IVC New TopHolding Sarl

Luxembourg

Konzernabschluss zum Geschäftsjahr vom 01.10.2021 bis zum 30.09.2022

Anhangangabe im Konzernabschluss über die Befreiung des Tochterunternehmens

Exemption under section 264 (3) HGB

A subsidiary included in these consolidated financial statements (Cremare Tierkrematorien GmbH) has availed of the exemption from auditing and filing its individual financial statements with the Federal Gazette (Bundesanzeiger) as permitted by Section 264 (3) of the German Commercial Code (HGB), on the basis that it has satisfied the conditions as laid out in section 264 (3) HGB.

Bestätigungsvermerk zum Konzernabschluss

To the Board of Managers of

IVC New TopHolding S.à r.l.

51A, Boulevard Royal

L - 2449 Luxembourg

REPORT OF THE REVISEUR D'ENTREPRISES AGREE

Report on the Audit of the consolidated financial statements

Opinion

We have audited the consolidated financial statements of IVC New TopHolding S.à r.l. and its subsidiaries (the "Group"), which comprise the consolidated statement of financial position as at September 30, 2022, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at September 30, 2022, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Basis for Opinion

We conducted our audit in accordance with the Law of July 23, 2016 on the audit profession (Law of July 23, 2016) and with International Standards on Auditing (ISAs) as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier" (CSSF). Our responsibilities under the Law of July 23, 2016 and ISAs as adopted for Luxembourg by the CSSF are further described in the "Responsibilities of the "réviseur d'entreprises agréé" for the Audit of the consolidated financial statements" section of our report. We are also independent of the Group in accordance with the International Code of Ethics for Professional Accountants, including International Independence Standards, issued by the International Ethics Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the consolidated financial statements, and have fulfilled our other ethical responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other information

The Board of Managers is responsible for the other information. The other information comprises the information stated in the consolidated annual report including the management report but does not include the consolidated financial statements and our report of the "réviseur d'entreprises agréé" thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard.

Responsibilities of the Board of Managers and Those Charged with Governance for the consolidated financial statements

The Board of Managers is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with IFRSs as adopted by the European Union, and for such internal control as the Board of Managers determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Board of Managers is responsible for 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 the Board of Managers either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Responsibilities of the "réviseur d'entreprises agréé" for the Audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report of the "réviseur d'entreprises agréé" that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Law of July 23, 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the Law of July 23, 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Managers.

• Conclude on the appropriateness of Board of Managers use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report of the "réviseur d'entreprises agréé" to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report of the "réviseur d'entreprises agréé". However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Report on Other Legal and Regulatory Requirements

The consolidated management report is consistent with the consolidated financial statements and has been prepared in accordance with applicable legal requirements.

June 30, 2023

For Deloitte Audit

Cabinet de révision agréé

Luc Brucher, Réviseur d'entreprises agréé, Partner

Konzern-Bilanz

Consolidated Statement of Financial Position as at 30 September 2022	Note	30.09.2022 £M	30.09.2021 £M
Non-current assets
Property, plant and equipment	13	927,3	583,8
Goodwill	16	6.180,9	2.397,8
Other intangible assets	15	840,6	337,0
Trade and other receivables	19	20,0	0,0
Other investments	17	1,5	1,3
Total non-current assets		7.970,3	3.319,9
Current assets
Inventories	18	96,1	54,9
Trade and other receivables	19	259,1	154,1
Income tax receivable		6,2
Cash and cash equivalents		231,3	186,7
Total current assets		592,7	395,7
Total assets		8.563,0	3.715,6
Current liabilities
Trade and other payables	20	-447,1	-348,5
Lease liabilities	14	-77,2	-46,5
Income tax payable			-4,9
Employee benefit liabilities 22, 28	22, 28	-21,4	-8,6
Financial liabilities at fair value	23	-300,6	-44,1
Loans and borrowings	21	-15,6	0,0
Total current liabilities		-861,9	-452,6
Non-current liabilities
Trade and other payables	20	-0,3	-2,8
Loans and borrowings	21	-4.529,0	-2.032,5
Lease liabilities	14	-519,0	-347,9
Deferred tax liability	24	-187,6	-65,6
Employee benefit liabilities	22, 28	-7,2	-1,4
Financial liabilities at fair value	23	-113,3	-86,9
Total non-current liabilities		-5.356,4	-2.537,1
Total liabilities		-6.218,3	-2.989,7
NET ASSETS		2.344,7	725,9
Equity
Share capital	25	20,6	17,4
Share premium reserve	25, 26	3.552,3	1.719,3
Capital contribution reserve		0,9	0,9
Merger reserve 26 (550.5) (550.5)	26	-550,5	-550,5
Translation reserve	26	266,3	-26,0
Accumulated deficit	26	-948,2	-454,0
Equity attributable to the owners of the parent		2.341,4	707,1
Non-controlling interests		3,3	18,8
TOTAL EQUITY		2.344,7	725,9
The notes on pages 48 to 195 form part of these consolidated financial statements.

