis of accounting unless they

either intended to liquidate the Company or to cease

operations, or have no realistic alternative but to do so.

Financial Statements

Esken Limited Annual Report and Accounts 2022

111

Strategic Report Corporate Governance

The Directors are responsible for such internal control as

they determine is necessary to enable the preparation of

financial statements that are free from material misstatement,

whether due to fraud or error, and have general responsibility

for taking such steps as are reasonably open to them to

safeguard the assets of the Company and to prevent and

detect fraud and other irregularities.

Directors are responsible for keeping proper accounting

records that disclose with reasonable accuracy at any

time the financial position of the Group and enable them

to ensure that the financial statements comply with the

Companies (Guernsey) Law 2008.

They are also responsible for safeguarding the assets of

the Group and hence for taking reasonable steps for the

prevention of fraud and other irregularities.

The Directors are responsible for the maintenance and

integrity of the corporate and financial information included

on the Group’s website. Legislation in Guernsey governing

the preparation and dissemination of financial statements

may differ from legislation in other jurisdictions.

The Board and senior Executives of the Group are

accountable to the shareholders and communicate

with them on a regular basis in a number of ways.

Communication methods and channels include:

• Annual General and Extraordinary Meetings.

• Announcements on the London Stock Exchange.

• Regular briefings on the Group’s website.

• Bi-annual presentations to institutional shareholders.

Responsibility statement of the Directors in respect of

the Annual Report and Group financial statements

The Directors confirm to the best of their knowledge that:

• The financial statements, prepared in accordance with UK-

adopted international accounting standards, give a true

and fair view of the assets, liabilities, financial position and

profit or loss of the Group.

• The Annual Report includes a fair view of the development

and performance of the business and the position of the

Group and the undertakings included in the consolidation

taken as a whole, together with a description of the

principal risks and uncertainties that the Group faces.

• The Directors consider the Annual Report and Accounts,

taken as a whole, to be fair, balanced and understandable

and to contain the information necessary for shareholders

to assess and provide the Group’s position and

performance, business model and strategy.

• A robust assessment of the principal risks facing the

Group, including those that would threaten its business

model, future performance, solvency and liquidity has

taken place.

Auditor

Resolutions to appoint the auditor of the Company following

the outcome of the ongoing tender process referred to

elsewhere in this document and for the approval of its

remuneration are to be proposed at the 2022 AGM.

The Directors who held office at the date of the approval

of this Directors’ Report confirm that, so far as they are

each aware, there is no relevant audit information of

which the Group’s auditor is unaware; and each Director

has taken all the steps that they ought to have taken as

Director to make themselves aware of any relevant audit

information and establish that the Group’s auditor is aware

of that information.

The Directors’ Report was approved by the Board and

signed on its behalf by:

Matthew Joy

Company Secretary

24 May 2022

Esken plc Annual Report and Accounts 2022

112

Independent Auditor’s Report

to the members of Esken Limited

1. Our opinion is unmodified

We have audited the financial statements of Esken Limited

(the Group) for the year ended 28 February 2022, which

comprise the consolidated income statement, consolidated

statement of comprehensive income, consolidated

statement of financial position, consolidated statement

of changes in equity, consolidated statement of cashflows

for the year then ended and the related notes, including

the accounting policies in note 1.

In our opinion the financial statements:

• give a true and fair view of the state of the Group’s

affairs as at 28 February 2022 and of the Group’s

loss for the year then ended;

• are in accordance with UK-adopted international

accounting standards; and

• comply with the Companies (Guernsey) Law 2008.

Basis for opinion

We conducted our audit in accordance with International

Standards on Auditing (UK) (ISAs (UK)) and applicable law.

Our responsibilities are described below. We have fulfilled

our ethical responsibilities under, and are independent of the

Group in accordance with, UK ethical requirements including

the FRC Ethical Standard as applied to other listed entities.

We believe that the audit evidence we have obtained is a

sufficient and appropriate basis for our opinion.

Overview

Materiality:

Group financial

statements as a whole

£1,000,000 (2021: £985,000)

0.96% (2021: 0.97%) of revenue

Coverage 83% (2021: 93%) of Group revenue

Key audit matters vs 2021

Recurring risks Going concern

Event driven New: Aircraft maintenance

provision held by Propius

Esken plc Annual Report and Accounts 2022

113

Strategic Report Corporate Governance Financial Statements

2. Material uncertainty relating to going concern

The risk Our response

Going concern

We draw attention to note 1 to

the financial statements which

describes a material uncertainty

in respect of securing the

necessary funds required

before maturity of the revolving

credit facility in January

2023 to meet working capital

requirements, the repayment of

aircraft leases and maintenance

commitments, and repayment of

the exchangeable bond before

its maturity in May 2024.

These events and conditions,

along with the other matters

explained in note 1, constitute

a material uncertainty that may

cast significant doubt on the

Group’s ability to continue as a

going concern. Our opinion is

not modified in this respect.

Refer to (Audit Committee

report) page 94, disclosure of

material uncertainties related to

going concern (note 1).

Disclosure quality

The financial statements explain how the

Board has formed a judgement that it is

appropriate to adopt the going concern

basis of preparation for the Group.

That judgement is based on an evaluation

of the inherent risks to the Group’s business

model and how those risks might affect

the Group’s financial resources or ability

to continue operations over a period until

May 2024 from the date of approval of the

financial statements.

There is little judgement involved in the

Director’s conclusion that the risks and

circumstances described in note 1 to the

financial statements represent a material

uncertainty over the ability of the Group to

continue as a going concern for the period

until May 2024, from the date of approval

of the financial statements.

However, clear and full disclosure of the

facts and the Directors’ rationale for the use

of the going concern basis of preparation,

including that there is a related material

uncertainty, is a key financial statement

disclosure and so was the focus of our audit

in this area. Auditing standards require that

to be reported as a key audit matter.

Our procedures included:

Assessing transparency: We considered whether

the going concern disclosure in note 1 to the

financial statements gives a full and accurate

description of the Directors’ assessment of

going concern, including the identified risks, the

availability of funding and the likely outcome

should the required funding not be obtained in

the timetable expected.

We assessed the completeness of the going

concern disclosure.

Testing application: We inspected the aircraft

leasing agreements held by Propius in addition to

the exchangeable bond agreement to assess the

expected payment profile of these obligations and

compared this to management’s model.

Enquiry of Directors: We made inquiries with

the Board of Directors to understand the status

of refinancing and available funding options with

external parties.

Assessing forecasts: We critically assessed

assumptions in base case and downside

scenarios relevant to liquidity, in particular in

relation to securing the required funding, the

ability to achieve forecasts, accuracy of historical

forecasts and consistency with other internal

forecasts. We assessed whether downside

scenarios applied mutually consistent and severe

assumptions in aggregate, using our assessment

of the possible range of each key assumption and

our knowledge of inter-dependencies.

We evaluated the achievability of the actions the

Directors consider they would take to improve

the position should the risks materialise, which

included deferral of discretionary outflows and

the sale of non-core assets, taking into account

the extent to which the Directors can control the

timing and outcome of these.

Esken plc Annual Report and Accounts 2022

114

Independent Auditor’s Report continued

to the members of Esken Limited

3. Other key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the

financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud)

identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in

the audit; and directing the efforts of the engagement team. Going concern is a significant key audit matter and is described

in section 2 of our report. We summarise below the other key audit matter, in arriving at our audit opinion above, together

with our key audit procedures to address this matter. This matter was 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 this matter.

The risk Our response

Aircraft maintenance

reserves held by Propius

Refer to summary of significant

accounting judgements and

estimates (note 2c), Provisions

(note 25), Audit committee

report page 94.

(£23.6m; 2021: £20.0m)

Subjective estimates

Propius a wholly owned subsidiary (as

a lessee) leases aircrafts from a third

party. Propius previously sub-leased

these aircraft to Stobart Air. However,

following the liquidation of Stobart Air

the aircraft were recovered from the

administrator by Propius and grounded.

Under the head lease agreement

Propius is required to return the

aircraft in a pre-determined condition

specified in the lease agreement at the

termination date. During the year, the

Group has re-assessed the value of the

maintenance reserve due to the aircraft

being grounded.

Provisions for the maintenance reserves

held by Propius require the directors to

make judgments and estimates for the

full costs of ensuring that the aircraft are

returned in a pre-determined condition

specified in the lease agreement at the

termination date. The maintenance costs

are sensitive to the underlying condition

of specific components (for example

engines, propellers and air frames)

and the associated overhaul costs.

The effect of this matter is that, as part

of our risk assessment for audit planning

purposes, we determined that the

amount of the provision required had a

high degree of estimation uncertainty,

with a potential range of reasonable

outcomes greater than our materiality for

the financial statements as a whole, and

possibly many times that amount. The

financial statements (note 2c) disclose

the sensitivity estimated by the Group.

We performed the tests below rather than

seeking to rely on any of the Group’s controls

because our knowledge of the design of these

controls indicated that we would not be able to

obtain the required evidence to support relying

on them.

Our procedures included:

Test of detail: We obtained and assessed the

head lease agreement to evaluate the existence

and completeness of maintenance obligations

including any penalty clauses for each aircraft.

Challenge of assumptions: We challenged the

Group’s assumptions by assessing the accuracy

and completeness of the inputs into the Group’s

maintenance reserve calculation by agreeing

costs to supporting documentation such as the

lease agreements, third party quotes, invoices for

comparable maintenance events. We obtained

individual aircraft flight hour reports maintained

for regulatory purposes to corroborate the flight

hours in the maintenance reserves calculation.

Sensitivity analysis: We performed sensitivity

analysis of the key assumptions, which included

the scrap rates of propeller blades and the cost

uplift applied to airframe checks to take account

of the time the aircraft had been grounded.

Assessing transparency: We assessed

whether the Group’s disclosure in respect

of the maintenance provision, including the

sensitivity of the provision to changes in key

assumptions, have been adequately disclosed.

The Key Audit Matter in the prior year relating to Stobart Air and Propius-provisions for guarantees given by the Group prior

to the re-acquisition of lease obligations, impairment of acquired right-of-use assets post-acquisition, and post-balance

sheet decision to liquidate Stobart Air, which related to the Group’s guarantees prior to reacquisition (which took place in the

prior year), is no longer a Key Audit Matter. Following the liquidation of Stobart Air in the year, we have identified the Aircraft

maintenance reserves held by Propius as a Key Audit Matter. We continue to perform procedures over the impairment of

Right of Use assets, however following the impairment recognised to reduce the carrying amount to £nil in the prior year

we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately

identified in our report this year.

Esken plc Annual Report and Accounts 2022

115

Strategic Report Corporate Governance Financial Statements

300000

600000

900000

1200000

1500000

Group revenue from

continuing operations

Revenue

£104.6m (2021: total

revenue £101.4m)

Group materiality

£1.0m

£0.700m

£50,000

£0.650m

£1.0m (2021: £0.985m)

Whole financial

statements materiality

(2021: £0.985m)

Range of materiality

at 11 components

(£0.050m-£0.700m)

(2021: 12 components

£0.130m to £0.715m)

Misstatements reported

to the Audit Committee

(2021: £49,250)

Whole financial

statements performance

materiality (2021: £0.640m)

Group revenue

(2021: 93%)

83%

Group loss before tax

(2021: 91%)

91%

Group total assets

(2021: 94%)

89%

10 13

● Full scope for Group audit

purposes 2022

● Specified risk-focused audit

procedures 2022

● Full scope for Group audit

purposes 2021

● Specified risk-focused audit

procedures 2021

● Residual components

4. Our application of materiality and an overview of the

scope of our audit

Materiality for the financial statements as a whole was set

at £1,000,000 (2021: £985,000), determined with reference

to a benchmark of revenue, of which it represents 0.96%

(2021: 0.97%).

In line with our audit methodology, our procedures on

individual account balances and disclosures were performed

to a lower threshold, performance materiality, so as to

reduce to an acceptable level the risk that individually

immaterial misstatements in individual account balances

add up to a material amount across the financial statements

as a whole.

Performance materiality was set at 65% (2021: 65%) of

materiality for the financial statements as a whole, which

equates to £650,000 (2021: £640,000). We applied this

percentage in our determination of performance materiality

based on our assessment of the control environment during

the current period.

We agreed to report to the Audit Committee any

corrected or uncorrected identified misstatements

exceeding £50,000 (2021: £49,250), in addition to other

identified misstatements that warranted reporting on

qualitative grounds.

Our audit of the Group was undertaken to the materiality

and performance materiality levels specified above and

was performed by a single audit team.

Of the Group’s 19 (2021: 17) reporting components, we

subjected five (2021: six) to full scope audits for Group

purposes and six (2021: six) to specified risk-focused audit

procedures. The latter were not individually financially

significant enough to require a full scope audit for Group

purposes, but did present specific individual risks that

needed to be addressed. We conducted reviews of financial

information (including enquiry) at a further eight (2021: five)

non-significant components to identify any risks in these

components. No such risks noted.

The components within the scope of our work accounted for

the percentages illustrated opposite.

The remaining 17% (2021: 7%) of total Group revenue,

9% (2021: 9%) of Group loss before tax and 11%

(2021: 6%) of total Group assets is represented by

eight (2021: five) reporting components, none of which

individually represented more than 10% (2021: 10%) of

any of total Group revenue, Group loss before tax or total

Group assets. For these components, we performed

analysis at an aggregated Group level to re-examine our

assessment that there were no significant risks of material

misstatement within these.

The Group team approved the component materialities,

which ranged from £50,000 to £700,000 (2021: £130,000 to

£715,000), having regard to the mix of size and risk profile of

the Group across the components. The work on 0 of the 19

components (2021: 1 of the 17 components) was performed

by component auditors and the rest, including the audit of

the parent company, was performed by the Group team.

The scope of the audit work performed was predominantly

substantive as we placed limited reliance upon the Group’s

internal control over financial reporting.

Esken plc Annual Report and Accounts 2022

116

Independent Auditor’s Report continued

to the members of Esken Limited

5. The impact of climate change on our audit

In planning our audit, we have considered the potential

impact of risks arising from climate change on the Group’s

business activities and its financial statements.

We considered that the key areas contained within the

financial statements for which climate change could have

the greatest impact were the recoverability of goodwill

relating to the Energy CGU and property, plant and

equipment relating to the LSA CGU.

We considered the adequacy of the impairment testing

disclosures for both the property, plant and equipment

relating to the LSA CGU and goodwill relating to the

Energy CGU and given the level of headroom in those

impairment assessments we have not assessed climate

related risk to be a key assumption in the calculation of

the recoverable amount.

We took climate change factors into account of evaluating

the directors’ assessment of the useful life of the non-

current assets relating to the Energy CGU.

As a part of our audit, we have performed risk assessment

procedures, including making enquiries of Directors and

management, reading Board meeting minutes and applying

our knowledge of the Group and sectors in which it operates

to understand the extent of the potential impact of climate

change risk on the Group’s financial statements.

While the impact of climate change on the Group is

inherently uncertain, our risk assessment was therefore

that the impact of climate change does not currently have

a significant impact on the financial statements. Climate

change therefore only had a limited impact on the overall

audit strategy, the allocation of resources in the audit and

directing the efforts of the engagement team.

We have read the Group’s TCFD in the Annual Report

considered consistency with the financial statements

and our audit knowledge.

6. Going concern basis of preparation

The Directors have prepared the financial statements on

the going concern basis as they do not intend to liquidate

the Group,or to cease its operations, and as they have

concluded that the Group’s financial position means that this

is realistic for at least 24 months from the date of approval

of the financial statements (the going concern period). As

stated in section 2 of our report, they have also concluded

that there is a material uncertainty related to going concern.

An explanation of how we evaluated management’s

assessment of going concern is set out section 2 of

our report.

Our conclusions based on this work:

• we consider that the Directors’ use of the going concern

basis of accounting in the preparation of the financial

statements is appropriate; and

• we have nothing material to add or draw attention to

in relation to the Directors’ statement in note 1 to the

financial statements on the use of the going concern basis

of accounting, and their identification therein of a material

uncertainty over the Group’s ability to continue to use

that basis for the going concern period, and we found the

going concern disclosure in note 1 to be acceptable.

7. Fraud and breaches of laws and regulations –

ability to detect

Identifying and responding to risks of material

misstatement due to fraud

To identify risks of material misstatement due to fraud

(fraud risks) we assessed events or conditions that could

indicate an incentive or pressure to commit fraud or provide

an opportunity to commit fraud. Our risk assessment

procedures included:

• Enquiring of Directors, the Audit Committee, internal audit,

internal and external legal counsel and inspection of policy

documentation as to the Group’s high-level policies and

procedures to prevent and detect fraud and the Group’s

channel for ‘whistleblowing’, as well as whether they have

knowledge of any actual, suspected or alleged fraud.

• Reading Board and Audit Committee meeting minutes.

• Considering remuneration incentive schemes and

performance targets for Directors and key management

personnel.

• Using analytical procedures to identify any unusual or

unexpected relationships.

We communicated identified fraud risks throughout the

audit team and remained alert to any indications of fraud

throughout the audit.

As required by auditing standards, and taking into account

possible pressures to meet profit targets we perform

procedures to address the risk of management override of

controls, in particular the risk that Group and component

management may be in a position to make inappropriate

accounting entries. On this audit we do not believe there is

a fraud risk related to revenue recognition because there

are limited incentives, rationalisations and/or opportunities

to fraudulently adjust revenue recognition, in addition to the

fact revenue levels have significantly fallen as a result of

COVID-19.We did not identify any additional fraud risks.

We discussed with the Audit Committee and those charged

with governance matters related to actual or suspected

fraud, for which disclosure is not necessary, and considered

any implications for our audit.

Identifying and responding to risks of material

misstatement due to non-compliance with laws

and regulations.

We identified areas of laws and regulations that could

reasonably be expected to have a material effect on the

financial statements from our general commercial and

sector experience, through discussion with the Directors

and other management (as required by auditing standards),

and from inspection of the Group’s regulatory and legal

correspondence and discussed with the Directors and

other management the policies and procedures regarding

compliance with laws and regulations.

As the Group is regulated, our assessment of risks involved

gaining an understanding of the control environment

including the entity’s procedures for complying with

regulatory requirements.

Esken plc Annual Report and Accounts 2022

117

Strategic Report Corporate Governance Financial Statements

We communicated identified laws and regulations

throughout our team and remained alert to any indications

of non-compliance throughout the audit.

Firstly, the Group is subject to laws and regulations

that directly affect the financial statements including

financial reporting legislation (including related companies

legislation), taxation legislation and we assessed the extent

of compliance with these laws and regulations as part of our

procedures on the related financial statement items.

Secondly, the Group is subject to many other laws and

regulations where the consequences of non-compliance

could have a material effect on amounts or disclosures in

the financial statements, for instance through the imposition

of fines or litigation or the loss of Group’s license to operate.

We identified the following areas as those most likely to

have such an effect: environmental regulations, aviation

regulations, health and safety, anti-bribery, employment law,

and certain aspects of company legislation recognising the

nature of the Group’s activities and its legal form. Auditing

standards limit the required audit procedures to identify

non-compliance with these laws and regulations to enquiry

of the Directors and other management and inspection of

regulatory and legal correspondence, if any. Therefore, if

a breach of operational regulations is not disclosed to us

or evident from relevant correspondence, an audit will not

detect that breach.

We discussed with the Audit Committee matters related

to actual or suspected breaches of laws or regulations,

for which disclosure is not necessary, and considered

any implications for our audit.

Context of the ability of the audit to detect fraud

or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an

unavoidable risk that we may not have detected some

material misstatements in the financial statements, even

though we have properly planned and performed our audit

in accordance with auditing standards. For example, the

further removed non-compliance with laws and regulations

is from the events and transactions reflected in the financial

statements, the less likely the inherently limited procedures

required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk

of non-detection of fraud, as these may involve collusion,

forgery, intentional omissions, misrepresentations, or the

override of internal controls. Our audit procedures are

designed to detect material misstatement. We are not

responsible for preventing non-compliance or fraud and

cannot be expected to detect non-compliance with all laws

and regulations.

8. We have nothing to report on the other information

in the Annual Report

The Directors are responsible for the other information

presented in the Annual Report together with the financial

statements. Our opinion on the financial statements does

not cover the other information and, accordingly, we do

not express an audit opinion or, except as explicitly stated

below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and,

in doing so, consider whether, based on our financial

statements’ audit work, the information therein is materially

misstated or inconsistent with the financial statements or

our audit knowledge. Based solely on that work we have not

identified material misstatements in the other information.

Disclosures of emerging and principal risks and

longer-term viability

We are required to perform procedures to identify whether

there is a material inconsistency between the Directors’

disclosures in respect of emerging and principal risks and

the viability statement, and the financial statements and

our audit knowledge.

Based on those procedures, other than the material

uncertainties related to going concern referred to above, we

have nothing further to add or draw attention to in relation to:

• the Directors’ confirmation within the viability statement

page 77 that they have carried out a robust assessment

of the emerging and principal risks facing the Group,

including those that would threaten its business model,

future performance, solvency and liquidity;

• the principal risks disclosures describing these risks and

how emerging risks are identified,and explaining how they

are being managed and mitigated; and

• the Directors’ explanation in the viability statement of

how they have assessed the prospects of the Group, over

what period they have done so and why they considered

that period to be appropriate, and their statement as to

whether they have a reasonable expectation that the

Group will be able to continue in operation and meet

its liabilities as they fall due over the period of their

assessment, including any related disclosures drawing

attention to any necessary qualifications or assumptions.

Our work is limited to assessing these matters in the

context of only the knowledge acquired during our financial

statements’ audit. As we cannot predict all future events

or conditions and as subsequent events may result in

outcomes that are inconsistent with judgements that were

reasonable at the time they were made, the absence of

anything to report on these statements is not a guarantee

as to the Group’s longer-term viability.

Esken plc Annual Report and Accounts 2022

118

Corporate governance disclosures

We are required to perform procedures to identify whether

there is a material inconsistency between the Directors’

corporate governance disclosures and the financial

statements and our audit knowledge.

Based on those procedures, we have concluded that each

of the following is materially consistent with the financial

statements and our audit knowledge:

• the Directors’ statement that they consider that the

Annual Report and financial statements taken as a whole

is fair, balanced and understandable, and provides the

information necessary for shareholders to assess the

Group’s position and performance, business model

and strategy;

• the section of the Annual Report describing the work of

the Audit Committee, including the significant issues that

the Audit Committee considered in relation to the financial

statements, and how these issues were addressed; and

• the section of the Annual Report that describes the review

of the effectiveness of the Group’s risk management and

internal control systems.

We are required to review the part of the Corporate

Governance Statement relating to the Group’s compliance

with the provisions of the UK Corporate Governance Code

specified by the Listing Rules for our review.

We have nothing to report in this respect.

9. We have nothing to report on the other matters on

which we are required to report by exception

Under the Companies (Guernsey) Law, 2008 we are required

to report to you if, in our opinion:

• the Group has not kept proper accounting records; or

• the consolidated financial statements are not in

agreement with the accounting records; or

• we have not received all the information and explanations,

which to the best of our knowledge and belief are

necessary for the purpose of our audit.

We have nothing to report in these respects.

10. Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page

110, the Directors are responsible for: the preparation of

the financial statements that give a true and fair view; such

internal control as they determine is necessary to enable

the preparation of financial statements that are free from

material misstatement, whether due to fraud or error;

assessing the Group’s ability to continue as a going concern,

disclosing, as applicable, matters related to going concern;

and using the going concern basis of accounting unless they

either intend to liquidate the Group or to cease operations,

or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about

whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and

to issue our opinion in an auditor’s report. Reasonable

assurance is a high level of assurance, but does not

guarantee that an audit conducted in accordance with

ISAs (UK) will always detect a material misstatement when

it exists. Misstatements can arise from fraud or error and

are considered material if, individually or in aggregate,

they could reasonably be expected to influence the

economic decisions of users taken on the basis of the

financial statements.

A fuller description of our responsibilities is provided on the

FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The Company is required to include these financial

statements in an annual financial report prepared using the

single electronic reporting format specified in the TD ESEF

Regulation. This auditor’s report provides no assurance over

whether the annual financial report has been prepared in

accordance with that format.

11. The purpose of our audit work and to whom we owe

our responsibilities

This report is made solely to the Company’s members, as

a body, in accordance with section 262 of the Companies

(Guernsey) Law, 2008. 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 Company and the Company’s

members, as a body, for our audit work, for this report,

or for the opinions we have formed.

Michael Froom for and on behalf of KPMG LLP

Chartered Accountants and Recognised Auditor

1 St Peter’s Square

Manchester

M2 3AE

24 May 2022

Independent Auditor’s Report continued

to the members of Esken Limited

Esken Limited Annual Report and Accounts 2022

119

Strategic Report Corporate Governance Financial Statements

Consolidated income statement

for the year ended 28 February 2022

Notes

Year ended

28 February

2022

£’000

Restated

Year ended

28 February

2021

£’000

Continuing operations

Revenue 4 104,633 101 ,404

Other income 6 8,36 4 389

Operating expenses – other 7 (102,479) (10 9,0 39)

Share of post-tax losses of associates and joint ventures 14 (3 56) (218)

Gain on swaps 22 93 80

Adjusted EBITDA 10, 25 5 (7, 3 8 4)

Depreciation 13 (2 0,4 6 4) (1 9, 424)

(Impairment)/reversal of impairment of property assets 13 (5, 36 9) 824

Operating loss (15,578) (2 5,9 8 4)

Impairment of loan notes 10 – (8 ,000)

Finance costs 10 (21,2 28) (13 ,1 9 1)

Finance income 9 2, 239 3, 004

Loss before tax (3 4, 5 67) (4 4 ,1 7 1)

Tax 11 9,8 65 7, 0 8 3

Loss for the year from continuing operations (24,702) (3 7, 0 8 8)

Discontinued operations

Loss from discontinued operations, net of tax 5 (2,3 86) (118 ,02 5)

Loss for the year (2 7, 0 8 8) (1 5 5 ,1 1 3)

Notes

Year ended

28 February

2022

Restated

Year ended

28 February

2021

Loss per share expressed in pence per share – continuing operations

Basic 12 (2. 99)p (6. 89)p

Diluted 12 (2. 99)p (6. 89)p

Loss per share expressed in pence per share – total

Basic 12 (3 . 28)p (28.81)p

Diluted 12 (3 . 28)p (28.81)p

1 The 2021 results have been restated where required due to IFRS 5 Discontinued Operations. Refer to note 5 for more details.

The notes on pages 124 to 171 are an integral part of these consolidated financial statements.

Esken Limited Annual Report and Accounts 2022

120

Consolidated statement of comprehensive income

for the year ended 28 February 2022

Notes

Year ended

28 February

2022

£’000

Restated

Year ended

28 February

2021

£’000

Loss for the year (2 7, 0 8 8) (1 5 5 ,1 1 3)

Discontinued operations, net of tax, relating to exchange differences (1 , 824) 3, 826

Other comprehensive (expense)/income – items that are or may be reclassified

subsequently to profit or loss, net of tax (1, 82 4) 3,82 6

Remeasurement of defined benefit plan 23 1, 876 1,1 76

Change in fair value of financial assets classified as fair value through

other comprehensive income 15 (1 ,18 7) 4,64 3

Rent review of property headlease and sublease (323) –

Tax on items relating to components of other comprehensive income 11 (41 7) (182)

Other comprehensive (expense)/income – items that will not be reclassified to

profit or loss, net of tax (51) 5,63 7

Other comprehensive (expense)/income for the year, net of tax (1, 875) 9, 4 63

Total comprehensive expense for the year (2 8,9 63) (145, 65 0)

1 The 2021 results have been restated where required due to IFRS 5 Discontinued Operations. Refer to note 5 for more details.

Of the total comprehensive expense for the year, a loss of £24, 753, 000 (2021: £31,451 ,000) is in respect of continuing

operations and a loss of £4 ,210, 000 (2021: £114, 199 ,000) is in respect of discontinued operations.

The notes on pages 124 to 171 are an integral part of these consolidated financial statements.

Esken Limited Annual Report and Accounts 2022

121

Strategic Report Corporate Governance Financial Statements

Consolidated statement of financial position

as at 28 February 2022

Notes

28 February

2022

£’000

28 February

2021

£’000

Non-current assets

Property, plant and equipment 13 26 5,6 37 285,621

Investment in associates and joint ventures 14 1,0 16 1, 372

Other financial assets 15 14 ,1 0 5 1 0,392

Intangible assets 16 5 4,669 54, 669

Net investment in leases 28 16,20 4 15 , 824

Defined benefit pension surplus 23 348 –

Other receivables 18 1, 495 1,4 95

3 5 3, 474 36 9, 373

Current assets

Inventories 17 12, 5 52 15, 33 4

Trade and other receivables 18 23, 8 83 27 ,378

Cash and cash equivalents 22 52 ,73 8 12, 4 08

Corporation tax 11 – 3 24

8 9 ,1 7 3 55,444

Total assets 4 42 ,6 47 424 ,817

Non-current liabilities

Loans and borrowings 22 (2 1 7, 5 3 9) (122,1 16)

Defined benefit pension obligation 23 – (2,418)

Other liabilities 20 (8 ,6 43) (8 ,2 71)

Deferred tax liability 24 – (2 61)

Provisions 25 (13, 279) (3 9, 53 4)

(2 39, 4 61) (1 72, 600)

Current liabilities

Trade and other payables 19 (3 0 ,1 6 0) (52,73 5)

Financial liabilities 22 – (1, 5 81)

Loans and borrowings 22 (24 , 714) (8 9 ,12 1)

Exchangeable bonds 22 (52,3 8 5) (52, 01 0)

Corporation tax 11 (5,1 1 0) –

Provisions 25 (2 0 , 6 74) (8, 457)

(13 3,0 43) (2 03 ,9 04)

Total liabilities (3 7 2, 50 4) (376,504)

Net assets 7 0 ,14 3 4 8,31 3

Capital and reserves

Issued share capital 27 102,5 34 6 2,492

Share premium 40 3, 225 3 90, 336

Foreign currency exchange reserve 218 3, 826

Reserve for own shares held by employee benefit trust (7, 5 9 6) (7 , 480)

Retained deficit (428 , 23 8) (4 0 0, 8 61)

Group shareholders’ equity 7 0 ,14 3 4 8,31 3

The notes on pages 124 to 171 are an integral part of these consolidated financial statements.

The financial statements were approved and authorised for issue by the Board of Directors on 24 May 2022 and were signed

on its behalf by:

David Shearer Lewis Girdwood

Executive Chairman Director

Esken Limited Annual Report and Accounts 2022

122

Consolidated statement of changes in equity

for the year ended 28 February 2022

For the year ended 28 February 2022

Notes

Issued

capital

£’000

premium

£’000

Foreign

currency

exchange

reserve

£’000

Reserve for

own shares

held by

EBT

£’000

Retained

deficit

£’000

Total

equity

£’000

Balance at 1 March 2021 62,4 92 39 0,33 6 3 ,826 (7 ,480) (4 0 0, 8 61) 48 ,3 13

Loss for the year – – – – (2 7, 0 8 8) (2 7, 0 8 8)

Other comprehensive expense

for the year – – (1, 824) – (51) (1, 875)

Total comprehensive expense

for the year – – (1, 824) – (27 , 139) (28 ,9 63)

Issue of ordinary shares 27 40,04 2 12, 8 8 9 – – (6 0 0) 52, 3 31

Employee benefit trust – – – (116) (4) (120)

Reclassification of exchange

differences on disposal of

subsidiaries – – (1,78 4) – – (1 ,78 4)

Share-based payment charge 26 – – – – 28 5 285

Tax on share-based

payment charge 24 – – – – 81 81

Balance at 28 February 2022 102,534 4 03,22 5 218 (7, 5 9 6) (42 8, 2 38) 7 0 ,1 4 3

For the year ended 28 February 2021

Notes

Issued

capital

£’000

premium

£’000

Foreign

currency

exchange

reserve

£’000

Reserve for

own shares

held by

EBT

£’000

Retained

deficit

£’000

Total

equity

£’000

Balance at 1 March 2020 37, 4 6 5 324 , 3 68 – (7, 1 6 1) (2 5 1 , 5 74) 103,09 8

Loss for the year – – – – (1 5 5,1 13) (15 5 ,1 13)

Other comprehensive income

for the year – – 3, 826 – 5, 637 9, 46 3

Total comprehensive income/

(expense) for the year – – 3, 826 – (149, 476) (14 5, 65 0)

Issue of ordinary shares 27 25, 027 6 5,96 8 – – – 90, 99 5

Employee benefit trust – – – (31 9) 3 (316)

Share-based payment charge 26 – – – – 190 19 0

Tax on share-based

payment charge 24 – – – – (4) (4)

Balance at 28 February 2021 62,492 390,336 3, 826 (7, 4 8 0) (4 0 0,8 61) 48 ,313

The notes on pages 124 to 171 are an integral part of these consolidated financial statements.

Esken Limited Annual Report and Accounts 2022

123

Strategic Report Corporate Governance Financial Statements

Consolidated statement of cash flows

for the year ended 28 February 2022

Notes

Year ended

28 February

2022

£’000

Restated

Year ended

28 February

2021

£’000

Cash generated from continuing operations 31 2,846 1,291

Cash outflow from discontinued operations 5 (1 7, 3 3 0) (30,26 9)

Income taxes paid – (46 5)

Net cash outflow from operating activities (14, 4 84) (29, 4 43)

Purchase of property, plant and equipment (3, 0 15) (3, 02 2)

Purchase/development of property inventories – (16 4)

Proceeds from the sale of property, plant and equipment 1 ,11 5 426

Proceeds from disposal of assets held for sale – 9, 8 67

Receipt of capital element of net investment in lease 1, 5 47 76 8

Acquisition of subsidiary undertakings (net of cash acquired) – (86 4)

Cash disposed on liquidation/disposal of subsidiary undertakings 5 (3 62) (1)

Acquisition of other investments 15 (4, 9 0 0) (973)

Interest received 415 –

Cash outflow from discontinued operations 5 (7,808) (1, 05 8)

Net cash (outflow)/inflow from investing activities (13, 00 8) 4,979

Proceeds from the issue of ordinary shares (net of issue costs) 27 52, 33 0 90, 99 6

Proceeds from issue of convertible debt (net of costs) 22 111, 4 59 –

Proceeds from grants 21 2, 60 0 –

Principal element of lease payments 22 (1 7, 0 2 6) (12,973)

Net repayment of revolving credit facility (net of costs) 22 (5 8 ,1 6 5) (24, 28 6)

Repayment of other borrowings 22 – (4 ,5 0 0)

Interest paid 10 (8, 992) (5 ,4 45)

Cash outflow from discontinued operations 5 (14, 3 84) (16,722)

Net cash inflow from financing activities 6 7, 8 2 2 2 7, 0 7 0

Increase in cash and cash equivalents 40, 330 2,60 6

Cash and cash equivalents at beginning of year 12, 4 08 9, 8 02

Cash and cash equivalents at end of year 52,7 38 1 2,4 08

1 The 2021 results have been restated where required due to IFRS 5 Discontinued Operations. Refer to note 5 for more details.

The notes on pages 124 to 171 are an integral part of these consolidated financial statements.

Esken Limited Annual Report and Accounts 2022

124

Notes to the consolidated financial statements

for the year ended 28 February 2022

1 Accounting policies of Esken Limited

Basis of preparation and statement of compliance

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have

been consistently applied to all the years presented, unless otherwise stated.

These Group financial statements have been prepared in accordance with UK-adopted international accounting standards.

The financial statements of the Group are also prepared in accordance with the Companies (Guernsey) Law 2008.

Esken Limited (the Company) is a Guernsey-registered company. The Company’s ordinary shares are traded on the

London Stock Exchange.

Measurement convention

The financial statements are prepared on the historical cost basis except financial assets held at fair value through other

comprehensive income (FVOCI) and derivative financial instruments which are stated at their fair value.

Going concern

The Group’s business activities, together with factors likely to affect its future performance and position, are set out in the

Executive Chairman’s statement on pages 20 to 25 and the financial position of the Group, its cash flows and funding are

set out in the Financial Review on pages 28 to 31.

Note 22 of the financial statements includes details of the Group’s loans and borrowings at the year end, together with the

Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its

financial instruments and its exposure to credit risk and liquidity risk. After making enquiries, the Directors have a reasonable

expectation that the Group has adequate resources to continue in operational existence for the foreseeable future until

May 2024 (representing the maturity of the exchangeable bond and the going concern assessment period). Accordingly,

the financial statements have been prepared on a going concern basis. However, there is a material uncertainty in respect

of this going concern assumption and the Directors have exercised a significant degree of judgement in concluding that

the Group remains a going concern. In particular, the assumption that a refinancing will be completed at a sufficient level

prior to the expiration of the revolving credit facility (RCF) and exchangeable bond that mature in February 2023 and May

2024 respectively.

In performing the going concern assessment, the Directors have reviewed the cash flow forecasts together with the funding

options that may be available to the Group and the likelihood of them being accessible, including additional funding in excess

of £100m, in the timescale required and anticipated in the forecasts, which cover the period up to May 2024. The additional

funding required principally covers Propius aircraft liabilities, payable over the period to September 2023, and £43.9m for

the refinancing of the exchangeable bond (bond) in May 2024, based on year end valuations. The cash outflow for the bond,

with nominal value of £53.1m, is dependent on the value of the offsetting listed share collateral held at the date of maturity,

valued at £9.2m, at 28 February 2022.

As at 28 February 2022, the Group had cash balances of £52.7m and an undrawn RCF of £20.0m, resulting in headroom

as of that date of £72.7m. However, any drawdowns from the RCF are subject to bank consent. Included in this £52.7m

of cash is £14.4m of cash ringfenced in London Southend Airport (LSA) and its subsidiaries, as part of the Carlyle Global

infrastructure Opportunity Fund (CGI) convertible debt facility. Whilst the Group continues to tightly manage its cash

resources during the post-year end period, the current position is that the Group needs to complete a refinancing of

at least £50m prior to the expiration of the RCF on 1 February 2023, or complete significant asset disposals, otherwise

the Group may be unable to continue trading. In addition, further refinancing will need to occur before the expiration of

the exchangeable bond in May 2024 of at least £50m, unless this requirement is covered by the initial refinancing prior

to 1 February 2023. The Directors have a reasonable expectation, following discussions with external parties, that the

required refinancing will be completed within the timescales required.

Should the refinancing not successfully complete before the expiration of the RCF the Group will have severe liquidity issues

and the Directors would have a limited amount of time to raise additional funds, for example through an equity raise or a

distressed sale of major assets, and this may not be completed in sufficient time to allow the Group to continue trading.

Consequently, the Group, in all likelihood, would need to market LSA for sale. Under both the base and plausible downside

scenario, Group liquidity following the maturity of the existing RCF on 1 February 2023 becomes negative, excluding any

additional mitigating actions such as the proceeds from disposal of non-core assets.

The reasonableness of the assumption made by the Directors that the refinancing funds will be received is a significant

judgement and consequently there is a material uncertainty in respect of securing the necessary funds. The Directors have

prepared base case forecasts to May 2024, together with sensitivity analysis on those forecasts, including a severe but

plausible downside set of assumptions detailed below. On the assumption that the above planned refinancing is successful,

the base case forecast indicates Group headroom of c.£24m at May 2024; and the severe but plausible downside indicates

that the Group will have headroom of c.£13m at this point. This excludes any cash inflows from non-core asset sales or the

potential mitigation of leased aircraft cashflows should the opportunity arise to return the aircraft earlier than expected.

Esken Limited Annual Report and Accounts 2022

125

Strategic Report Corporate Governance Financial Statements

The Renewables division has recovered to its pre-COVID-19 volumes, and the gate fee decline observed as a result of

COVID-19 have now reversed. The Aviation division has shown initial signs of recovery but at a much slower pace as airlines

continue to arrange their scheduling and routes, whilst considering the different COVID-19 government policies across

Europe, the availability of aircraft, pilots and crew, as well as the difficulties from the ongoing conflict in Eastern Europe.

In particular, and for the purposes of this going concern analysis only, the base case forecast assumes:

• The Group completes the refinancing before the required time, resulting in additional funding in excess of c.£100m of

which c.£50m will be used to settle liabilities in relation to legacy aircraft leases following the liquidation of the regional

airline Stobart Air;

• The Group terminates its undrawn RCF facility of £20m prior to its expiration;

• A resumption of flying from May 2022, with full year passenger volumes from LSA of c.0.5m for the year ending

28 February 2023 and c.1.4m passengers in the year ending 28 February 2024;

• Continued performance of the Renewables division in relation to gate fee income along with the major plants we supply

continuing to take their contractual volumes;

• An expectation that the Group will receive no mitigation of leased aircraft cashflows, scheduled for redelivery between

November 2022 and September 2023; and

• No cash received in respect of non-core asset disposals, with the exception of c.£1m from the disposal of a small land

plot currently ongoing. The RCF reduces from £20m at a rate of 25% of net disposal proceeds of non-core assets as those

assets are disposed of.