Konzern-Gewinn- und Verlustrechnung

Consolidated Income Statement for the Year Ended 30 September 2022	Note	2022 £M	2021 £M
Revenue	5	2.844,0	1.771,2
Cost of sales	6	-1.577,7	-987,0
Gross profit		1.266,3	784,2
Other operating income	7	22,7	9,7
Administrative expenses	6	-1.064,6	-598,6
Operating profit before goodwill impairment		224,4	195,3
Impairment of goodwill	16	-416,7	0
Operating (loss)/profit		-192,3	195,3
Finance expense	11	-327,0	-155,2
Finance income	11	34,2	33,9
Revaluation of financial instruments	23	66,7	-41,6
(Loss)/profit before tax		-418,4	32,4
Taxation	12	-50,3	-40,4
Loss for the year		-468,7	-8,0
Attributable to:
Owners of the parent		-469,1	-8,5
Non-controlling interest		0,4	0,3
Loss for the year		-468,7	-8,2
The above results were derived from continuing operations.
The notes on pages 48 to 195 form part of these consolidated financial statements.

Konzern-Eigenkapitalspiegel

Consolidated Statement of Changes in Equity as at 30 September 2022
	Share capital £M	Share premium £M	Capital contribution reserves £M	Merger reserve £M	Translation reserve £M	Accumulated deficit £M
Balance at 1 October 2021	17,4	1.719,3	0,9	-550,5	-26,0	-454,0
Comprehensive income/(loss) for the year
(Loss) / income for the year						-469,1
Other comprehensive income/(loss) for the year					292,3	1,1
Total comprehensive income/(loss) for the year					292,3	-468,0
Business combinations (note 29)
Acquisition of non-controlling interest						-26,2
Disposal of subsidiaries
Transactions with owners
Issue of share capital (note 25)	3,2	1.833,0
Dividends paid
Total business combinations and transaction with owners	3,2	1.833,0	0,0	0,0	0,0	-26,2
Balance at 30 September 2022	20,6	3.552,3	0,9	-550,5	266,3	-948,2

	Total attributable to equity holders of parent £M	Non-controlling interests £M	Total Equity £M
Balance at 1 October 2021	707,1	18,8	725,9
Comprehensive income/(loss) for the year
(Loss) / income for the year	-469,1	0,4	-468,7
Other comprehensive income/(loss) for the year	293,4		293,4
Total comprehensive income/(loss) for the year	-175,7	0,4	-175,3
Business combinations (note 29)		0,5	0,5
Acquisition of non-controlling interest	-26,2	-14,9	-41,1
Disposal of subsidiaries		-1,4	-1,4
Transactions with owners
Issue of share capital (note 25)	1.836,2		1.836,2
Dividends paid		-0,1	-0,1
Total business combinations and transaction with owners	1.810,0	-15,9	1.794,1
Balance at 30 September 2022	2.341,4	3,3	2.344,7

There were no transactions with current owners in the year.

The notes on pages 48 to 195 form part of these consolidated financial statements.

	Share capital £M	Share premium £M	Capital contribution reserves £M	Merger reserve £M	Translation reserve £M	Accumulated deficit £M
Balance at 1 October 2020	17,4	1.719,3	0,9	-550,5	-4,7	-447,2
Comprehensive income/(loss) for the year
(Loss) for the year						-8,5
Other comprehensive income/(loss) for the year					-21,3	1,7
Total comprehensive income/(loss) for the year					-21,3	-6,8
Business combinations (note 29)
Balance at 30 September 2021	17,4	1.719,3	0,9	-550,5	-26,0	-454,0

	Total attributable to equity holders of parent £M	Non-controlling interests £M	Total Equity £M
Balance at 1 October 2020	735,2	0,0	735,2
Comprehensive income/(loss) for the year
(Loss) for the year	-8,5	0,3	-8,2
Other comprehensive income/(loss) for the year	-19,6	0,0	-19,6
Total comprehensive income/(loss) for the year	-28,1	0,3	-27,8
Business combinations (note 29)		18,5	18,5
Balance at 30 September 2021	707,1	18,8	725,9

The notes on pages 48 to 195 form part of these consolidated financial statements.