The severe but plausible downside forecast includes a significant reduction in 2023 and 2024 Aviation operational

performance due to the slower recovery following the COVID-19 pandemic and reduced trading performance across both

Aviation and Renewables operations, resulting in a cash reduction to forecast. However, the severe but plausible forecast

maintains the assumption that the refinancing will complete prior to the August 2022 interim period end and, as a result, the

severe but plausible downside scenarios do not have a material impact on the ability of the Group to continue in operational

existence for the foreseeable future.

The severe but plausible downside forecast includes the following in addition to the base case assumptions above:

• Passenger volume growth from LSA is slowed and a reduction in cargo rotations;

• No new incremental business in Aviation Services in the next financial year; and

• Reduction in Renewables plant availability with an associated decrease in volume supplied within the terms of the

contractual agreements, reduction in driver numbers resulting in increased numbers of unused trucks, and a reduction

in gate fees to c.85% of base case.

Overall, the Directors are satisfied that the Group will have sufficient funds to continue to meet its liabilities as they fall

due until at least May 2024 and therefore have prepared the financial statements on a going concern basis. However, as

previously noted this is highly dependent on the successful completion of the Group’s refinancing plans, which indicate the

existence of a material uncertainty related to events or conditions that may cast significant doubt on the ability of the Group

to continue as a going concern and, therefore, to continue realising its assets and discharging its liabilities in the normal

course of business. The financial statements do not include any adjustments that would result from the basis of preparation

being inappropriate.

Significant accounting policies

Changes in accounting policies and disclosures

The accounting policies adopted are consistent with those of the previous financial year except as follows:

(a) New standards, amendments to existing standards and interpretations to existing standards adopted by the Group

The Group has considered the following amendments and definitions that are effective in this financial year and concluded

that they do not have a material impact on the financial position or performance of the Group:

• Reference to the Conceptual Framework (Amendments to IFRS 3)

• 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)

Esken Limited Annual Report and Accounts 2022

126

1 Accounting policies of Esken Limited continued

(b) New standards and interpretations not applied

The following UK-endorsed standards and amendments have an effective date after the date of these financial statements:

Effective for

accounting periods

commencing on or after

Proposed adoption

in the year ending

Definition of Accounting Estimates (Amendments to IAS 8) 1 January 2023 28 February 2023

Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction

(Amendments to IAS 12) 1 January 2023 28 February 2023

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) 1 January 2023 28 February 2023

The adoption of these standards and amendments is not expected to have a material effect on the net assets, results and

disclosures of the Group. There are no other new UK-endorsed standards and amendments that are issued but not yet

effective that would be expected to have a material impact on the Group in future reporting periods and on foreseeable

future transactions.

Summary of significant accounting policies

Revenue

The Aviation division provides some of its services under contracts and others relate to the sale of goods. Revenue is

recognised in the consolidated income statement at the point in time when the performance obligation has been met,

and this is the same for all revenue streams. It is recognised at the fair value of the consideration received or receivable,

net of VAT. The principal sources of revenue within the Aviation division are aeronautical income, jet fuel sales, retail and

concession income, hotel income, surface access income and ground handling services.

A receivable is recognised when the services are delivered as this is the point in time that the consideration is unconditional

because only the passage of time is required before the payment is due. Any marketing contributions paid to airlines under

contractual agreements are separately disclosed, not netted against revenue, as the marketing contributions arise from a

separate transaction that is not linked to the revenue generated.

Revenue from the Renewables division mainly relates to gate fee income, in relation to waste wood taken, and delivery

of processed material to biomass power plants. Gate receipts are not contracted, and revenue received is recognised on

receipt of waste material as this is the point in time that the consideration is unconditional. The majority of revenue from the

supply of processed material is contracted. These contracts detail the specification of material required, annual tonnages

required and the price per tonne. Revenue and a contract asset are recognised on delivery of the material as that is when the

performance obligations have been met. Contract assets are transferred to receivables when proof-of-delivery paperwork

has been processed and the right becomes unconditional, which is around two weeks from delivery.

Within certain fuel supply agreements there are ‘take or pay’ provisions where revenue can be recognised on material not

taken by plants. This revenue is recognised at a point in time in line with specific contractual provisions. During the year, the

tonnages delivered under each contract are reviewed to ensure that contracted tonnages will be met. As soon as there is

reason to believe contract tonnages will not be met, a contract liability is provided to reduce the revenue recognised to date.

Revenue from the Non-Strategic Infrastructure division relates to rental income under contracts. Revenue is recognised in

the consolidated income statement at the contractual rental income over the term of the lease, as these charges represent

the service provided.

Revenue generated in Group Central principally relates to rental income and is recognised at a point in time. In the prior year

Group Central also generated royalty revenue from the licence of its trademarks and designs which was recognised in the

consolidated income statement over the licence agreement period as the obligations of the licence agreement were met.

Revenue is analysed by segment in note 4.

Presentation of consolidated income statement

Adjusted EBITDA, a non-GAAP measure, is the key profitability measure used by management for performance review in the

day-to-day operations of the Group. The Group’s calculation of adjusted EBITDA is explained in more detail in note 33. Non-

GAAP measures are used as they are considered to be both useful and necessary. They are used for internal performance

analysis; the presentation of these measures facilitates comparability with other companies, although management’s

measures may not be calculated in the same way as similarly titled measures reported by other companies.

Functional and presentation currency

The Group’s functional and presentational currency is GBP. The functional currency of subsidiaries Stobart Air and Propius

are EUR and USD respectively.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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127

Strategic Report Corporate Governance Financial Statements

Basis of consolidation

Where the Company has the power, either directly or indirectly, to control the relevant activities of another entity or

business; has exposure, or rights, to variable returns from its involvement with the entity; and has the ability to use its

power over the entity to affect the amount of the returns to the Company; it is classified as a subsidiary. The consolidated

financial statements present the results of Esken Limited and its subsidiaries (the Group) as if they formed a single entity.

Intercompany transactions and balances between Group companies are therefore eliminated in full.

Discontinued operations and business disposals

A subsidiary is derecognised when the Group no longer has control. A profit or loss on disposal is recognised in the

consolidated income statement, calculated as proceeds less net assets/liabilities disposed and disposal costs incurred.

A discontinued operation is a component of the Company’s business that represents a separate major line of business or

geographical area of operations that has been disposed of or is abandoned. The post-tax results of discontinued operations,

along with any gain or loss recognised on the measurement to fair value less costs to sell (FVLCS) or on the disposal of the

assets or disposal groups constituting the discontinued operation, are disclosed as a single amount in the consolidated

income statement. The comparative period results are restated accordingly. Further analysis of the results and cash flows

from discontinued operations is set out in note 5.

Business combinations (from 1 March 2010)

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the

aggregate of the consideration transferred, measured at acquisition-date fair value, and the amount of any non-controlling

interest in the acquiree. Acquisition costs are expensed and included within operating profit/loss.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification

and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the

acquisition date. Any contingent consideration payable to be transferred by the acquirer is recognised at fair value at the

acquisition date.

Goodwill is initially measured at cost, being the excess of the aggregate of the acquisition-date fair value of the

consideration transferred and the amount recognised for the non-controlling interest (and where the business combination

is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree) over

the net identifiable amounts of the fair value of the assets acquired and the liabilities assumed in exchange for the business

combination.

Identifiable intangible assets, meeting either the contractual-legal or separability criterion, are recognised separately

from goodwill.

Contingent liabilities representing a present obligation are recognised if the acquisition-date fair value can be measured

reliably. If the aggregate of the acquisition-date fair value of the consideration transferred (and where the business

combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the

acquiree) is lower than the fair value of the assets, liabilities and contingent liabilities, and the fair value of any pre-

existing interest held in the business acquired, the difference is recognised in the consolidated income statement.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Any impairment in carrying

value is charged to the consolidated income statement. For the purpose of impairment testing, goodwill acquired in a

business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (CGUs) (or groups

of CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree

are assigned to those units. Each unit or group of units to which goodwill is allocated shall represent the lowest level within

the entity at which goodwill is monitored for internal management purposes and shall not be larger than an operating

segment before aggregation. See note 6 for details on business combinations.

Business combinations (prior to 1 March 2010)

Business combinations were accounted for using the purchase method. Transaction costs directly attributable to the

acquisition formed part of the acquisition costs. The minority interest is accounted for using the Parent-entity extension

method, whereby the difference between the consideration paid and the book value of the share in net assets acquired is

recognised as goodwill.

Goodwill was initially measured at cost, being the excess of the cost of business combination over the Group’s interest in the

net fair value of the identifiable assets, liabilities and contingent liabilities. Where the net fair value of the acquired entity’s

identifiable assets, liabilities and contingent liabilities was greater than the cost of investment, the difference was recognised

in the consolidated income statement.

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1 Accounting policies of Esken Limited continued

Impairment of non-financial assets

Impairment tests of goodwill are undertaken at least annually at the financial year end and also if there are indicators

of impairment. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances

indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable

amount (i.e. the higher of value-in-use and fair value less costs to sell), the asset is written-down accordingly. Where it is

not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s

CGU (i.e. the lowest group of assets in which the asset belongs for which there are separately identifiable cash inflows).

Goodwill is allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from the synergies of

the combination giving rise to the goodwill.

The Group’s CGUs are the lowest groups of assets for which there are separately identifiable cash inflows. These are

predominantly the trading legal entities.

Impairment charges are included in the consolidated income statement, except to the extent they reverse gains previously

recognised in the consolidated statement of other comprehensive income. Impairment losses, except losses relating to

goodwill, can be reversed in certain circumstances.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment

losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A

previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the

asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the

asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have

been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is

recognised in the consolidated income statement unless the asset is carried at revalued amount, in which case the reversal

is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the

asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Cash and cash equivalents

Cash and cash equivalents are defined as cash in hand, demand deposits and highly liquid investments readily convertible to

known amounts of cash and subject to insignificant risk of changes in value.

Foreign currency

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in

which they operate (their ‘functional currency’) are recorded at the rates ruling when the transactions occur. Foreign currency

monetary assets and liabilities are translated at the rates ruling at the consolidated statement of financial position date.

Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in

the consolidated income statement.

The assets and liabilities of foreign operations are translated into GBP at the rate of exchange prevailing at the statement of

financial position date. The income statements are translated at the average rate. The exchange differences arising on the

translation are taken directly to a separate component of equity.

Financial instruments

The classification of financial instruments is determined by the contractual cash flows and where applicable the business

model for managing the financial instruments.

Financial assets are classified at initial recognition and subsequently measured at amortised cost, FVOCI, or fair value

through profit or loss (FVPL). A financial asset is measured at amortised cost, if the objective of the business model is to

hold the financial asset in order to collect contractual cash flows and the contractual terms give rise to cash flows that

are solely payments of principal and interest. It is initially recognised at fair value plus or minus transaction costs that are

directly attributable to the acquisition or issue of the financial asset. Subsequently, the financial asset is measured using

the effective interest method less any impairment. Gains and losses are recognised in profit or loss when the asset is

derecognised, modified or impaired. The captive cell investment is a financial asset recognised at FVPL, see note 15.

All equity instruments are recognised at fair value. For equity instruments, on initial recognition, an irrevocable election (on an

instrument-by-instrument basis) can be made to designate these as at FVOCI instead of FVPL. Dividends received on equity

instruments are recognised in profit or loss when the right of payment has been established.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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Strategic Report Corporate Governance Financial Statements

Financial liabilities are measured at amortised cost or FVPL. Debt and trade payables are recognised initially at fair value

based on amounts exchanged, net of transaction costs, and subsequently at amortised cost. Interest expense on debt is

accounted for using the effective interest method, and other than interest capitalised, is recognised in profit or loss.

The Group uses derivative financial instruments such as fuel and currency swaps to mitigate the risk of fuel price and currency

fluctuations. Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is

entered into and are subsequently remeasured at FVPL at each reporting date with reference to market values. Derivatives are

carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Forward contracts are entered into by the Group to purchase and/or sell biomass-related products and management

judges that these forward commodity contracts are entered into for the Group’s ‘own use’ rather than as trading instruments.

They continue to be held in accordance with the Group’s expected purchase, sale and/or usage requirements. Accordingly,

these contracts are not accounted for as derivatives or other financial instruments.

The financial liability element of the convertible debt instrument, see note 22, is measured at amortised cost. The convertible

debt includes three derivatives in relation to conversion into shares in London Southend Airport Company Limited. These

have been accounted for as one single compound derivative, as they are not considered independent of each other, which

is separate from the host contract. The fair value of the embedded derivative is considered at each reporting date and the

movement in fair value is recognised through profit and loss.

The financial liability element of the exchangeable bond is measured at amortised cost. The option for bondholders to

convert to shares in Logistics Development Group has been accounted for as a separate derivative which is separate from

the host contract. The fair value of the embedded derivative is considered at each reporting date and the movement in fair

value is recognised through profit and loss.

Share capital

Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of

a financial liability. The Group’s ordinary shares are classified as equity instruments.

Own shares held by the employee benefit trust

Esken Limited shares held by the employee benefit trust are designated as own shares held, classified in shareholders’ equity

and recognised at cost. Consideration received for the sale of such shares is also recognised in equity, with any difference

between the proceeds from sale and original cost taken to retained earnings.

Pension arrangements and other post-employment benefits

The Group has pension schemes of both a defined benefit and defined contribution nature. The Group’s defined benefit

pension liability, which is assessed each period by actuaries, is based on key assumptions including return on plan assets,

discount rates, mortality rates, inflation, and future salary and pension costs. These assumptions, individually or collectively,

may be different to actual outcomes. Other key assumptions for pension obligations are based in part on current market

conditions. Additional information is disclosed in note 23.

The liability in respect of defined benefit schemes is the present value of the relevant defined benefit obligation at the

consolidated statement of financial position date less the fair value of scheme assets. The trustees commission a full

actuarial valuation triennially and the present value of the obligation is updated annually by external professional actuaries

using the projected unit method for financial reporting purposes. The present value of the obligation is determined by

the estimated future cash outflows using interest rates of high-quality corporate bonds which have terms to maturity

approximating to the terms of the related liability. The current service cost, and gains and losses on settlements and

curtailments, are recognised in operating costs in the consolidated income statement.

The Group determines the net interest expense/(income) on the net defined benefit liability/(asset) for the period by applying

the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined

benefit liability/(asset), taking into account any changes in the net defined benefit liability/(asset) during the period as a result

of contributions and benefit payments. Net interest expense/(income) and other expenses related to defined benefit plans are

recognised in the consolidated income statement. Remeasurements of the net defined benefit liability, which comprise actuarial

gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest),

are recognised immediately in the consolidated statement of comprehensive income.

For defined contribution schemes, costs are charged to the consolidated income statement as they accrue.

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1 Accounting policies of Esken Limited continued

Share-based payments

Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to

the consolidated income statement over the vesting period.

Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at

each consolidated statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting

period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of

the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market

vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

At each reporting period end before vesting, the cumulative expense is calculated, representing the extent to which the

vesting period has expired and management’s best estimate of the achievement or otherwise of non-market conditions and

of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition,

be treated as vesting as described above. The movement in cumulative expense since the previous statement of financial

position date is recognised in the consolidated income statement, with a corresponding entry in equity.

Where the Group issues share options as consideration for services received, the share-based payment charge reflects

the difference between the fair value of services received and the consideration paid for the services and is charged to the

consolidated income statement at the point in time when services are received.

Where cash-settled share-based payment arrangements are awarded to employees, the liability at grant is recognised in

the consolidated income statement. The liability is assessed at each reporting period end and any change in the liability is

recognised in the consolidated income statement. For schemes that are part settled in cash and part settled with equity the

respective parts of the scheme are treated as outlined above.

Leased assets

A lease liability is recognised in the statement of financial position at the present value of the future minimum lease

payments, discounted at the incremental borrowing rate, along with a corresponding right-of-use asset. The interest element

of the lease liability is charged to the consolidated income statement over the period of the lease. Right-of-use assets are

depreciated over the period of the lease and the depreciation is charged to the consolidated income statement. Where

the lease is short term or the asset is of low value (less than £5,000) the lease payments are charged to the consolidated

income statement. Any variable payments above the future minimum lease payments are charged to the consolidated

income statement. The lease liability is remeasured when there is a change in future lease payments arising from a revision

in substance to fixed lease payments. When the lease liability is remeasured in this way, a corresponding adjustment is made

to the carrying amount of the right-of-use asset.

The Group has subleases in place for two of its property assets. For each, a net investment is recognised at the present

value of the future minimum lease payments receivable, discounted at the incremental borrowing rate of the headlease.

Current taxation

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from

or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are substantively

enacted by the consolidated statement of financial position date. The Group is subject to corporate taxes in the UK and

Ireland jurisdictions, and judgement is required in determining the appropriate provision for transactions where the ultimate

tax determination is uncertain. In such circumstances, the Group recognises liabilities for anticipated taxes based on the

information available and where the anticipated liability can be estimated. Where the final outcome of such matters differs

from the amount recorded, any differences may impact the current tax and deferred tax provisions in the period in which the

final determination is made. Liabilities are classified as current.

The Directors use in-house tax experts, professional firms and previous experience when assessing tax risks.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated

statement of financial position differs from its tax base, except for differences arising on:

• The initial recognition of goodwill;

• The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the

transaction affects neither accounting or taxable profit; and

• Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal

of the difference and it is probable that the difference will not reverse in the foreseeable future.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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131

Strategic Report Corporate Governance Financial Statements

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available

against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been substantively enacted by the consolidated

statement of financial position date and are expected to apply when the deferred tax liabilities/(assets) are settled/

(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and

liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

• The same taxable Group company; or

• Different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the

assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or

liabilities are expected to be settled or recovered.

Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached

conditions will be complied with. Where the grant relates to an expense item, it is recognised as income over the period

necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates

to an asset, it is credited to deferred income and released to the consolidated income statement to match the depreciation

of the related asset. The receipt of government grants is disclosed as a financing cash flow in the consolidated statement

of cash flows as the cash provides the Group with financing for designated operations or assets.

UK Government Coronavirus Job Retention Scheme (furlough)

Payments received by the Group from the UK Government for furloughed employees are in the form of a grant. The payments

are recognised in the same period in which the related expense is incurred and are netted off against the expense. The amount

received is disclosed in note 8.

Provisions

A provision is recognised in the consolidated statement of financial position when the Group has a present legal or

constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of

economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future

cash flows at a pre-tax rate that reflects risks specific to the liability.

Dividends

Dividends are recognised when they become legally payable; in the case of interim dividends to equity shareholders, this is

when paid; in the case of final dividends, this is when approved by the shareholders at the AGM.

Property, plant and equipment

Freehold land and buildings, and plant and equipment are stated at cost less accumulated depreciation and any accumulated

impairment in value. Depreciation is provided on items of property, plant and equipment, other than land and assets under

construction, to write-off to their residual value the carrying value of items over their expected useful lives. Assets under

construction are not depreciated until they are in the location and condition necessary for them to be capable of operating

in the manner intended. Right-of-use assets are depreciated over the term of the lease. Useful lives and residual values are

reconsidered on an annual basis.

Depreciation is applied at the following rates:

Buildings 0.5%–30% per annum straight line

Plant and machinery 2%–50% per annum straight line

Commercial vehicles 14%–33% per annum straight line

Fixtures, fittings and equipment 3%–33% per annum straight line

An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected

from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net

disposal proceeds and the carrying amount of the asset) is recognised in the consolidated income statement in the period

the asset is derecognised. Borrowing costs attributable to qualifying assets are capitalised.

Self-constructed assets

The cost of a self-constructed asset is determined using the same principles as for an acquired asset. Costs include any

costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in

the manner intended by management. Costs include employee benefits, site preparation, delivery and handling, installation

and assembly, testing and professional fees. For assets made for sale or similar to those made for sale then the cost is the

same as the cost of constructing an asset for sale including fixed and variable overheads which are considered directly

attributable. Internal net profits are eliminated in arriving at such costs.

Esken Limited Annual Report and Accounts 2022

132

1 Accounting policies of Esken Limited continued

Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-

out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other

costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work

in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion

and estimated costs necessary to make the sale.

Inventories include property assets which are held for development and/or disposal, to the extent that they are not used

in the Group’s operations or held for investment purposes. The net realisable value of these property inventory assets

is determined by assessment of fair value less costs to sell, using a similar method to that used in impairment workings,

except for the cash flows not being discounted.

Non-current assets held for sale and disposal groups

Non-current assets are classified as held for sale when:

• They are available for immediate sale;

• Management is committed to a plan to sell;

• It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;

• An active programme to locate a buyer has been initiated;

• The asset or disposal group is being marketed at a reasonable price in relation to its fair value; and

• It is highly probable that a sale is expected to complete within 12 months from the date of classification (or an extended

period if the delay is caused by circumstances beyond the entity’s control but the Group remains committed to the plan to

sell the asset).

Non-current assets classified as held for sale are measured at the lower of their carrying amount immediately prior to being

classified as held for sale in accordance with the Group’s accounting policy and FVLCS. Following their classification as held

for sale, non-current assets are not depreciated. The results of operations disposed of during the prior year are included in

the consolidated income statement up to the date of disposal.

Associates and joint ventures

The Group’s investments in its associates are accounted for using the equity method of accounting unless the investment

is classified as held for sale. An associate is an entity in which the Group has significant influence and which is neither a

subsidiary nor a joint venture. Investments in joint ventures, which are jointly controlled entities, are included in the financial

statements using the equity method of accounting unless the investment is classified as held for sale.

Under the equity method, the equity investment in the associate or joint venture is carried in the consolidated statement

of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associate or joint

venture, but any loss is limited to the equity investment made, unless the Group has incurred legal or constructive

obligations or made payments on behalf of the associate or joint venture. Goodwill relating to the associate or joint venture

is included in the carrying amount of the investment and is not amortised. Loans to associates or joint ventures, where the

settlement is planned or expected to be repaid in the foreseeable future, do not form part of the equity investment and are

included in other receivables or non-current amounts owed by associates and joint ventures according to the expected

repayment terms.

The consolidated income statement reflects the share of the results of operations of the associate or joint venture, but the

loss is limited to the equity investment made, plus any loans which form part of the net investment in the associate, unless

the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

Where there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises

its share of any changes and discloses this, when applicable, in the statement of changes in equity and the statement of

other comprehensive income. The Group’s share of profits and losses resulting from transactions between the Group and

the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture, unless the Group

has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment

loss on the Group’s investment in its associates and joint ventures. The Group determines at each consolidated statement of

financial position date whether there is any objective evidence that an investment in an associate or joint venture is impaired.

If this is the case and there is a resulting impairment, the amount is recognised in the consolidated income statement.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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133

Strategic Report Corporate Governance Financial Statements

Aircraft maintenance provision

Under certain lease arrangements in Propius Holdings Limited, the Group is responsible for major overhaul aircraft maintenance

costs. The estimated cost is provided for to ensure the amount held at the year end is sufficient to cover all costs up to the

date of hand back of the aircraft. The provision consists of expected costs of maintaining engines, landing gear, propellers,

airframe and paint for each aircraft. See note 2 for information on significant estimation uncertainties relating to the provision.

Any change in value of the maintenance provision is recognised in the consolidated income statement.

2 Summary of significant accounting judgements and estimates

The Group makes judgements and estimates in preparing the financial statements. Judgements and estimates are

continually evaluated based on historical experience and other factors, including expectations of future events that are

believed to be reasonable under the circumstances. In the future, actual experience may differ from these judgements

and estimates. The judgements and estimates that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year are discussed below.

Judgements

(a) Going concern

The accounts have been prepared on the going concern basis. This treatment is based on judgements including the

performance of the business, the forecast cash flows for the foreseeable future, the capital requirements of the Group

and the funding options available, see note 1 for the basis of preparation.

Estimates

(a) Defined benefit pension obligation

The Group operates a defined benefit pension scheme. The year-end valuation has been performed by a qualified actuary

using the projected unit method. Estimates include the discounts rate applied to future pension payments, price inflation

and mortality after retirement. Further information, including carrying values, is set out in note 23.

(b) Aircraft maintenance provision

The Group has provided for the full cost of ensuring that the eight ATR aircraft leased by Propius are in the condition

specified by the lease agreement at the termination clause date, see note 25. The calculation of the level of provision

required includes certain items which are contractual and known in advance, so are not open to estimation, and total £13.6m.

The carrying value of the estimated portion of £10.0m included in the statement of financial position is based on extensive

industry experience within Propius. The uncertainty of the estimated portion will be reduced as each aircraft is handed back,

with the final hand back in September 2023.

At the year ended 28 February 2022 the Group has a £3.9m provision relating to the estimated cost required for remediation

works on leased land in Widnes. The Group commissioned surveys by a firm of independent environmental and sustainability

specialists which indicated a cost of remediation of between £2.1m and £5.7m depending on the scope of work and method

of rectification. Discussions are ongoing in relation to the level of works required to remediate the obligation and hence the

provision could materially change when this is confirmed. See note 25 for further details.

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134

3 Segmental information

The reportable segment structure is determined by the nature of operations and services. The operating segments are

Aviation, Renewables, Investments and Non-Strategic Infrastructure. In the current year the Energy segment was renamed

to the Renewables segment. In the prior year, the results of Stobart Air and Propius were included in the Investments

reporting segment. However, following the liquidation of Stobart Air and abandonment of Propius, the results of Stobart Air

and Propius are no longer included in the Investments segment but are presented as discontinued operations on the face of

the consolidated income statement, see note 5.

The Aviation segment specialises in the operation of commercial airports and the provision of ground handling services.

The Renewables segment specialises in the supply of sustainable biomass material for the generation of renewable energy.

No segmental assets or liabilities information is disclosed because no such information is regularly provided to, or reviewed

by, the Chief Operating Decision Maker.

The Investments segment holds a non-controlling interest in a logistics services investing business and a baggage-handling

business. The Non-Strategic Infrastructure segment specialises in the management, development and realisation of a

portfolio of property assets, including Carlisle Lake District Airport.

The Executive Directors are regarded as the Chief Operating Decision Maker. The Directors monitor the results of each business

unit separately for the purposes of making decisions about resource allocation and performance assessment. The main

segmental profit measure is adjusted EBITDA, which is calculated as loss before interest, tax, depreciation and impairments.

Income taxes and certain central costs are managed on a Group basis and are not allocated to operating segments.

Year ended 28 February 2022

Aviation

£’000

Renewables

£’000

Investments

£’000

Non-Strategic

Infrastructure

£’000

Group

Central and

Eliminations

£’000

Total

£’000

Revenue

External 23,389 79,650 – 563 1,031 104,633

Internal 22 – – 100 (122) –

Total revenue 23,411 79,650 – 663 909 104,633

Adjusted EBITDA (773) 20,308 (390) 3,273 (12,163) 10,255

Depreciation (10,781) (8,367) – (357) (959) (20,464)

(Impairment)/impairment reversal – (6,189) – 820 – (5,369)

Finance costs (net) (8,656) (1,660) (1,596) (309) (6,768) (18,989)

(Loss)/profit before tax from continuing

operations (20,210) 4,092 (1,986) 3,427 (19,890) (34,567)

Restated

Year ended 28 February 2021

Aviation

£’000

Renewables

£’000

Investments

£’000

Non-Strategic

Infrastructure

£’000

Group

Central and

Eliminations

£’000

Total

£’000

Revenue

External 24,611 74,733 – 909 1,151 101,404

Internal 131 – – 150 (281) –

Total revenue 24,742 74,733 – 1,059 870 101,404

Adjusted EBITDA (6,075) 10,005 128 (1,660) (9,782) (7,384)

Depreciation (9,362) (8,635) – (446) (981) (19,424)

(Impairment)/impairment reversal (656) – – 1,480 – 824

Finance costs (net) (1,429) (2,036) (1,555) (8,346) (4,821) (18,187)

Loss before tax from continuing operations (17,522) (666) (1,427) (8,972) (15,584) (44,171)

Internal revenue above relates to inter-segment revenues that are eliminated within Group central and eliminations. Intra-

segment revenues are eliminated within each segment.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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135

Strategic Report Corporate Governance Financial Statements

4 Revenue

Disaggregation of revenue

Revenue is primarily from contracts with customers. Other sources of revenue are from owned and leased fixed assets.

The following tables detail the split between revenue from contracts with customers and other revenue, and disaggregate

the revenue from contracts with customers.

Year ended 28 February 2022

Aviation

£’000

Renewables

£’000

Investments

£’000

Non-Strategic

Infrastructure

£’000

Group

Central and

Eliminations

£’000

Total

£’000

Revenue from contracts with customers 23,035 79,650 – 117 – 102,802

Other revenue – lease income 354 – – 446 1,031 1,831

23,389 79,650 – 563 1,031 104,633

Year ended 28 February 2022

Aviation

£’000

Renewables

£’000

Investments

£’000

Non-Strategic

Infrastructure

£’000

Group

Central and

Eliminations

£’000

Total

£’000

Major product/service line

Sale of goods 3,644 71,561 – – – 75,205

Rendering of services 19,327 8,089 – 117 – 27,533

Royalties/commissions 64 – – – – 64

23,035 79,650 – 117 – 102,802

Primary geographical markets

United Kingdom 18,054 79,650 – 117 – 97,821

Europe 4,967 – – – – 4,967

Rest of world 14 – – – – 14

23,035 79,650 – 117 – 102,802

Timing of revenue recognition

Products and services transferred at a

point in time 23,035 79,650 – 117 – 102,802

23,035 79,650 – 117 – 102,802

Restated

Year ended 28 February 2021

Aviation

£’000

Renewables

£’000

Investments

£’000

Non-Strategic

Infrastructure

£’000

Group

Central and

Eliminations

£’000

Total

£’000

Revenue from contracts with customers 23,890 74,733 – 191 292 99,106

Other revenue – lease income 721 – – 718 859 2,298

24,611 74,733 – 909 1,151 101,404

Esken Limited Annual Report and Accounts 2022

136

4 Revenue continued

Restated

Year ended 28 February 2021

Aviation

£’000

Renewables

£’000

Investments

£’000

Non-Strategic

Infrastructure

£’000

Group

Central and

Eliminations

£’000

Total

£’000

Major product/service line

Sale of goods 3,840 73,575 – 30 7 7 7,452

Rendering of services 20,050 1,158 – 161 – 21,369

Royalties/commissions – – – – 285 285

23,890 74,733 – 191 292 99,106

Primary geographical markets

United Kingdom 20,273 74,733 – 190 292 95,488

Europe 3,615 – – 1 – 3,616

Rest of world 2 – – – – 2

23,890 74,733 – 191 292 99,106

Timing of revenue recognition

Products and services transferred at a

point in time 23,890 74,733 – 191 7 98,821

Products and services transferred

over time – – – – 285 285

23,890 74,733 – 191 292 99,106

In both the current and prior year, no customer amounted to more than 10% of the Group’s total continuing revenue.

Contract balances

Opening and closing receivables, contract assets and contract liabilities from contracts with customers are provided in

the table below.

Contract balances

2022

£’000

2021

£’000

Receivables 10,064 9,301

Contract assets 3,327 5,463

Contract liabilities – (6,326)

13,391 8,438

Contract assets relate to the Group’s right to consideration for work completed but not billed at the reporting date on

contracts in the Renewables division. Contract assets are transferred to receivables when the right becomes unconditional.

Contract liabilities in the prior year related to advance consideration received from customers for flight bookings not yet

fulfilled in Stobart Air and have decreased in the year due to the liquidation of Stobart Air and de-consolidation of their

balance sheet from the Group accounts.

Receivables and contract assets are included in trade and other receivables, and contract liabilities are in trade and other

payables on the consolidated statement of financial position.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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137

Strategic Report Corporate Governance Financial Statements

5 Discontinued operations

Stobart Air and Propius

In the prior year, the Group bought Stobart Air and Propius to give the Group effective control over the pre-existing

guarantee obligations it had in respect of those businesses. Accounting for the recognition of these pre-existing guarantee

arrangements resulted in a loss of £58,182,000. The net liabilities recognised on the subsequent acquisition reflect this

loss. The Group reacquired equity in Stobart Air and Propius Limited on 27 April 2020 for cash consideration of £2,343,000

and deferred contingent consideration up to a maximum of £6,250,000, based on the equity value achieved after disposal

costs, on a realisation of value in respect of both of the businesses prior to 31 December 2023. The deferred contingent

consideration had a £nil fair value. The businesses were accounted for as 100% subsidiaries due to their being solely reliant

on the Group for funding in addition to the equity voting rights held.

On 14 June 2021, the Ireland High Court appointed liquidators to Stobart Air. Due to the liquidation the Stobart Air balance

sheet was deconsolidated in the Group accounts. Net liabilities deconsolidated totalled £15,562,000 and £4,255,000 of

costs in relation to the liquidation were incurred, resulting in a profit on liquidation of £11,307,000. On liquidation of Stobart

Air there is no deferred consideration payable.

Following the liquidation of Stobart Air, the results of Propius, our aircraft leasing business that leased all eight of its aircraft

to Stobart Air, have been presented as discontinued. Propius is abandoned in line with the IFRS 5 definition of a discontinued

operation. While the results of Propius are presented as discontinued, in the period up to 28 February 2024 there will be

ongoing finance charges and cash flows in respect of aircraft leases and cash flows in respect of maintenance obligations,

with the corresponding liabilities remaining on the Group’s consolidated statement of financial position.

The results of Stobart Air and Propius in the year, which were both separately considered major lines of business, and the

profit on liquidation, have been reported on a single line, net of tax on the face of the consolidated income statement.

The consolidated income statement for the year ended 28 February 2021 has been restated on the same basis.

The results of Stobart Air and Propius included in discontinued operations are as follows.

Results of discontinued operations of Stobart Air

2022

£’000

2021

£’000

Revenue 3,449 9,034

Other income – 5,695

Operating expenses (4,858) (24,210)

Depreciation – (7,615)

Impairments – (11,431)

Net finance income 325 330

Results from operating activities before tax (1,084) (28,197)

Loss on acquisition – (17,887)

Profit on liquidation 11,307 –

Profit/(loss) before tax 10,223 (46,084)

Tax – –

Profit/(loss) for the year from discontinued operations, net of tax 10,223 (46,084)

Results of discontinued operations of Propius

2022

£’000

2021

£’000

Operating expenses (9,613) (1,014)

Depreciation – (4,775)

Impairments – (11,490)

Net finance costs (2,601) (2,508)

Results from operating activities before tax (12,214) (19,787)

Loss on acquisition – (40,295)

Loss before tax (12,214) (60,082)

Tax (90) –

Loss for the year from discontinued operations, net of tax (12,304) (60,082)

Esken Limited Annual Report and Accounts 2022

138

5 Discontinued operations continued

The above results from discontinued operations are attributable to the owners of the Company.

The cash flows in relation to the Stobart Air and Propius operations are as follows.

Cash flows used in discontinued operations of Stobart Air

2022

£’000

2021

£’000

Net cash used in operating activities (14,868) (23,065)

Net cash used in investing activities – (69)

Net cash used in financing activities (2,143) (4,764)

Net cash flows for the year (17,011) (27,898)

Cash flows used in discontinued operations of Propius

2022

£’000

2021

£’000

Net cash used in operating activities (2,598) (6,435)

Net cash used in investing activities (7,808) –

Net cash used in financing activities (12,241) (10,222)

Net cash flows for the year (22,647) (16,657)

The results and cash flows of Stobart Air and Propius discontinued operations included in the above tables are after the

elimination of intra-group transactions between Stobart Air and Propius.

The effect of the deconsolidation of Stobart Air on individual assets and liabilities is as follows.

£’000

Inventories 3,096

Trade and other receivables 6,377

Cash and cash equivalents 362

Trade and other payables (12,992)

Lease liabilities (7,265)

Provisions (3,356)

Foreign currency exchange reserve (1,784)

Net assets and liabilities (15,562)

Disposal of Stobart Rail Limited

In the prior year, on 14 July 2020 the Group divested of Stobart Rail Limited (Stobart Rail) to Bavaria Industries Group AG

for initial cash consideration of £1,000 and contingent consideration with a fair value of £331,000. The net assets disposed

totalled £8,902,000 and £940,000 costs were incurred, resulting in a loss on disposal of £9,510,000.

On 30 June 2021 the contingent consideration, which related to a single legacy contract, was settled with the Group

receiving £170,000. The remaining contingent consideration held on the statement of financial position was released to

the consolidated income statement.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

Esken Limited Annual Report and Accounts 2022

139

Strategic Report Corporate Governance Financial Statements

The operations of Stobart Rail Limited represented a separate major line of business. The results of the operations, along

with the loss on disposal, are reported as part of the single line loss from discontinued operations, net of tax on the face of

the consolidated income statement. A summary of Stobart Rail results included in discontinued operations is as follows:

Results of Stobart Rail discontinued operations

2022

£’000

2021

£’000

Revenue – 6,309

Operating expenses – (7,9 02)

Depreciation – (854)

Net finance costs – (22)

Results from operating activities before tax – (2,469)

Loss on disposal (305) (9,510)

Loss before tax (305) (11,979)

Tax – 120

Loss for the year from discontinued operations, net of tax (305) (11,859)

The loss from discontinued operations of £305,000 (2021: £11,859,000) is attributable to the owners of the Company.

The cash flows in relation to this operation have been included in the following table.

Cash flows used in discontinued operations

2022

£’000

2021

£’000

Net cash generated from/(used in) operating activities 136 (769)

Net cash used in investing activities – (989)

Net cash used in financing activities – (1,736)

Net cash flows for the year 136 (3,494)

Summary of discontinued operations recognised within the consolidated income statement

2022

£’000

2021

£’000

Stobart Air 10,223 (46,084)

Propius (12,304) (60,082)

Stobart Rail (305) (11,859)

Loss for the year from discontinued operations, net of tax (2,386) (118,025)

Summary of cash flows from discontinued operations

2022

£’000

2021

£’000

Stobart Air (17,011) (27,898)

Propius (22,647) (16,657)

Stobart Rail 136 (3,494)

Net cash flows for the year (39,522) (48,049)

Esken Limited Annual Report and Accounts 2022

140

6 Other income

2022

£’000

Restated

2021

£’000

Profit on termination of onerous lease 4,667 –

Connect Airways recoveries and disposal 1,963 –

R&D tax credit 1,426 286

Profit on disposal of property, plant and equipment 308 98

Profit on sale of trade and assets – 5

Operating income 8,364 389

On 3 March 2022 an agreement was signed with the owners of Judd House for the Group to exit its long-term onerous

lease at the property. The exit resulted in the release of provisions, generating a profit of £2,260,000 (see note 25), and

reassessment of lease term, generating a profit of £2,407,000.

During the year, the Group received £813,000 from the administrators of Connect Airways Limited (Connect Airways),

relating to a secured first ranking loan that was fully impaired in the year ended 29 February 2020. Subsequent to this,

the Group sold its rights to all fully impaired loans due from Connect Airways for £1,150,000.

7 Operating expenses

Operating expenses are after charging the following:

2022

£’000

Restated

2021

£’000

Employee benefits expenses excluding share-based payment charge 33,219 39,092

Share-based payment charge 285 81

Direct material and other costs 29,329 37,985

Diesel and oil 9,384 8,244

Maintenance 4,832 5,691

Litigation and claims 6,806 3,318

Rates, light and heat 4,345 4,841

Insurance 3,133 1,876

Other purchases and external expenses 11,146 7,911

Operating expenses – other 102,479 109,039

Amounts receivable by the auditor and its associates in respect of the following:

2022

£’000

2021

£’000

Remuneration receivable in respect of the audit of the Company 631 705

The auditing of accounts of any subsidiary of the Company 434 576

Audit-related services – interim results review 150 173

Audit-related services – working capital review for capital raise 320 320

1,535 1,774

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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141

Strategic Report Corporate Governance Financial Statements

8 Staff costs

Staff costs (including Directors) comprise: Note

2022

£’000

Restated

2021

£’000

Wages and salaries 29,476 34,789

Social security costs 2,859 3,518

Other pension costs 1,031 872

Share-based payment charge 26 285 81

33,651 39,260

Included in staff costs above are costs which have been capitalised within assets under construction totalling £147,000

(2021: £87,000).

UK Government Coronavirus Job Retention Scheme (furlough)

The Group utilised the Coronavirus Job Retention Scheme implemented by the UK Government where those employees

designated as being ‘furloughed workers’ were eligible to have a proportion of their wage costs paid up to a maximum

amount of £2,500 per month. Payments received for furloughed employees are in the form of a grant and are recognised in

the same period in which the related expense is incurred and are netted off against the expense in the consolidated income

statement. During the year £1,425,000 (2021: £9,419,000) was received by the Group under the furlough scheme.