Konzern-Kapitalflussrechnung

Consolidated Statement of Cash Flows for the Year Ended 30 September 2022	Note	2022 £M	2021 £M
Cash flows from operating activities
Operating profit		-192,3	195,2
Adjustments for:
Depreciation of property, plant and equipment	13	88,3	51,3
Depreciation of right-of-use assets	13	87,2	60,0
Amortisation	15	79,6	40,4
Impairment of goodwill	16	416,7
Impairment losses on right-of-use assets	13		2,6
Gain on sale of property, plant and equipment		-1,2	-0,2
Gain on disposal of subsidiaries		-3,1
Lease termination			-1,9
Effect of foreign exchange rate changes		-9,3	-0,9
Cash generated from operations before working capital		465,9	346,5
(Increase) / decrease in trade and other receivables		-48,8	-21,1
(Increase) / decrease in inventories		-15,8	-11,6
(Decrease) / increase in trade and other payables		-71,9	-34,0
(Decrease) / increase in employee benefits liabilities		18,6	-8,9
Cash generated from operations		348,0	270,9
Income taxes paid		-42,3	-41,8
Net cash flows from operating activities		305,7	229,1
Investing activities
Acquisition of subsidiary undertakings and trade and assets acquisitions, net of cash acquired	29	-1.447,2	-421,0
Acquisition of investments			-0,4
Payment of contingent consideration	23	-39,5	-62,2
Purchases of property, plant and equipment	13	-121,4	-73,5
Proceeds on sale of property, plant and equipment		3,2	0,2
Interest received		0,7	0,2
Proceeds from sale of investments		3,2
Net cash used in investing activities		-1.601,0	-556,7
Financing activities
Issue of ordinary shares		57,9
Contribution from parent undertaking
Dividends paid to non-controlling interests		-0,1
Proceeds from bank and other loans		2.826,1	1.390,2
Debt issue costs paid		-25,2	-9,8
Repayment of bank and other loans		-1.207,5	-925,5
Principal paid on lease liabilities	14	-86,7	-55,3
Interest paid on lease liabilities	14	-32,4	-21,1
Interest paid on loans and borrowings		-193,9	-79,8
Net cash from financing activities		1.338,2	298,7
Net increase/(decrease) in cash and cash equivalents		42,9	-28,9
Cash and cash equivalents at beginning of year		186,7	219,6
Effect of foreign exchange rate changes		1,7	-4,0
Cash and cash equivalents at end of year		231,3	186,7

The notes form part of these consolidated financial statements.

The effects of foreign exchange rate changes have been reclassified in Statement of Cash Flows to present them in section to which the cash flows relates.

Konzern-Anhang

Notes to the Consolidated Financial Statements for the Year Ended 30 September 2022

1 General information

IVC New TopHolding S.à r.l. (previously "IVC New TopHolding S.A.") was incorporated in Luxembourg on 21 December 2018 as a société anonyme. On 13 August 2021, the Extraordinary General Meeting resolved to change the Company's legal name from IVC New TopHolding S.A. into IVC New TopHolding S.à r.l. and transform the Company from its original form of a Luxembourg public limited company (société anonyme) into the form of a Luxembourg private limited liability company (société à responsabilité limitée) in accordance with 10 August, 1915 Law. The Company is subject to Luxembourg Law and incorporated for an unlimited period of time (R.C.S. number B231 013). The Company has its registered office at 26A, Boulevard Royal, L-2449, Luxembourg.

The Company is registered with the Trade and Companies Register of Luxembourg (RCS) with the number B 231 013.

The principal activity of the Company and its subsidiaries (the "Group") is that of the provision of veterinary services in the United Kingdom, Europe and North America. The principal activity of the Company is that of a non-trading holding company. The Company was established to play a role in funding the Group's acquisition strategy of independent veterinary groups that provide high quality care. A full list of subsidiaries is detailed in note 36.

The Company is a wholly owned subsidiary of Islay New Group Holding S.A., incorporated in Luxembourg.

2 Accounting policies

Basis of accounting

IVC New TopHolding S.à r.l. acquired 100 % of the shares in IVC Acquisition Topco Limited on 12 February 2019 through a share for share exchange. The transaction is a business combination under common control and has been conducted at book value. These consolidated financial statements present the financial performance and position of the Group, including comparatives, as if IVC New TopHolding S.à r.l. had always controlled the entity.

The consolidated financial statements of the Group (the "consolidated financial statements") have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS") and in conformity with Luxembourg legal and regulatory requirements. All accounting policies have been applied consistently, unless otherwise stated.