9 Finance income

2022

£’000

Restated

2021

£’000

Foreign exchange gains – 1

Change in fair value of financial liabilities 1,581 2,378

Interest receivable from net investment in lease 658 607

Other – 18

2,239 3,004

During the year the Group’s put option with fellow Connect Airways shareholder Cyrus Capital Partners was exercised, see

note 22. The exercise meant that the associated financial liability had a fair value of £nil and £1,581,000 was released and

presented within finance income (2021: £458,000 cost) in the consolidated income statement.

10 Finance costs

2022

£’000

Restated

2021

£’000

Interest on revolving credit facility 2,879 3,090

Interest on exchangeable bond 1,460 1,484

Net interest of retirement benefit schemes 37 64

Finance charges payable under leases 4,083 4,669

Amortisation of deferred issue costs 5,784 2,229

Interest accrued on convertible debt 6,404 –

Foreign exchange losses 484 985

Change in fair value of financial liabilities – 458

Other interest 97 212

21,228 13,191

During the year no (2021: £nil) interest was capitalised. In addition to the amounts above, an impairment charge of £nil

(2021: £8,000,000) was recognised in relation to shareholder loan notes relating to Mersey Bioenergy Holdings Limited, the

Widnes biomass plant owner. A new £20m revolving credit facility (RCF) was agreed in the year replacing the old £120m

RCF. As a result, the remaining debt issue costs of £1,717,000 relating to the old RCF were released in full and are included

within amortisation of deferred issue costs in the above table. During the year interest paid in cash on continuing operations

amounted to £8,992,000 (2021: £5,445,000), this included bank loans and loan notes of £5,084,000 (2021: £3,703,000) and

finance charges payable under leases of £3,908,000 (2021: £1,742,000).

Esken Limited Annual Report and Accounts 2022

142

11 Tax

Total tax charged in the consolidated income statement from continuing and discontinued operations

2022

£’000

2021

£’000

Corporation tax:

Current year corporation tax (9,433) (456)

Adjustment in respect of prior years 254 54

Total corporation tax (9,179) (402)

Deferred tax:

Origination and reversal of temporary differences (2,258) (5,174)

Adjustment in respect of prior years 1,542 (1,920)

Effect of changes in tax rates 120 293

Total deferred tax (596) (6,801)

Total credit in the consolidated income statement (9,775) (7,203)

Split between:

– Continuing operations (9,865) (7,083)

– Discontinued operations 90 (120)

Included in the above tax charges are a total current tax credit on continuing operations of £9,179,000 (2021: £402,000) and

a total deferred tax credit on continuing operations of £686,000 (2021: £6,681,000) giving a total tax credit on continuing

operations in the consolidated income statement of £9,865,000 (2021: £7,083,000). In addition, there is a total tax charge

on discontinued operations of £90,000 (2021: £120,000 credit) giving a total tax credit on continuing and discontinued

operations in the consolidated income statement of £9,775,000 (2021: £7,203,000).

The current tax adjustment of £164,000 in respect of prior years is in relation to the R&D expenditure credit in Esken

Renewables Limited; there is a deferred tax adjustment of an equal and opposite amount. In addition, there is a £90,000

charge relating to Propius.

The deferred tax adjustment in respect of prior years is primarily in relation to fixed asset timing differences between the

financial statements and the final submitted tax returns for the period, and the consequential adjustments made in relation

to the settlement of the tax enquiry are included in the revised carried forward tax written down value and loss numbers.

The effective tax rate in the year was 26.7% which was driven by the release of the uncertain tax position as a current

year movement.

Reconciliation of income tax charge

A reconciliation of the income tax credit applicable to the results from ordinary activities at the statutory income tax rate

to income tax expense at the Group’s effective income tax rate for the year is as follows:

2022

£’000

2021

£’000

Net loss before tax from continuing and discontinued operations (36,863) (162,316)

UK income tax at rate 19%

(2021: 19%) (7,004) (30,840)

Effects of:

Release of uncertain tax position (9,590) –

Income not taxable (5,485) (4,976)

Reversal of deferred tax on impairment reversal (156) –

Losses carried forward not recognised 7,349 5,308

Expenses incurred not relievable against current tax 3,196 23,223

Adjustments in respect of prior years 1,795 (1,866)

Impact of change in tax rate 120 1,948

Total credit in the consolidated income statement from continuing and discontinued operations (9,775) (7,203)

1 The Parent Company of the Group is tax resident in the UK. As such, the tax rate in the reconciliation of income tax charge is the UK corporation tax rate.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

Esken Limited Annual Report and Accounts 2022

143

Strategic Report Corporate Governance Financial Statements

Expenses incurred not relievable against current tax include legal fees in relation to the acquisition, disposal and liquidation

of investments, and depreciation on assets which previously didn’t qualify for capital allowances. The £9,590,000 release of

uncertain tax position relates primarily to the release of tax provisions, see note 25.

Included in the statement of other comprehensive income is a tax charge of £417,000 (2021: £182,000), all in relation to

deferred tax. Included in the statement of changes to equity is a credit of £81,000 (2021: £4,000 charge), all in relation to

deferred tax.

Non-taxable income includes profit on the disposal of net liabilities in relation to the liquidation of Stobart Air.

The deferred tax credit in the consolidated income statement is analysed as follows:

2022

£’000

2021

£’000

Accelerated allowances on plant and machinery 3 (1,603)

Revaluation of properties to fair value on acquisition (796) 469

Brands recognised on acquisition – (1,700)

Other temporary differences 161 (3,967)

(632) (6,801)

Cumulative deferred tax on temporary differences amounts to £78,935,000 (2021: £59,329,000). This has not been

recognised in the financial statements on the basis that these temporary differences relate to tax losses of certain Group

entities that have a history of making losses. Convincing other evidence is required before these unused tax losses can be

recognised and at the year end this evidence was not of a convincing enough level. These losses do not have an expiry date.

Esken Limited’s affairs are conducted such that it is considered to be resident in the UK for tax purposes. HM Revenue &

Customs (HMRC) has not objected to this position. As a result, the Company is liable to pay UK corporation tax on its profits.

Factors that may affect the future tax charge

Changes to the future expected UK corporation tax rates were enacted as part of The Finance (No. 2) Act 2021 which

received Royal Assent on 10 June 2021, in which the government announced that the corporation tax main rate will remain

at 19% for the years starting 1 April 2021 and 2022 before increasing to 25% for the year starting 1 April 2023 and thereafter.

Deferred taxation assets and liabilities have been remeasured at the blended average rates at which they are expected

to unwind.

Corporation tax in the consolidated statement of financial position is a net liability of £5,110,000. Within this liability are

uncertain tax provisions of £5,897,000. £5,922,000 was reclassified from provisions (see note 25), including £2,586,000

relating to a settlement with HMRC that will be paid in quarterly instalments between April 2022 and March 2023. The

Directors believe that a range of outcomes for the liabilities under these enquiries is between £2,586,000 and £5,922,000.

Offsetting this liability is a £787,000 asset relating to a Research and Development Expenditure Credit claim in the

Renewables division.

No deferred tax assets have been recognised as at 28 February 2022 in respect of tax losses carried forward within various

Group entities. This is on the basis that there is insufficient visibility of future taxable profits against which the potential

deferred tax assets would unwind.

12 Earnings per share

Basic earnings per share (EPS) amounts are calculated by dividing net profit or loss for the year attributable to ordinary

equity holders of the Parent by the weighted average number of ordinary 10p shares outstanding during the year.

Diluted EPS is calculated by dividing net profit or loss attributable to ordinary equity holders of the Parent by the weighted

average number of ordinary shares, adjusted for share options which have exercise prices below the average market price

of shares during the year. No share options have been included in the calculation of diluted EPS as the exercise prices of the

SAYE schemes are above the average market share price and the other options have performance conditions which have not

been unconditionally met at the year end.

Esken Limited Annual Report and Accounts 2022

144

12 Earnings per share continued

The following table reflects the income and share data used in the basic and diluted EPS calculations:

Numerator

2022

£’000

Restated

2021

£’000

Continuing operations

Loss for the year used for basic and diluted earnings (24,702) (37,088)

Discontinued operations

Loss for the year used for basic and diluted earnings (2,386) (118,025)

Total

Loss for the year used for basic and diluted earnings (27,088) (155,113)

Denominator Number Number

Weighted average number of shares used in basic EPS 826,598,148 538,444,665

Effects of employee share options – –

Weighted average number of shares used in diluted EPS 826,598,148 538,444,665

Weighted average of own shares held and therefore excluded

from weighted average number 4,197,496 3,514,092

On 22 June 2017, 896,721 awards were made to Executive Directors and other senior employees under a Long-Term

Incentive Plan (LTIP). During prior years, 2,700 shares were exercised, 361,026 shares were forfeited and 532,995 shares

lapsed. There were no shares outstanding from this award at the year-end date.

On 3 November 2017, 2,333 awards were made to other senior employees under an LTIP. During the prior year, these options

lapsed. There were no shares outstanding from this award at the year end.

On 20 June 2018, 726,522 awards were made to Executive Directors and other senior employees under an LTIP. During prior

years, 1,946 shares were exercised, 15,576 shares were forfeited and 249,889 shares lapsed. During the year, 459,111 shares

lapsed. There were no shares outstanding from this award at the year end.

On 21 December 2018, the Group invited qualifying employees to join a Save As You Earn (SAYE) scheme. During prior years,

108,548 options were forfeited and 1,061,057 options were cancelled. During the year, 9,221 shares were forfeited and 20,883

shares were cancelled. There are 13,442 shares outstanding at the year end. These are potentially dilutive instruments but have

not been included in the calculation of diluted EPS because the exercise price is higher than the average market share price

during the year.

On 3 July 2019, 1,939,896 awards were made to Executive Directors and other senior employees under an LTIP. During prior

years, 295,665 shares lapsed. During the year 5,086 additional shares were granted as a result of the equity raise in August

2021 and 416,845 shares lapsed. There are 1,232,472 shares outstanding at the year end. These are potentially dilutive

instruments but were not included in the calculation of diluted EPS because the performance conditions had not been met

unconditionally at the year-end date.

On 2 August 2019, the Group invited qualifying employees to join a SAYE scheme. During prior years, 571,010 shares were

forfeited and 1,235,909 shares were cancelled. During the year, 193,876 shares were forfeited and 436,313 shares were cancelled.

There are 525,820 shares outstanding at the year end. These are potentially dilutive instruments but have not been included in the

calculation of diluted EPS because the exercise price is higher than the average market share price during the year.

On 31 August 2021, 11,116,945 awards were made to Executive Directors and other senior employees under an LTIP. During

the year, 1,048,290 shares lapsed. There are 10,068,655 shares outstanding at the year end. These are potentially dilutive

instruments but were not included in the calculation of diluted EPS because the performance conditions had not been met

unconditionally at the year-end date.

On 21 December 2021, 18,165,737 awards were made to Executive Directors and other senior employees under an LTIP. All of

these shares are outstanding at the year end. These are potentially dilutive instruments but were not included in the calculation

of diluted EPS because the performance conditions had not been met unconditionally at the year-end date.

No treasury shares were held at year end (2021: nil). Treasury shares are not included in the weighted average number of shares

used to calculate EPS. Own shares held in an employee benefit trust are excluded from the weighted average number of shares.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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145

Strategic Report Corporate Governance Financial Statements

13 Property, plant and equipment

Year ended 28 February 2022

Land and

buildings

£’000

Plant and

machinery

£’000

Fixtures, fittings

and equipment

£’000

Commercial

vehicles

and aircraft

£’000

Total

£’000

Cost

At 1 March 2021 284,048 66,257 17,425 56,213 423,943

Additions 2,806 1,743 84 – 4,633

Right-of-use asset additions 1,576 537 – – 2,113

Disposals (791) (4,411) (478) (489) (6,169)

Right-of-use asset disposals (271) (112) – – (383)

Transfers between categories (2,982) 3,040 (69) 11 –

Liquidation of subsidiary undertaking (1,973) (1,094) (407) (15,208) (18,682)

At 28 February 2022 282,413 65,960 16,555 40,527 405,455

Aggregate depreciation and impairment charges

At 1 March 2021 57,828 27,246 10,426 42,822 138,322

Charge for the year 6,364 6,079 1,881 3,026 17, 350

Charge for the year on right-of-use assets 2,804 246 – 64 3,114

Impairment 5,369 – – – 5,369

Disposals (794) (3,867) (481) (221) (5,363)

Right-of-use asset disposals (243) (49) – – (292)

Transfers between categories (3) (9) (1) 13 –

Liquidation of subsidiary undertaking (1,973) (1,094) (407) (15,208) (18,682)

At 28 February 2022 69,352 28,552 11,418 30,496 139,818

Net book value at 28 February 2022 213,061 37,408 5,137 10,031 265,637

Net book value of right-of-use assets included

in the table above 42,949 19,401 713 8,934 71,997

Esken Limited Annual Report and Accounts 2022

146

13 Property, plant and equipment continued

Year ended 28 February 2021

Land and

buildings

£’000

Plant and

machinery

£’000

Fixtures, fittings

and equipment

£’000

Commercial

vehicles

and aircraft

£’000

Total

£’000

Cost

At 1 March 2020 283,758 72,241 12,145 34,806 402,950

Acquisition of subsidiary 1,618 1,098 463 33,554 36,733

Additions 3,460 1,046 225 352 5,083

Right-of-use asset additions 866 390 – 163 1,419

Disposals (542) (559) (66) (809) (1,976)

Right-of-use asset disposals (4,436) (25) – (15) (4,476)

Transfers between categories (1,464) 3,901 6,959 (7,611) 1,785

Disposal of subsidiary undertaking (37) (11,785) (2,213) (475) (14,510)

Transfer from inventory 470 – – – 470

Effect of movements in foreign exchange 355 (50) (88) (3,752) (3,535)

At 28 February 2021 284,048 66,257 17,425 56,213 423,943

Aggregate depreciation and impairment charges

At 1 March 2020 53,546 17,682 6,846 18,292 96,366

Charge for the year 4,685 6,994 2,560 3,273 17,512

Charge for the year on right-of-use assets 3,635 239 – 11,283 15,157

(Impairment reversal)/impairment (1,201) 1,493 353 20,500 21,145

Disposals (542) (382) (45) (678) (1,647)

Right-of-use asset disposals (926) (22) – (5) (953)

Transfers between categories (1,293) 7,954 2,835 (7,711) 1,785

Disposal of subsidiary undertaking (35) (6,658) (2,035) (283) (9,011)

Effect of movements in foreign exchange (41) (54) (88) (1,849) (2,032)

At 28 February 2021 57,828 27,246 10,426 42,822 138,322

Net book value at 28 February 2021 226,220 39,011 6,999 13,391 285,621

Net book value of right-of-use assets included

in the table above 53,270 26,696 803 13,192 93,961

Of the total depreciation charge for the year of £20,464,000 (2021: £32,669,000) included in the above tables, £nil (2021:

£13,246,000) is included within the loss from discontinued operations, net of tax, on the consolidated income statement.

Of the total impairment for the year of £5,369,000 (2021: £21,145,000) included in the above tables, £nil (2021: £22,921,000)

is included within the loss from discontinued operations, net of tax, on the consolidated income statement.

Impairment of assets

At the year end, the Group subjected two land and buildings assets at Carlisle Lake District Airport (CLDA) and a water port

and storage site at Weston Point Runcorn (Runcorn), to external independent development valuations carried out by Knight

Frank LLP on a fair value less costs to sell basis. The valuations were performed in accordance with the RICS Valuation

Standards issued by the Royal Institution of Chartered Surveyors. These valuations have driven a reversal of impairment

of £820,000. The key assumptions taken in arriving at the valuations include rental yields and rates per acre.

It was expected that a portion of land leased in Widnes was to be used in the Renewables division, but during the year

the Group reassessed its strategy for the use of the land and concluded that this was not viable. Consequently, the Group

has considered the recoverable amount of the right-of-use asset and deemed it immaterial resulting in an impairment

of £6,189,000.

The impairment charges in the current and prior years are presented on a separate line on the face of the consolidated

income statement. Any future increases in value will be recognised as a gain through the same line on the face of the

consolidated income statement.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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Strategic Report Corporate Governance Financial Statements

Impairment testing of other property, plant and equipment where no charge for impairment has been recognised

The London Southend Airport (LSA) cash-generating unit (CGU) comprises the business operations of the commercial

airport, airport hotel and railway station ancillary operations. The CGU has been tested for impairment as the business

suffered a loss before tax in the year to 28 February 2022. The Group estimated the fair value less costs to sell (FVLCS) of

the CGU and determined that no charge for impairment was necessary. The FVLCS method is used as the Directors believe

this better represents the value of the assets. The completion of the investment in LSA through a £125m convertible loan

from Carlyle Global Infrastructure Opportunity Fund provides evidence towards the FVLCS recoverable amount. Taking into

account climate change factors in addition to the current aviation market due to COVID-19, it is the view of the Directors

that the FVLCS is in excess of £375m, which has been calculated based on the underlying equity value of LSA, and as such

is more than sufficient to cover the carrying amount of the LSA CGU assets. The carrying amount of the LSA CGU asset

base as at 28 February 2022 is £154m. The assumptions used to determine this recoverable amount include future forecast

EBITDA, including passenger growth, and multiples achieved by London airports. Although there continues to be uncertainty

in the aviation industry which has impacted airline allocation decisions, the Directors believe that the relaxation of travel

restrictions and pent-up demand will allow LSA to recover close to pre-pandemic passenger volumes at profitable levels

by 2025. The Directors have considered the impact on the FVLCTS of a delay in reaching pre-pandemic levels until 2027

and are satisfied that it would not result in a material impairment. The fair value measurement of the CGU is categorised as

level 3. See note 22, convertible debt section, for method and assumptions used in the calculation of the FVLCS.

Other disclosures in relation to property, plant and equipment

Bank borrowings are secured on the Group’s freehold land and buildings, see note 22 for further details.

Included in land and buildings at 28 February 2022 are assets under construction of £4,772,000 (2021: £9,098,000).

The current year assets relate principally to development work at LSA and CLDA.

14 Investments in associates and joint ventures

Entity Year end

Issued

ordinary

Company holding

direct investment Residence

Principal activity

of the entity or

group headed by

the entity

% of nominal

value

of issued

shares or

members’

capital held

Convoy Limited

5 April 2 SPD1 Limited

Isle of

Man Property investment 50%

Mersey Bioenergy

Holdings Limited 31 December 100

Esken Green Energy

Limited UK

Operation of

energy plant 39.6%

Connect Airways

Limited

31 December 500,000,100 Esken Aviation Limited UK Commercial airlines 30%

AirPortr Technologies

Ltd 31 December 8,248,892 Esken Limited UK

Aviation services

company 16.3%

AirPortr Technologies

Ltd 31 December 8,248,892 Esken Brands LLP UK

Aviation services

company 3.0%

1 These entities are joint ventures; all others are associates.

None of the entities above is strategic to the Group’s activities.

Associates and joint ventures

2022

£’000

2021

£’000

At 1 March 1,372 1,590

Share of post-tax losses (356) (218)

At 28 February 1,016 1,372

The balance at 28 February 2022 relates to the investment in AirPortr Technologies Ltd.

Aggregate joint ventures

The 30% investment in Connect Airways Limited is fully written-down due to the business entering administration

on 18 March 2020.

Esken Limited Annual Report and Accounts 2022

148

14 Investments in associates and joint ventures continued

Aggregate associates

2022

£’000

2021

£’000

Carrying amount 1,016 1,372

Share of post-tax losses (356) (218)

During the year, the Group did not take a 39.6% share of the Mersey Bioenergy Holdings Limited losses (2021: £nil) as

equity-accounted losses had already reached the cap at the value of the investment. During the year, AirPortr Technologies

Ltd contributed equity-accounted losses of £356,000 (2021: £218,000). The Group’s exposure for AirPortr Technologies Ltd’s

losses is limited to its investment in the company. There was no impact on the consolidated statement of cash flows.

15 Other financial assets

2022

£’000

2021

£’000

At 1 March 10,392 4,776

Additions 4,900 973

Impairments – (70)

Revaluation – FVOCI (1,187) 4,713

At 28 February 14,105 10,392

During the year, the Group utilised a Protected Captive Cell (PCC) arrangement as part of its insurance portfolio. The PCC

had to be fully funded once the policies were issued; thus of the £5,000,000 paid, £100,000 related to an insurance premium

which was expensed to the consolidated income statement, and £4,900,000 was capitalised and added to other financial

assets on the consolidated statement of financial position. There have been no drawdowns on the PCC and the value of the

investment at 28 February 2022 was £4,900,000.

At the year end the Group holds 9.14% of the total nominal value of issued shares of AIM-listed Logistics Development Group

plc (LDG). At 28 February 2022 the Group’s investment was worth £9,205,000 (2021: £10,392,000). The exchangeable bond

(see note 22) is secured on ordinary shares in LDG and of the total 64,149,500 shares held by the Group, the pool of shares

for which the bond may be exchanged is 51,708,179. The Group made an irrevocable election to account for LDG as fair value

through other comprehensive income, on adoption of IFRS 9 on 1 March 2018. The fair value of LDG is calculated using the

market price per AIM. The revaluation in the year relates to the change in LDG share price.

16 Intangible assets

Goodwill

£’000

Customer

relationships

£’000

Total

£’000

Cost

At 1 March 2020 87,419 1,793 89,212

At 28 February 2021 and 28 February 2022 87,419 1,793 89,212

Amortisation and impairment

At 1 March 2020 32,750 1,793 34,543

At 28 February 2021 and 28 February 2022 32,750 1,793 34,543

Net book value

At 29 February 2020 54,669 – 54,669

At 28 February 2021 and 28 February 2022 54,669 – 54,669

No internally generated intangible assets are recognised in the financial statements.

Customer relationships consisted of contractual relationships with customers recognised on acquisitions.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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149

Strategic Report Corporate Governance Financial Statements

Goodwill

The goodwill from a business combination has been allocated to a cash-generating unit (CGU). Carrying amounts of goodwill

allocated to each CGU are set out in the following table. These assets are considered to have indefinite lives because there

is no foreseeable limit to the period over which the assets are expected to generate net cash inflows for the Group.

Renewables Total

2022

£’000

2021

£’000

2022

£’000

2021

£’000

Carrying amount of goodwill 54,669 54,669 54,669 54,669

Impairment testing of goodwill

In accordance with IAS 36 Impairment of Assets, the Group has undertaken impairment testing for each CGU. The key

assumptions applied in respect of each CGU are set out below. A sensitivity analysis has been performed, at the individual

CGU level, in order to review the effect of changes in key assumptions.

Renewables CGU

The recoverable amount of goodwill in the Renewables CGU has been based on value-in-use calculations using projections

from financial forecasts approved by senior management covering a five-year (2021: five-year) period. The main assumptions

on which the forecasts were based include gate fee income cash flows and estimated contracted volumes supplied. The

gate fee income and profit margins are based on management’s past experience and are primarily determined by gate fees

received and material costs. The pre-tax discount rate applied to the cash flow projections was 12.6% (2021: 12.8%) based

on a weighted average cost of capital based on market participant parameters, taking into account the cost of equity and

debt for the CGU, and adjusting for risk specific to the CGU. Cash flows beyond the five-year period have been recognised

up to 2037, being the expiration of Renewable Obligation Certificates issued to renewable energy plants, with an annual

growth rate of 2.0% (2021: 2.0%) assumed in the calculations beyond year five. The forecast cash flows are restricted to

2037, rather than continuing to perpetuity, to reflect the contracted supply to renewable energy plants. Whilst not all long-

term fuel supply agreements go out to at least 2037 the Directors are satisfied that it is more likely than not that all will run

to at least this point through contract renewals and extensions.

No impairment losses have been recognised in the current or prior year. The calculation of the value-in-use is most sensitive

to the discount rate, gate fee income received, and substantial achievement of contracted volumes as the business matures.

Whilst individually sensitising these key assumptions does not result in an impairment, a combination of all could result in a

material impairment. However, the Directors are satisfied that the risk of all sensitivities crystallising is remote. In order for

the estimated recoverable amount to equal the carrying amount, the pre-tax discount rate would have to increase to 31.8%

or cash flows would have to reduce by 48.5%.

The methods used to determine the factors within the discount rate calculations were consistent with the prior year.

Reasons for changes in some of the discount rates include a reduction in size premium and variations in risk-free rate,

gearing and beta values for comparative companies used to calculate cost of equity.

The Renewables CGU is the same as the Renewables segment.

17 Inventories

2022

£’000

2021

£’000

Consumable supplies 581 3,771

Goods held for resale 520 112

Property inventories 11,451 11,451

12,552 15,334

Consumable supplies has reduced in the year primarily due to the de-consolidation of Stobart Air’s balance sheet from the

Group accounts.

During the year inventory of £11,447,000 (2021: £13,107,000) was expensed to the consolidated income statement within

operating expenses, and £nil (2021: £nil) was written-off to the consolidated income statement.

Property inventory relating to Widnes is subject to a fixed charge under the revolving credit facility, see note 22 for

further details.

Development land at Widnes was subject to an external independent development valuation carried out by Knight Frank LLP.

The valuation was performed in accordance with the RICS Valuation Standards issued by the Royal Institution of Chartered

Surveyors. The valuation provided a value of £10,590,000 (2021: £10,675,000). As this value was not materially different to

the carrying value of £10,675,000 no impairment (2021: £952,000) has been recognised.

Esken Limited Annual Report and Accounts 2022

150

18 Trade and other receivables

2022

£’000

2021

£’000

Non-current

Deferred consideration 1,495 1,495

1,495 1,495

Current

Trade receivables – net 8,364 15,657

Other receivables and prepayments 15,519 11,721

23,883 27,378

Movement in the loss allowance

At 1 March 417 210

Movement in the year 912 207

At 28 February 1,329 417

The £1,495,000 deferred consideration relates to the sale of brand assets to a third party in May 2020.

The analysis of trade receivables by due date is as follows:

2022

Receivable

£’000

2022

Provision

£’000

2021

Receivable

£’000

2021

Provision

£’000

Current 4,824 (69) 7,480 (11)

1 month 2,297 – 1,145 (11)

2 months 307 (8) 609 8

3+ months 2,265 (1,252) 6,840 (403)

9,693 (1,329) 16,074 (417)

The standard period for credit sales varies from 30 days to 60 days. The Group assesses creditworthiness of all trade debts

on an ongoing basis providing for expected credit losses in line with IFRS 9. The Group has considered credit risk rating

grades, which are based on the ageing categories above. New customers are subject to stringent credit checks. COVID-19

has not had a material impact on the collection of 28 February 2022 year-end trade receivables. The analysis of trade

receivables past due but not impaired by invoice date is as follows:

2022

£’000

2021

£’000

Neither past due nor impaired 5,770 8,514

<30 days 1,447 1,036

31-60 days 204 747

61-90 days 107 976

91-120 days 1,644 2,343

>120 days 521 2,458

9,693 16,074

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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151

Strategic Report Corporate Governance Financial Statements

19 Trade and other payables

Note

2022

£’000

2021

£’000

Trade payables 10,828 16,789

Other taxes and social security 1,772 3,382

Other payables and accruals 14,653 31,064

Government grants 21 2,907 1,500

30,160 52,735

20 Other liabilities

Note

2022

£’000

2021

£’000

Other payables and accruals 1 34

Government grants 21 8,642 8,237

8,643 8,271

21 Government grants

The Aviation division has received several grants for development work at London Southend Airport on runway refurbishment

and extension, operational buildings, new road, radar and airport operations. The grants are released to the consolidated

income statement either in line with the useful life of the assets to which they relate if applicable, or over the period

specified in the grant terms.

The Renewables division has received a number of grants for site development at several locations, with conditions on job

creation and spend in designated geographical areas. The grants are released to the consolidated income statement in line

with the useful life of the assets to which they relate.

The Non-Strategic Infrastructure division was awarded a grant from the Regional Growth Fund and related to job creation

for land remediation at the 3MG site in Widnes. The grant is held on the statement of financial position and released to the

consolidated income statement based on the number of jobs created. The division was also awarded a grant for the creation

of jobs and employment space at Carlisle Lake District Airport. The grant is released to the consolidated income statement in

line with the useful life of the asset.

Payments received under the UK Government Coronavirus Job Retention Scheme are in the form of a grant and are

recognised in the same period in which the related expense is incurred, see note 8.

Reconciliation of movement in grant liability to cash flows arising from financing activities

2022

£’000

2021

£’000

Balance at 1 March 9,737 10,199

Changes from financing cash flows:

New grants received 2,600 –

Total changes from financing cash flows 2,600 –

Release to consolidated income statement (788) (480)

Reclass from other creditors – 18

Balance at 28 February 11,549 9,737

Esken Limited Annual Report and Accounts 2022

152

22 Financial assets and liabilities

Loans and borrowings

2022

£’000

2021

£’000

Non-current

Obligations under leases 98,677 122,116

Convertible debt (net of costs) 118,862 –

217,539 122,116

Current

Exchangeable bonds 52,385 52,010

Obligations under leases 24,714 36,792

Revolving credit facility (net of arrangement fees) – 52,329

77,099 141,131

Total loans and borrowings 294,638 263,247

Cash (52,738) (12,408)

Net debt 241,900 250,839

Included within the cash balance of £52,738,000 is £14,444,000 of ring-fenced cash for use in London Southend Airport and

its subsidiaries under the terms of the convertible debt agreement with Carlyle Global Infrastructure Opportunity Fund, and

£945,000 for use in the Employee Benefit Trust.

Reconciliation of movements of liabilities to cash flows arising from financing activities

Liabilities

Exchangeable

bonds

£’000

Revolving

credit facility

£’000

Convertible

debt

£’000

Obligations

under leases

£’000

Total

£’000

Balance at 1 March 2021 52,010 52,329 – 158,908 263,247

Changes from financing cash flows:

Additional loans – – 125,000 – 125,000

Net cash repaid – (55,000) – – (55,000)

Cash outflow from debt issue costs – (3,165) (13,541) – (16,706)

Principal elements of lease payments – continuing operations – – – (17,026) (17,026)

Principal elements of lease payments – discontinued operations – – – (11,470) (11,470)

Interest paid – continuing operations (1,460) (3,624) – (3,908) (8,992)

Interest paid – discontinued operations – – – (2,913) (2,913)

Total changes from financing cash flows (1,460) (61,789) 111,459 (35,317) 12,893

Release of deferred issue costs 375 4,411 998 – 5,784

Reclass to other debtors – 1,425 – – 1,425

New leases entered into – – – 5,744 5,744

Termination of lease – – – (6,707) (6,707)

Unwind of discount – – – 171 171

Disposal of subsidiary undertaking – – – (7,265) (7, 265)

The effect of changes in foreign exchange rates – – – 1,077 1,077

Non-cash interest accruals 1,460 3,624 6,405 6,780 18,269

Balance at 28 February 2022 52,385 – 118,862 123,391 294,638

Deferred issue costs included in the above liabilities 814 – 12,542 – 13,356

Deferred issue costs associated with the revolving credit facility (RCF) of £1,425,000 are held within trade and other

receivables in the statement of financial position as the RCF is undrawn at year end.

The £6,707,000 termination of lease primarily relates to the exit of the Judd House lease, see note 6, and the termination

of aircraft leases in Stobart Air.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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153

Strategic Report Corporate Governance Financial Statements

Liabilities

Exchangeable

bonds

£’000

Revolving credit

facility

£’000

Obligations under

leases

£’000

Total

£’000

Balance at 1 March 2020 51,689 74,757 118,811 245,257

Changes from financing cash flows:

Net cash repaid – (20,000) – (20,000)

Cash outflow from debt issue costs (51) (4,286) – (4,337)

Principal elements of lease payments – continuing operations – – (24,018) (24,018)

Principal elements of lease payments – discontinued operations – – (187) (187)

Interest paid – continuing operations (1,460) (2,243) (1,742) (5,445)

Interest paid – discontinued operations – – (3,942) (3,942)

Total changes from financing cash flows (1,511) (26,529) (29,889) (57,929)

Release of deferred issue costs 372 1,858 – 2,230

New leases entered into – – 3,408 3,408

Termination of lease – – (63) (63)

Unwind of discount – – 141 141

Acquisition of subsidiary – – 64,884 64,884

Disposal of subsidiary undertaking – – (1,707) (1,707)

The effect of changes in foreign exchange rates – – (4,752) (4,752)

Non-cash interest accruals 1,460 2,243 8,075 11,778

Balance at 28 February 2021 52,010 52,329 158,908 263,247

Deferred issue costs included in the above liabilities 1,189 2,671 – 3,860

During the year the current bank lenders signed a new £20m RCF which matures on 1 February 2023. This facility replaced

the old £120m RCF which was fully repaid in the year. The £20m variable rate committed RCF, with end date February 2023,

uses a variable rate plus a similar margin to the old RCF and has a simplified covenant structure which reflects the forecast

performance of the business going forward. Under the new RCF, Esken Limited and all material subsidiaries, excluding

London Southend Airport Company Limited (LSA), have charged security to the lenders via a debenture, and the material

subsidiaries, excluding LSA, are also guarantors and obligors in relation to the facility agreement. There are fixed charges

over land and properties including Widnes, Runcorn and Carlisle Lake District Airport, in addition to floating charges and

charges over shares. The RCF was undrawn (2021: £55,000,000) at the year end.

Esken Limited provides support to its subsidiaries where required. Examples of support include intercompany funding

arrangements and the provision of guarantees in relation to financing lines provided by a number of lenders. In addition, one

Renewables contract has a covenant relating to the market capital of Esken Limited, where a breach would be remedied by

additional letters of credit. The Group was in compliance with, or received waivers for, all financial covenants throughout

both the current and prior year and subsequent to the year end.

The book value and fair values of financial assets and financial liabilities are as follows:

Book value

2022

£’000

Fair value

2022

£’000

Financial assets

Cash 52,738 52,738

Other investments 14,105 14,105

Trade receivables 8,364 8,364

Other receivables 335 335

Financial liabilities

Trade payables 10,828 10,828

Exchangeable bonds 52,385 47,402

Convertible debt 118,862 122,511

Lease obligations 123,391 123,542

Other payables 23 23

Esken Limited Annual Report and Accounts 2022

154

22 Financial assets and liabilities continued

Book value

2021

£’000

Fair value

2021

£’000

Financial assets

Cash 12,408 12,408

Other investments 10,211 10,211

Trade receivables 15,658 15,658

Other receivables 9,258 9,258

Swaps 310 310

Financial liabilities

Trade payables 19,558 19,558

Revolving credit facility 52,329 52,329

Exchangeable bonds 52,010 47,920

Lease obligations 158,908 148,647

Other payables 2,034 2,034

Swaps 404 404

The following financial assets and liabilities, included in the above tables, are measured at fair value: other investments,

swaps and £nil (2021: £1,581,000) within other payables. All others are measured at amortised cost. For trade and other

receivables/payables with a remaining life of less than one year, the carrying amount is considered to reflect the fair value.

The fair values of loans and borrowings have been calculated by discounting the expected future cash flows at prevailing

interest rates. The fair value of lease liabilities and of loans and borrowings are classified as level 2 in the fair value hierarchy.

Convertible debt

On 26 August 2021, the Group signed an agreement with Carlyle Global Infrastructure Opportunity Fund (CGI) for a £125m

investment in LSA through a 30% convertible debt instrument (loan). The loan can be converted by CGI at any time following

this date until maturity, being seven years. If CGI does not convert prior to maturity, the loan is repayable at the greater of

an amount achieving 10% IRR for CGI or £193.8m (Repayment Price). Interest accrues at 8% per annum to be paid in cash or

rolled into the principal, depending on cash generated by LSA in the previous year and certain minimum liquidity headroom

requirements. In addition, 2% per annum PIK interest is rolled into the principal. The loan includes three derivatives in relation

to conversion, however, these have been accounted for as one single compound derivative as they are not considered

independent of each other.

The derivative was fair valued at £1,005,000 on issue of the loan and is revalued at each reporting date, with any gain or loss

recognised in finance costs in the consolidated income statement. The host contract is measured at amortised cost. The

derivative fair value on issue is different to that disclosed in the Interim Statement following an amendment in calculation

methodology, in line with the year-end valuation.

The fair value of the derivative is arrived at using the income approach which values the underlying equity value of LSA

and the fair value of the host contract, forming inputs into the valuation model. The equity value and fair value of host

contract have been calculated by applying a probability weighted average to seven scenarios above and below the base

case cashflows per LSA’s latest five-year business model (Base Case), flexing passenger forecasts adopted in the base case

scenario. In each of the scenarios, 30% of LSA’s equity value is compared to the repayment price to assess the likelihood

of conversion. At 28 February 2022, the compound derivative was valued at £1,088,000 which represents the difference

between the fair value of the convertible debt and the host loan, presented in the convertible debt line above. The derivative

valuation is expected to increase materially if base case forecasts are substantially exceeded. If LSA performs below base

case forecasts, the valuation of the derivative is expected to reduce towards nil.

The key valuation assumption and sensitivities for the option valuation are:

Discount rate

Judgement is used in arriving at the appropriate discount rate which includes a specific risk premium which takes into

account the significant uncertainty in LSA achieving forecasted growth and the comparable cost of debt and equity for

other European airports. A discount rate of 11.25% was used. A 1% movement in rate would lead to an increase/decrease

in the value of the option of c.£500,000.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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155

Strategic Report Corporate Governance Financial Statements

Probability weighting of scenarios

The probability weighting of scenarios flexes passenger forecasts adopted in the Base Case scenario model and assigns

probabilities to each scenario.

Exchangeable bonds

On 3 May 2019, the Group placed £53.1m of secured guaranteed exchangeable bonds (Bonds). The Bonds have a five-year

maturity, bear interest at 2.75% per annum and are exchangeable into ordinary shares of 1p each in the capital of Logistics

Development Group plc (LDG). The bondholders have an unconditional right to require the Group to settle the bonds by

giving the bondholders shares in LDG at any time. The Directors have obtained legal advice that confirms the liquidation

of Stobart Air does not result in additional rights to redemption of the Bonds. The Bonds have a May 2024 maturity, with

repayment being the difference between the £53.1m gross Bonds and shares in LDG into which the Bonds are convertible.

At 28 February 2022 this amounted to £45.7m.

Cyrus put option

The Group entered into a put option with fellow Connect Airways shareholder Cyrus Capital Partners (Cyrus) on

11 January 2019. This agreement gave Cyrus the option to exchange £23m of second-ranking six-year 8% RCF debt with

Connect Airways, for equity shares in Esken Limited at 247p per share. The option was exercisable two years following the

acquisition of Flybe plc by Connect Airways and required 30 days’ notice. On 7 May 2021 the put option was exercised and

6m shares were issued. The exercise meant that the associated financial liability had a fair value of £nil and £1,581,000 was

released and presented within finance income (2021: £458,000 cost) in the consolidated income statement. The share issue

resulted in an increase in share capital and an increase in retained deficit.

Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by

valuation technique:

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

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable,

either directly or indirectly.

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on

observable market data.

Financial assets and liabilities measured at fair value

As at 28 February 2022

Total

£’000

Level 1

£’000

Level 2

£’000

Level 3

£’000

Financial assets

Other financial assets 14,229 9,205 4,900 124

Financial liabilities

Other financial liabilities 1,088 – – 1,088

As at 28 February 2021

Total

£’000

Level 1

£’000

Level 2

£’000

Level 3

£’000

Financial assets

Other financial assets 10,516 10,392 – 124

Currency swaps 310 – 310 –

Financial liabilities

Other financial liabilities 1,581 – – 1,581

Currency swaps 358 – 358 –

Diesel swaps 46 – 46 –

Fair value calculation methodology

Other investments are valued based on quoted market price. Swaps are valued based on market rates and market-accepted

models. Fair value for financial instruments held at amortised cost has been estimated by discounting cash flows at

prevailing interest rates.

During the current and prior year, there were no transfers between level 1 and level 2 fair value measurements, no transfer

into level 3 fair value measurements and one transfer out of level 3 due to the exercise of the Cyrus put option.

Esken Limited Annual Report and Accounts 2022

156

22 Financial assets and liabilities continued

Financial instruments – risk management

The Group is exposed through its operations to the following financial risks:

• Credit risk

• Liquidity risk

• Diesel price risk

• Currency price risk

• Fair value or cash flow interest rate risk

• Capital risk

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note

describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them.

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

• Trade and other receivables

• Convertible debt

• Exchangeable bonds

• Floating-rate revolving credit facility

• Cash at bank

• Trade and other payables

• Lease obligations

General objectives, policies and processes

The Board has overall responsibility for the determination of the Group’s risk management objectives and policies.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting

the Group’s competitiveness and flexibility. Further details regarding these policies are set out below.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or a counterparty to a financial instrument fails to meet its

contractual obligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy, implemented locally,

to assess the credit risk of new customers before entering contracts. Such credit ratings are taken into account by local

business practices.

All credit sales are made under Group payment and delivery terms and conditions and are mostly covered by insurance.

All credit limits are formally set and are in agreement with the bank.

The recoverability of the net trade receivables, including contract assets, is considered highly likely. This is supported by the

collection history of the Group. In generating the expected credit loss provision, historical credit loss rates for the preceding

five years are observed, including consideration given to factors that may affect the ability of customers to settle receivables,

and percentages applied to the trade and other receivable ageing buckets at the year end. The Group applies the simplified

approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables.

The expected credit losses on other receivables have not been recognised as the resultant provision would not be material

to the financial statements.

Interest rate risk

The Group is exposed to cash flow interest rate risk from long-term borrowings and cash at variable rates. There are loan

facilities at variable rates as well as amounts held on deposit. These borrowing policies are managed centrally. Although the

Board accepts that this policy neither protects the Group entirely from the risk of paying rates in excess of current market

rates nor eliminates fully cash flow risk associated with variability in interest payments, it considers that it achieves an

appropriate balance of exposure to these risks.

The Group’s fixed and variable rate borrowings were denominated in GBP.

Capital risk

The Group is exposed to capital risk in relation to its shareholding in Logistics Development Group (LDG). Any adverse

movement in the quoted share price will directly impact the fair value of the investment held.

Diesel price risk

The Group is exposed to diesel price risk as diesel fuel is a key supply to the transport fleet of vehicles in the Renewables

business. If diesel prices rise, there will be increases in the base costs that cannot be fully passed on to customers.

To mitigate this risk, when necessary the Group takes out diesel swap contracts to manage its exposure.

The fair value of diesel swap contracts falling within level 2 of the fair value hierarchy as at 28 February 2022 is £nil

(2021: £46,000 liability) and the gross swap coverage was £nil (2021: £333,000). The fair value of the swaps is calculated

by Lloyds Bank Corporate Markets plc (Lloyds Bank plc) and Mitsui Bussan Commodities Ltd based on mid-market levels

as of the close of business on 28 February 2022.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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Strategic Report Corporate Governance Financial Statements

Foreign exchange risk

The Group is exposed to currency price risk as it undertakes certain transactions denominated in foreign currencies,

primarily the leasing of aircraft, and purchase of spare parts, maintenance and fuel in USD and EUR. To mitigate this risk,

when necessary the Group takes out currency swap contracts to manage its exposure.

The fair value of currency swap contracts falling within level 2 of the fair value hierarchy as at 28 February 2022 is £nil

(2021: £48,000 liability) and the gross swap coverage was £nil (2021: £10,052,000). The fair value of the swaps is calculated

by Lloyds Bank plc based on mid-market levels as of the close of business on 28 February 2022.

Sensitivity analysis

The sensitivity analysis set out in the following table summarises the sensitivity of the market value of financial instruments

to hypothetical changes in market rates and prices. Sensitivity is calculated based on all other variables remaining constant.

The interest rate analysis assumes a 1% change in interest rates, the currency analysis assumes a 1% change in currency

price and the diesel price analysis assumes a 10% price change. The diesel and currency price sensitivity analysis is based

on diesel and currency-related derivative instruments held at the end of each reporting period.

The following table discloses:

• The impact on the fair value of fixed-rate hire purchase agreements, and the impact to the consolidated income statement

from floating rate hire purchase agreements and the RCF, of a 1% increase in interest rates;

• The impact to the fair value and impact to the consolidated income statement of a 1% increase in currency price on

currency swaps; and

• The impact to the fair value and impact to the consolidated income statement of a 10% increase in the diesel price on

diesel swaps.

A corresponding decrease results in an equal and opposite impact on the consolidated income statement.

Interest rate

1% increase

£’000

Diesel price

10% increase

£’000

Currency price

1% increase

£’000

At 28 February 2022

Decrease in fair value of financial instruments (155) – –

Impact on profit: loss (332) – –

At 28 February 2021

(Decrease)/increase in fair value of financial instruments (767) 30 6

Impact on profit: (loss)/gain (731) 30 6

Capital management

The objective of the Group’s capital management is to ensure that it maintains a strong credit rating and for capital ratios to

be at a level that supports the business strategy going forward and maximises shareholder value.

The Group monitors capital using gearing ratios. Gearing based on net debt divided by capital was 326.7% at 28 February

2022 (2021: 519.2%). The Group includes the following within borrowings: bank loans, lease obligations and exchangeable

bonds. Capital comprises equity attributable to the equity holders of the Parent.

The Group uses share capital to partly fund major acquisitions where considered appropriate. The Group is not subject to any

externally imposed capital restraints except compliance with normal bank covenants. Dividends are payable after considering

the solvency of the Group and the forecast funding requirements and headroom.

Liquidity risk

Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on

its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

See the maturity profile of loans and borrowings below.

The Group prepares and reviews rolling weekly cash flow projections. Actual cash and debt positions along with available

facilities and headroom are reported weekly. These are monitored by senior management.

In addition, full annual five-year forecasts are prepared including cash flow and headroom forecasts. These are full, detailed

forecasts prepared by each division and consolidated for the Group.

Esken Limited Annual Report and Accounts 2022

158

22 Financial assets and liabilities continued

The financial statements have been prepared using the going concern basis. See note 1 for further details.

The table below summarises the maturity analysis of financial liabilities based on contractual undiscounted payments:

<1 year

£’000

1 to 5 years

£’000

>5 years

£’000

Total

£’000

At 28 February 2022

Loans and borrowings – 53,075 193,750 246,825

Obligations under lease 30,208 54,870 115,954 201,032

Trade payables 10,828 – – 10,828

41,036 107,945 309,704 458,685

At 28 February 2021

Loans and borrowings 55,882 – – 55,882

Obligations under lease 39,821 68,571 92,684 201,076

Trade payables 19,558 – – 19,558

Swaps 404 – – 404

115,665 68,571 92,684 276,920

23 Employee benefits – pension schemes

The Ansa plan remains open for employees of Ansa Logistics Limited, a subsidiary of the Group. The latest actuarial valuation

of the Ansa plan was as at 31 December 2019 and was carried out by an independent qualified actuary using the projected

unit method. At the date of the latest actuarial valuation, the realisable value of assets was £28,176,000, which was sufficient

to cover 78% of the value of benefits that had accrued to members, measured on the continuing basis. Total contributions

payable for the year to 28 February 2022 amounted to £1,211,000 (2021: £1,176,000) with no contributions (2021: none) due

to the plan at 28 February 2022.

The scheme is established under trust law and has a corporate trustee that is required to run the scheme in accordance

with the scheme’s trust deed and rules and to comply with all the relevant legislation. Responsibility for governance of the

scheme lies with the trustee. The trustee is a company whose Directors comprise representatives of the Group and the

scheme participants, in accordance with its Articles of Association and UK pension law.

The scheme was formed after 1997 and therefore Guaranteed Minimum Pension is not an issue.

The principal assumptions for the purpose of the actuarial valuations used in these consolidated financial statements were

as follows:

2022 2021

Discount rate for scheme liabilities 2.50% 1.90%

Rate of inflation (RPI) 3.70% 3.10%

Rate of inflation (CPI) 2.80% 2.40%

Rate of general increase in salaries n/a n/a

Mortality table used

S3NA,

CMI_2020,

1.25%

minimum annual improvement

S3NA,

CMI_2019,

1.25%

minimum annual improvement

While COVID-19 has had an impact on mortality in the current year, the impact on future mortality trends is currently

unknown and consequently no adjustment has been made to mortality assumptions in this regard.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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159

Strategic Report Corporate Governance Financial Statements

Longevity assumptions for members of the Ansa plan

The life expectancies based on the plan’s IAS 19 mortality assumptions at the plan’s normal retirement age of 65 are

as follows:

Male life

expectancy

Female life

expectancy

28 February 2022 85 89

28 February 2042 86 90

28 February 2021 87 89

28 February 2041 88 90

The figures for the members 20 years in the future show how the expected future improvements in longevity, as a result

of the CMI projections and the 1.25% per annum minimum annual improvements, affect life expectancies. An ‘improvement’

means the decrease in the rate of mortality at a given age over the time period.

Sensitivities to principal assumptions

The principal risk to the Group in relation to the plan is that the Group would be required to fund any deficits in the plan,

the level of which is variable and depends upon mortality rates, inflation and returns on plan assets.

The most significant sensitivity stems from the following assumptions:

• Discount rate: This is a key assumption because it is applied to the future pension payments.

• Price inflation: This is a key assumption because it is used to determine increases to pensions in payment and in

deferment and increases to pensionable salaries for the one active member.

• Mortality after retirement: This is a key assumption because it determines how long pensions are paid for when

they come into payment. The central assumptions are the S3NA base tables, with the CMI_2020 projections of future

experience, subject to a 1.25% per annum minimum annual improvement with no age rating.

Sensitising the assumptions listed above would have the following effects on the total liabilities, assets and deficit positions.

For the purposes of the mortality sensitivity illustrations, we have varied the minimum annual improvement.

Discount rate assumption

2.25%

£’000

2.50%

£’000

2.75%

£’000

Liabilities 30,213 29,151 28,147

Assets 29,499 29,499 29,499

(Surplus)/deficit (714) 348 1,352

RPI inflation assumption

3.45%

£’000

3.70%

£’000

3.95%

£’000

Liabilities 28,380 29,151 29,919

Assets 29,499 29,499 29,499

Deficit/(surplus) 1,119 348 (420)

Minimum annual improvement

0.75%

£’000

1.25%

£’000

1.75%

£’000

Liabilities 28,644 29,151 29,674

Assets 29,499 29,499 29,499

Deficit/(surplus) 855 348 (175)

Amounts recognised in the consolidated statement of financial position

2022

£’000

2021

£’000

Present value of funded obligations (29,151) (30,862)

Fair value of scheme assets 29,499 28,444

Net asset/(liability) recognised in the consolidated statement of financial position 348 (2,418)

Esken Limited Annual Report and Accounts 2022

160

23 Employee benefits – pension schemes continued

Amounts recognised in the consolidated income statement

2022

£’000

2021

£’000

Return on scheme assets 540 445

Interest expense (577) (509)

Finance expense (37) (64)

Current service cost (included in staff costs) (4) (4)

Amounts recognised in the consolidated statement of comprehensive income

2022

£’000

2021

£’000

Actual return less return recognised in profit or loss 596 201

Experience (losses)/gains arising on the scheme liabilities (511) 326

Changes in financial assumptions underlying the present value of the scheme liabilities 446 761

Changes in demographic assumptions underlying the present value of the scheme liabilities 1,345 (112)

Amounts recognised in the consolidated statement of comprehensive income 1,876 1,176

Deferred tax (417) (182)

Remeasurement on defined benefit plan 1,459 994

Actual return less return recognised in profit or loss

Actual return on scheme assets 1,136 646

Less return recognised in profit or loss (540) (445)

596 201

Changes in the present value of defined benefit obligations and the fair value of scheme assets are as follows:

2022

£’000

2021

£’000

Defined benefit obligation

Opening defined benefit obligation 30,862 32,311

Current service cost 4 4

Interest expense 577 509

Actuarial gains (1,280) (975)

Employee contributions 1 1

Benefits paid (1,013) (988)

Closing defined benefit obligation 29,151 30,862

Fair value of scheme assets

Opening fair value of scheme assets 28,444 27,889

Return recognised in profit or loss 540 445

Actuarial gains 596 201

Contributions made by the Group 1,211 1,176

Employee contributions 1 1

Benefits paid (1,013) (988)

Expenses (280) (280)

Closing fair value of scheme assets 29,499 28,444

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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161

Strategic Report Corporate Governance Financial Statements

The fair value of the scheme assets at the year end is analysed as follows:

2022

£’000

2021

£’000

Equity instruments 8,063 7, 201

Bonds 14,296 14,097

Diversified growth funds 7,017 6,912

Other (including cash) 123 234

Fair value of scheme assets 29,499 28,444

The plan assets do not include any of the Group’s own financial instruments, nor any property occupied by, or other assets

used by, the Group. The trustees of the Ansa plan regularly review their investment strategies to ensure that wherever

possible the nature of assets held in each scheme is appropriate to the maturity profile of the underlying pension obligation.

The types of assets held are shown above, all of which have quoted prices in active markets with the exception of other

assets. The age profile of the Ansa plan members, which provides an indication of the maturity profile of the defined benefit

obligation, is as follows:

2022

Years

2021

Years

Normal retirement age 65 65

Average age of deferred members 58 56

Average age of pensioner members 70 68

The Group expects to contribute £1,243,000 to the Ansa plan in the year ended 28 February 2023. A schedule of

contributions was agreed with the trustees in the year ended 28 February 2022 to cover a period ending 31 December 2026,

setting out the deficit contributions payable into the scheme. The trustees seek to align the investment strategies with the

maturity profile of the liabilities in the schemes. An additional liability for any surplus contributions payable as a result of this

agreement has not been recognised as the Group has the right to a refund of any surplus.

The Group operates a defined contribution plan. The charge in the year to the consolidated income statement was

£1,031,000 (2021: £872,000). The value of contributions outstanding as at 28 February 2022 and included in other payables

is £111,000 (2021: £187,000).

24 Deferred tax

Deferred tax liabilities

2022

£’000

2021

£’000

Accelerated allowances on plant and machinery (4,813) (4,816)

Other temporary differences (840) (3,402)

Roll-over relief – 2,030

Revaluation of properties to fair value on acquisition 5,653 6,449

– 261

Deferred tax assets have been recognised in respect of temporary differences giving rise to deferred tax assets because it is

probable that the assets will be recovered. These temporary differences on which deferred tax has been recognised relate to

fixed assets, provisions, pensions, share-based payments and interest disallowance carried forward. All deferred tax assets

recognised relate to the UK.

Deferred tax has not been recognised in respect of tax losses of certain Group entities of £78,935,000 as at 28 February

2022 (2021: £59,329,000) on the basis that there is uncertainty over whether taxable profit will be available within the trades

operated by these entities against which the unused tax losses can be utilised in future periods. These losses do not have an

expiry date.

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162

24 Deferred tax continued

The deferred tax balances have been calculated at a blended rate, the amounts expected to unwind pre-April 2023 are

calculated at 19% and the amounts expected to unwind post-April 2023 are calculated at 25%, as these were the rates that

were substantively enacted at the statement of financial position date. The deferred tax liability at the year end is £nil.

Movement in recognised deferred tax balances during the year

Balance

29 February

2020

£’000

Transfer out

on disposal

£’000

Recognised

in profit

or loss

£’000

Recognised

in other

comprehen-

sive income

£’000

Recognised

in retained

earnings

£’000

Balance

28 February

2021

£’000

Recognised

in profit

or loss

£’000

Recognised

in other

comprehen-

sive income

£’000

Recognised

in retained

earnings

£’000

Balance

28 February

2022

£’000

Provisions 464 (6) 951 – – 1,409 (791) – – 618

Tax losses – – – – – – – – – –

Share-based

payments 120 (31) (29) – (4) 56 41 – 46 143

Pension 754 – (113) (182) – 459 (129) (417) – (87)

Roll-over relief (2,543) – 513 – – (2,030) (891) – – (2,921)

Revaluation of

properties to

fair value on

acquisition (5,980) – (469) – – (6,449) 796 – – (5,653)

Brands

recognised

on acquisition (1,700) – 1,700 – – – – – – –

Accelerated

allowances

on plant and

machinery 4,316 (1,103) 1,603 – – 4,816 (3) – – 4,813

Capitalised

interest (1,782) – 1,782 – – – – – – –

Corporate

interest

restriction

disallowance 615 – 863 – – 1,478 1,609 – – 3,087

(5,736) (1,140) 6,801 (182) (4) (261) 632 (417) 46 –

25 Provisions

Site

restoration

£’000

Onerous

contracts

£’000

Tax

£’000

Litigation

and

claims

£’000

Remediation

provision

£’000

Maintenance

reserves

£’000

Total

£’000

At 1 March 2021 3,036 508 16,136 3,781 4,466 20,064 47,991

Provisions used – (585) (26) (1,443) – (3,311) (5,365)

Provisions made – 2,503 – 2,038 – 8,034 12,575

Provisions reversed during the year (1,862) (426) (9,514) (312) – – (12,114)

Reclassification to corporation tax – – (5,922) – – – (5,922)

Reclassification to other payables – – (674) – – – (674)

Unwind of discount 76 21 – – – – 97

Currency retranslation – – – (6) (5) 731 720

Disposal of subsidiary – – – (963) (519) (1,873) (3,355)

At 28 February 2022 1,250 2,021 – 3,095 3,942 23,645 33,953

Analysis of provisions:

Current 1,250 1,491 – 3,095 3,942 10,896 20,674

Non-current – 530 – – – 12,749 13,279

Provisions comprise liabilities where there is uncertainty about the timing of settlement, but where a reliable estimate can be

made of the amount. Details of each provision category are as follows.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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163

Strategic Report Corporate Governance Financial Statements

Site restoration

The Group leased a long leasehold property which is currently unoccupied, in respect of which it had annual dilapidation and

holding costs obligations. Post year end, on 3 March 2022 an agreement was signed with the owners of the property for the

Group to exit the lease. The exit resulted in the release of dilapidation obligations of £1,862,000 to the consolidated income

statement within other income, see note 6. The remaining £1,250,000 held on the statement of financial position at the year

end was paid in March 2022.

Onerous contracts

The exit of the property lease also led to the release of holding cost provisions of £398,000 to the consolidated income

statement within other income, see note 6.

Following the liquidation of Stobart Air, see note 5, there was a review of unavoidable costs related to the eight ATR aircraft

in Propius prior to redelivery which led to the Group making a provision of £2,503,000. During the year, £517,000 of this

provision has been used. The provision is separate from the maintenance provision held for the aircraft, see following.

Tax

During the year ended 28 February 2022, the Group has released £9,514,000 from provisions, following a reassessment of

all open tax enquiries and settlements with HMRC. The Group changed tax advisors in late 2020 and since this appointment

there has been an increase in engagement with HMRC which has provided a better understanding and clarity regarding

the open enquiries and timing of settlements. Consequently, remaining uncertain tax provisions of £5,922,000, have been

reclassified to corporation tax payable (see note 11) and £674,000 has been reclassified to other payables.

Litigation and claims

The balance at the year end primarily relates to a provision for part 1 claims relating to London Southend Airport. During

the year claims totalling £1,340,000 have been settled and, following remeasurement, an additional £1,000,000 has been

provided for. It is expected that these claims will be settled within 12 months. During the year £1,038,000 has been provided

for other legal costs and claims around the Group. Subsequent to the year end a judgement on one legal case was issued;

the outcome is fully covered by the provision.

Remediation provision

This relates to the estimated cost required for remediation works on leased land in Widnes. The Group commissioned

surveys by independent environmental and sustainability specialists, received in November 2021 and April 2022, providing

options for the scope of work, methods and estimates of cost of remediation. The surveys indicated a range of £2.1m to

£5.7m depending on the scope and method of remediation. Taking into account uncertainties over the final cost, scope and

method of remediation required, in addition to future discussions with appropriate regulators, management believes that the

current provision of £3.9m is appropriate. It is anticipated that works on the site will begin within the next 12 months and so

the provision has been presented as a current liability.

In addition, it was anticipated that the land would be used in the Renewables division, but during year the Group reassessed

its strategy for the use of the land and concluded that this was not viable. Consequently, the Group has considered the

recoverable amount of the right-of-use asset and deemed it immaterial resulting in an impairment of £6.2m, see notes 3

and 13.

Maintenance reserves

Following the liquidation of Stobart Air, an update of the maintenance reserves was required to cover all amounts payable on

the eight ATR aircraft in Propius prior to redelivery. This was the main driver for the £8,034,000 maintenance provision made

in the period with all aircraft grounded. In prior years, when the aircraft were operational, the reserves increased over time

based on usage and time to next overhaul. The estimate of maintenance reserves is sensitive to changes in market prices

and the level of wear on specific components once in the process of overhaul. The provisions represent the estimated cost

of ensuring the aircraft are kept in a suitable condition for when they are handed back at the end of the leases including

redelivery costs. The impact of discounting is not material and has not been recognised. The current liability element relates

to work on the first aircraft to be handed back and all non-current costs are expected to be incurred prior to the year ending

29 February 2024.

The estimated proportion of the provision is £10.0m and largely relates to airframe and propeller blade costs. The key

estimates include the scrap rate of propeller blades, currently 15% (c.£1.3m). A 500 basis points change in this rate would

lead to a £0.4m change in provision. Airframe checks include significant estimation uncertainty, with £0.7m relating to

an uplift in cost due to the fact the aircraft are grounded. Total estimation within airframe costs is £7.1m. The condition

of each aircraft across the fleet is not expected to significantly differ due to their age and the hours that each has flown.

The key driver to all provision estimation is the work required to put the aircraft into a condition defined by the leases prior

to redelivery, outside of the fixed cost work required. If all estimated costs increased by 20%, this would drive a material

increase in provision of c.£2.0m. See note 2 for information on significant estimation uncertainties.

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164

26 Share-based payments

The table below shows the expenses arising from share-based payment transactions (credited)/charged to operating profit.

2022

£’000

2021

£’000

Long-Term Incentive Plan 2014 to date (9) 98

Long-Term Incentive Plan 2020 to date 354 –

SAYE schemes to date (60) (88)

Stobart Aviation Incentive Plan – 180

285 190

Of the total expenses for the year of £285,000 (2021: £190,000), £nil (2021: £109,000) is included within the loss from

discontinued operations, net of tax, on the consolidated income statement.

The average life of the share-based payment plans is between 11 and 24 months. The plans are described as follows.

Long-Term Incentive Plan 2014 to date

During the prior years, performance shares were awarded to Executive Directors and other senior management under

a Long-Term Incentive Plan (LTIP). These performance shares vest subject to the TSR and the cumulative adjusted EPS,

both measured over three-year periods.

50% of the share awards vest dependent on the TSR performance of the Group. None of these share awards will vest

if the TSR performance of the Group is less than that of the comparator group (the TSR of the FTSE 250). 25% of the

awards will vest if the TSR performance of the Group equals that of the comparator group and the remaining 75% will

vest proportionately in line with how the TSR performance of the Group exceeds that of the comparator group between

0% and 10%.

50% of the share awards vest dependent on the cumulative adjusted EPS over the three financial years ending at the end

of the third February after grant. None of these share awards will vest if the cumulative adjusted EPS is less than threshold,

25% of the shares will vest if the cumulative adjusted EPS is threshold and the remaining 75% will vest proportionately in line

with how the cumulative adjusted EPS performs between threshold and stretch.

If both elements of the performance conditions are achieved in full, the awards will be subject to a multiple up to a maximum

of 2x multiplier if the Group’s three-year TSR outperforms the index by 40% per annum or more. Further details are included

in the Directors’ Remuneration Report.

EPS threshold and EPS stretch for each issue

Grant date

Number of

awards

EPS

threshold

EPS

stretch

20 June 2018 726,522 20.0p 28.0p

3 July 2019 127,660 20.0p 28.0p

3 July 2019 1,939,896 4.4p 14.1p

Long-Term Incentive Plan 2020 to date

During the year, performance shares were awarded to Executive Directors and other senior management under an LTIP.

For Group participants, performance is measured against the TSR performance of the Group at the end of the three-year

period. For operating division participants, 75% of the performance shares are measured against the three-year cumulative

profit before tax (PBT) performance of the relevant division and 25% are measured on the Group TSR performance at the

end of the three-year period.

25% of the shares vest upon achievement of threshold, 50% vest at target and 100% vest at stretch. Vesting is proportionate

on a straight line between these points. No shares vest below threshold and no more than 100% vest beyond stretch. Further

details are included in the Directors’ Remuneration Report.

TSR threshold, target and stretch for each issue

Grant date

Number of

awards TSR threshold TSR target TSR stretch

31 August 2021 11,116,945 31.9p 37.7p 49.2p

21 December 2021 18,165,737 20p 25p 30p

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

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165

Strategic Report Corporate Governance Financial Statements

SAYE schemes to date

During prior years, qualifying employees and Directors were invited to join the Save As You Earn (SAYE) schemes, where

participants entered into a contract to save a fixed amount per month of up to a maximum of £500 for three years and were

granted an option over shares at a fixed option price, set at a 20% discount to average market price for the three days prior

to the invitation to participate. The number of shares comprising the option is determined by the monthly amount saved on

maturity of the savings contract. Options granted under the SAYE scheme are not subject to any performance conditions.

The range of exercise prices is between £nil and 162p.

Grant date

Number of

awards Option price

21 December 2018 1,213,151 162p

2 August 2019 2,962,928 94.88p

Stobart Aviation Incentive Plan (SAIP)

In January 2017, an eligible participant entered into an incentive plan which gives the participant the opportunity to benefit

from a potential increase in value of the Aviation division. This scheme will be part settled with cash and part settled with

Esken shares. The updated terms of the SAIP were provided in the Directors’ Remuneration Report of the 2019 Annual Report

at the 23 July 2019 AGM. This scheme was cancelled during the year and no awards will be made from the scheme. Further

details are provided in the Directors’ Remuneration Report.

Services rendered

The Group has used share options as partial consideration for services received. The fair value was determined using a

market price for the services received. These share options will vest dependent on the market capitalisation of the Group

during the performance period.

Movements in the year

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in,

outstanding share awards during the year:

2022

No. ’000

2022

WAEP

2021

No. ’000

2021

WAEP

Outstanding at 1 March 3,685 £0.32 5,740 £0.48

Granted during the year 29,287 – – –

Exercised during the year – – – –

Lapsed during the year (1,603) – (576) –

Forfeited during the year (203) £0.98 (522) £0.97

Cancelled during the year (457) £0.98 (957) £0.97

Outstanding at end of year 30,709 £0.02 3,685 £0.32

Exercisable at end of year 13 £1.62 – –

The weighted average contractual life of awards/options outstanding at the year end is 19 months (2021: 18 months).

Valuation details

The fair value of the options granted without market-based performance conditions is estimated using a Black-Scholes

model taking into account the terms and conditions upon which the options were granted. The fair value of the options

granted with market-based performance conditions are estimated using a Monte Carlo model taking into account the terms

and conditions upon which the options were granted.

Esken Limited Annual Report and Accounts 2022

166

26 Share-based payments continued

The following tables list the inputs to the models used for the current and prior year.

FY19 LTIP share awards

Long-Term Incentive Plan

subject to TSR

Long-Term Incentive Plan

subject to EPS

Dividend yield (%) 5.74 5.74

Expected volatility (%) 25.46 25.46

Risk-free interest rate (%) 0.24 0.24

Expected life of options (years) 3 3

Weighted average share price (£) 2.568 2.568

Fair value at date of grant (£) 1.258 2.132

Model used Monte Carlo Black-Scholes

FY20 LTIP share awards

Long-Term Incentive Plan

subject to TSR

Long-Term Incentive Plan

subject to EPS

Dividend yield (%) 2.46 2.46

Expected volatility (%) 25.46 25.46

Risk-free interest rate (%) 0.24 0.24

Expected life of options (years) 3 3

Weighted average share price (£) 1.220 1.220

Fair value at date of grant (£) 0.598 1.013

Model used Monte Carlo Black-Scholes

FY21 LTIP share awards

Long-Term Incentive Plan

subject to TSR

Long-Term Incentive Plan

subject to PBT

Dividend yield (%) 0% 0%

Expected volatility (%) 74.06% 74.06%

Risk-free interest rate (%) 0.14% 0.14%

Expected life of options (years) 1.5 1.5

Weighted average share price (£) 0.139 0.139

Fair value at date of grant (£) 0.043 0.139

Model used Monte Carlo Black-Scholes

FY22 LTIP share awards

Long-Term Incentive Plan

subject to TSR

Long-Term Incentive Plan

subject to PBT

Dividend yield (%) 0% 0%

Expected volatility (%) 74.06% 74.06%

Risk-free interest rate (%) 0.14% 0.14%

Expected life of options (years) 3 3

Weighted average share price (£) 0.19 0.19

Fair value at date of grant (£) 0.059 0.190

Model used Monte Carlo Black-Scholes

2018 SAYE scheme SAYE plan

Dividend yield (%) 3.97

Expected volatility (%) 36.13

Risk-free interest rate (%) 0.83

Expected life of options (years) 3.5

Weighted average share price (£) 1.51

Fair value at date of grant (£) 0.29

Model used Black-Scholes

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

Esken Limited Annual Report and Accounts 2022

167

Strategic Report Corporate Governance Financial Statements

2019 SAYE scheme SAYE plan

Dividend yield (%) 5.14

Expected volatility (%) 55.21

Risk-free interest rate (%) 0.83

Expected life of options (years) 3.5

Weighted average share price (£) 1.17

Fair value at date of grant (£) 0.29

Model used Black-Scholes

The fair value at the date of grant of the awards subject to the multiplier was £0.009 (2021: £0.009).

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may

occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may

also not necessarily be the actual outcome.

27 Issued share capital and reserves

Ordinary shares issued and fully paid

Number

of shares

2022

’000

capital

2022

£’000

Number

of shares

2021

’000

capital

2021

£’000

At 1 March 624,926 62,492 374,653 37,465

Share issue 400,411 40,042 250,273 25,027

At 28 February 1,025,337 102,534 624,926 62,492

During the year, the Company issued 394,410,618 (2021: 250,273,461) ordinary shares of 10p each for 14p (2021: 40p)

per share raising £55,217,000 (2021: £100,109,000). The share capital increased by £39,442,000 (2021: £25,027,000)

and share premium increased by £12,889,000 (2021: £65,968,000), net of costs. The employee benefit trust purchased

822,307 (2021: 797,465) of the ordinary shares issued.

During the year the Group issued 6,000,000 (2021: none) ordinary shares of 10p each in Esken Limited to Cyrus Capital

Partners (Cyrus). The shares were issued to satisfy the put option between Esken and Cyrus, see note 22. The share issue

resulted in an increase in share capital £600,000 (2021: £nil) and an increase in retained deficit of £600,000 (2021: £nil).

The number of shares held by the employee benefit trust increased from 3,778,457 at 28 February 2021 to 4,600,764 at

28 February 2022, following the purchase of ordinary shares.

The Group has a retained deficit at 28 February 2022; however, this does not prevent dividends being paid. Esken Limited

is registered in Guernsey and under Guernsey Law, prior to making payments to shareholders, a company must satisfy the

solvency test, which requires that it is able to meet its liabilities as they fall due and has assets which are greater than its

liabilities, and the Directors must certify that this is the case. Taking into account the significant share premium account,

the Company continues to satisfy these requirements.

Voting rights

Ordinary shareholders are entitled to vote at all general meetings. The deferred shares have no voting rights.

Nature and purpose of other reserves

Own shares held by employee benefit trust

This comprises the weighted average cost of own shares held by the employee benefit trust.

Esken Limited Annual Report and Accounts 2022

168

28 Lease commitments

Group as lessee

The Group leases a number of premises, vehicles and equipment with varying terms, renewal rights and termination options.

Under IFRS 16, each lease is reflected in the consolidated statement of financial position as a right-of-use asset and a lease

liability, with the exception of short-term leases and leases of low-value underlying assets.

The following amounts have been recognised in the consolidated income statement and the consolidated statement of

cash flows:

2022

£’000

2021

£’000

Interest on lease liabilities 6,761 8,682

Expenses relating to short-term leases 467 379

Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets 32 36

7,260 9,097

Recognised in the consolidated statement of cash flows

2022

£’000

2021

£’000

Total cash outflow for leases 32,004 27,512

Group as lessor

The Group has commercial property leases on some of its properties including subleases on two properties that have been

presented as right-of-use assets. The headlease and sublease of the first property have an expiration date of February

2038, which is unchanged from the prior year. The headlease and sublease of the second property have an expiration date

of March 2025. Both subleases are presented as net investment in lease in the consolidated statement of financial position.

The maturity analysis of the future undiscounted lease receivables is shown in the table below.

2022

£’000

2021

£’000

Less than one year 1,997 1,859

One to two years 1,864 1,859

Two to three years 1,983 1,726

Three to four years 1,199 1,845

Four to five years 1,199 1,061

More than five years 13,193 12,729

Total undiscounted lease receivable 21,435 21,079

Finance income (5,231) (5,255)

Net investment in lease 16,204 15,824

Capital commitments

At 28 February 2022, the Group had commitments of £746,000 (2021: £1,209,000). The commitments relate to development

works at London Southend Airport in the Aviation division.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

Esken Limited Annual Report and Accounts 2022

169

Strategic Report Corporate Governance Financial Statements

29 Contingent liabilities

Liability under financial guarantees exist across the Group and a number of these liabilities are no longer considered remote.

The Group is subject to a number of ongoing unprovided legal cases that will be vigorously defended. The Group considers

that the net liability in respect of these claims, if any, is unlikely to exceed approximately £2m. The cases are expected to be

settled within the next 12 months.

30 Post balance sheet events

There were no post balance sheet events other than a judgement on one legal case, see note 25.

31 Notes to the consolidated cash flow statement

Notes

Year ended

28 February

2022

£’000

Restated

Year ended

28 February

2021

£’000

Loss before tax from continuing operations (34,567) (44,171)

Adjustments to reconcile loss before tax to net cash flows:

Non-cash:

Realised profit on sale of property, plant and equipment (308) (98)

Share of post-tax losses of associate accounted for using the equity method 14 356 218

Loss on disposal of assets held for sale – 208

Depreciation of property, plant and equipment 13 20,464 19,423

Finance income 9 (2,239) (2,396)

Finance costs 10 20,744 19,599

Release of grant income 21 (788) (479)

Release of deferred premiums – (167)

Impairment/(impairment reversal) 13, 17 5,369 (824)

Charge for share-based payments 26 285 81

(Gain)/loss on swaps mark to market valuation (93) 42

(Decrease)/increase in retirement benefits and other provisions (5,018) 226

Working capital adjustments:

Increase in inventories (144) (28)

Decrease in trade and other receivables 6,625 4,213

(Decrease)/increase in trade and other payables (7,840) 5,444

Cash generated from continuing operations 2,846 1,291

Esken Limited Annual Report and Accounts 2022

170

32 Related parties

Relationships of common control or significant influence

W A Tinkler was a related party until 14 June 2018 when he ceased to be a Director of the Group. The amounts outstanding

are unsecured and were entered into under normal commercial terms.

WA Developments International Limited is owned by W A Tinkler. There were no related party sales or purchases during the

current or prior years. At the year end £60,000 (2021: £60,000) was due from WA Developments International Limited. As of

14 June 2018, WA Developments International Limited was no longer a related party.

Apollo Air Services Limited is owned by W A Tinkler. There were no related party sales or purchases during the current or

prior years. At the year end £83,000 (2021: £83,000) was owed by the Group and £46,000 (2021: £46,000) was owed to the

Group by this company. As of 14 June 2018, Apollo Air Services Limited was no longer a related party.

WA Tinkler Racing is owned by W A Tinkler. There were no related party sales or purchases during the current or prior years.

At the year end £26,000 (2021: £26,000) was owed to the Group. As of 14 June 2018, WA Tinkler Racing was no longer a

related party.

During the current and prior years, the Group made no purchases from or sales to Stobart Capital Limited, a business part-

owned by W A Tinkler, relating to investment management. At the year end £6,000 (2021: £6,000) was owed to the Group.

As of 14 June 2018, Stobart Capital Limited was no longer a related party.

Speedy Hire plc is a related party from 1 June 2019, when David Shearer became Non-Executive Chairman of the Group, as

he is also Non-Executive Chairman of Speedy Hire plc. During the year, the Group made purchases of £3,000 (2021: £4,000)

relating to equipment hire of which £nil (2021: £1,000) was owed by the Group at the year end.

Buchanan Shearer Associates LLP is a related party from 1 June 2019, when David Shearer became Non-Executive Chairman

of the Group, as he is also a designated member of Buchanan Shearer Associates LLP. During the year, the Group made

purchases of £207,000 including VAT (2021: £nil) relating to advisory services (£180,000) and recharge of expenses

(£27,000). At the year end, £nil (2021: £nil) was owed by the Group.

Associates and joint ventures

The Group has loans, not part of the net investment, outstanding from its associate interest, Mersey Bioenergy Holdings

Limited, of £nil (2021: £nil) at the year end due to the loans being fully written-down. The interest outstanding at the

year end, net of amounts provided, was £nil (2021: £nil). The loans are unsecured and have a ten-year term ending in

November 2024.

During the year, the Group made sales of £7,411,000 (2021: £5,937,000) to Mersey Bioenergy Limited (a subsidiary of

Mersey Bioenergy Holdings Limited) relating to the sale of material. At the year end, £220,000 (2021: £507,000) was

owed to the Group.

There were no other balances between the Group and its joint ventures and associates during the current or prior year.

All loans are unsecured and all sales and purchases are settled in cash on the Group’s standard commercial terms.

Key management personnel

Key management personnel are the Executive and Non-Executive Directors. Total aggregate emoluments, including pension

contributions and excluding share-based payments, were £1,419,000 (2021: £1,534,000) and consisted of:

2022

£’000

2021

£’000

Emoluments 1,324 1,358

Share-based payment 135 229

Company contribution to money purchase pension plan 95 176

1,554 1,763

Further details of the Executive and Non-Executive Directors’ remuneration are set out in the Directors’ Remuneration Report.

Notes to the consolidated financial statements continued

for the year ended 28 February 2022

Esken Limited Annual Report and Accounts 2022

171

Strategic Report Corporate Governance Financial Statements

33 Alternative performance measures

In the reporting of financial information, the Directors have adopted various alternative performance measures (APMs).

These measures are not defined by International Financial Reporting Standards (IFRS) and therefore may not be directly

comparable with other companies’ APMs.

APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measurements.

Non-GAAP APMs are used as they are considered to be both useful and necessary as well as enhancing the comparability of

information between reporting periods, by adjusting for non-recurring or uncontrollable factors which affect IFRS measures,

to aid users in understanding the Group’s performance.

Consequently, APMs are used by the Directors and management for internal performance analysis, planning, reporting and

incentive-setting purposes. The presentation of these measures facilitates comparability with other companies, although

management’s measures may not be calculated in the same way as similarly titled measures reported by other companies.

Adjusted EBITDA

Adjusted EBITDA is the key profitability measure used by management for performance review in the day-to-day operations

of the Group. Adjusted EBITDA represents loss before interest, tax, depreciation and impairments. Refer to note 3 for

reconciliation to statutory loss before tax.

Headroom

This is the sum of cash per the consolidated statement of financial position plus the £20m revolving credit facility which was

undrawn at the year end. It shows the amount of cash that can be drawn on by the Group at short notice.

Net debt

Net debt is defined as the sum of obligations under leases, revolving credit facility, exchangeable bonds and convertible

debt, less cash and cash equivalents. See note 22 for reconciliation of these measures.

Gearing

This is defined as net debt, as defined above, divided by Group shareholders’ equity per the consolidated statement of

financial position.

Divisional operating cash flow

This is defined as a division’s net cash flow from operating activities, less net intercompany cash flows. Group operating cash

flow for the year is an outflow of £14,484,000 (2021: £29,443,000) which is made up of Aviation £4,663,000 outflow (2021:

£4,050,000), Renewables £17,924,000 inflow (2021: £15,440,000) and other £27,745,000 outflow (2021: £40,833,000).

Propius lease and aircraft-related costs

This is the sum of cash outflows related to the ATR aircraft in Propius to be paid in FY23 and FY24. It consists of net lease

payments, less deposit paid, of £21.4m, maintenance outflows of £23.6m, see note 25 maintenance reserves, and other

unavoidable aircraft costs of £2.0m, see note 25 onerous leases/contracts.

Esken Limited Annual Report and Accounts 2022

172

Directors, officers and advisers

Executive Directors

David Shearer Appointed 1 June 2019 as Director, appointed 9 February 2021 as Executive Chairman

Nick Dilworth Appointed 1 September 2018

Chief Operating Officer and Executive Director – Renewables

Lewis Girdwood Appointed 1 April 2019

Chief Financial Officer and Executive Director – Aviation

Non-Executive Directors

David Blackwood Appointed 1 March 2019

Deputy Chairman and Senior Independent Director

John Coombs Appointed 1 July 2014

Ginny Pulbrook Appointed 1 October 2018

Clive Condie Appointed 1 July 2020

Company Secretary

Matthew Joy

Registered office

Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 4LY

Registered number

39117

Administrator

Ocorian Administration (Guernsey) Limited

Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 4LY

Auditor

KPMG LLP

1 St Peter’s Square, Manchester M2 3AE

Banker

Lloyds Bank plc

Black Horse House, 91 Sandyford Road, Newcastle upon Tyne NE1 8HQ

Corporate Broker and Financial Adviser

Canaccord Genuity Limited

88 Wood Street, London EC2V 7QR

Corporate Broker

Liberum Capital Limited

25 Ropemaker Street, London EC2Y 9LY

Financial Adviser

UBS Investment Bank

5 Broadgate, London EC2M 2QS

Esken plc

Floor 2

Trafalgar Court

Les Banques

St Peter Port

Guernsey

GY1 4LY

esken.com

Esken plc Annual Report and Accounts 2022