The consolidated financial statements are presented in Pounds Sterling which is the Company's functional currency. Monetary amounts are rounded to the nearest million.

The consolidated financial statements have been prepared on the historical cost basis except where the IFRS requires an alternative treatment, such as certain financial instruments measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for measurements that have some similarities to fair value but are not fair value, such as net realisable value in Inventories ("IAS 2") or value in use in Impairment of Assets ("IAS 36").

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability.

Basis of consolidation

The consolidated financial statements consolidate the separate financial statements of the Company and its subsidiaries as at and for the year ended 30 September 2022.

A subsidiary is an entity controlled by the Group. The Group controls an investee if all of the following three elements are present: power over the investee, exposure or rights to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. The results of subsidiaries acquired or disposed of during the year are included in the consolidated financial statements from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the individual financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.

De-facto control exists when the size of the Group's own voting rights relative to the size and dispersion of other vote holders, give the Group the practical ability unilaterally to direct the relevant activities of the acquired business. The Group holds less than 50 % of voting rights in various acquired business in France and Belgium, with the remaining majority of voting rights being held by numerous individual shareholders. The relevant activities of these acquired businesses are controlled by Supervisory Committees and Partnerships, for which the Group maintains majority positions and ability to direct these relevant activities. The Group has determined that the Group has the practical ability unilaterally to direct the relevant financial and operating activities of these acquired businesses, and has consolidated the entities as a subsidiaries.

France vet operations - Each vet company is managed and administered by a "Supervisory Committee". The Supervisory Committee decides on how to run the operating and financing activities of the business. It makes key decisions such as setting the budget, proposing dividends and deciding on the activities of the business. IVC Evidensia nominates the majority of members on the Supervisory Committee. An entity can consolidate an investee under IFRS 10 Consolidated financial Statements if it has power over the investee and can use that power to affect the amount of returns in the investee. Management has determined that having control of the Supervisory Committee means IVC Evidensia can exert control over the entity.

Belgium - Vets must provide their services through a company that is fully owned by veterinarians. This means that neither Evidensia Belgium nor any of the 100 % owned IVC Evidensia companies can acquire vet practices as they are not fully owned by veterinarians. IVC Evidensia enters into partnership agreements with the vets (i.e. the sellers) to jointly run a veterinary services business. IVC Evidensia indirectly owns 99 % of voting rights in the partnership. As IVC Evidensia has 99 % of the voting shares, it can consolidate under IFRS 10 as it has the power through this partnership agreement to affect the shareholder returns, and therefore has control.

Veternity group - The following factors have been considered in respect of the shareholding of Veternity in reaching the judgement that that group is controlled by IVC Evidensia:

During the financial year ended 30 September 2021, five companies in France that are 49 % owned by the Group collectively purchased a 51 % stake in La Compagnie des Veterinaires SA ("Veternity") via Eden Vet SAS (a holding company 100 % collectively owned by these five companies). During the year ended 30 September 2022, the stake in Veternity was increased from 51 % to 96 %. Therefore, for many of the Veternity companies, including entities in USA, Canada, Poland, Czech Republic, Germany and Portugal as well as France, ownership is a c47 % indirect holding. However, as the Group has control of each supervisory committee of the five companies that collectively have a controlling stake in Veternity, the group has control of Veternity and must consolidate 100 % line by line into its group consolidated financial statements.

VetStrategy (Canada)

The Group purchased 100 % of the shares of VetStrategy Canada Top Holdings Inc on 3 November 2021 via a share for share exchange. VetStrategy consolidates a number of subsidiaries without ownership interest. It has control via practice management and administration agreements. This is because the Veterinarians Act and Veterinary Profession Act in Canada requires; that all or the majority of directors of a veterinarian professional corporation must be veterinarians. These agreements despite the lack of ownership gives VetStrategy the power to direct the relevant activities of these practices through these agreements and receive variable returns through distributions of net income, management fees and rights to appreciation in the value of the individual practices. In addition, the vet that sits on the Board of these companies acts as an agent for VetStrategy through these agreements, receives only fixed remuneration and can be removed by VetStrategy on written notice. A number of subsidiaries also have a minority interest. VetStrategy has a call option to purchase this minority interest and maintains control of these also through the above mechanism. Therefore, the Group can consolidate these entities under IFRS 10.

Austria - The Group acquired a clinic in Austria during the year through a 100 % held subsidiary Evidensia Österreich GmbH. The group owns 50 % of the shares in the clinic indirectly. The group is able to control the day- to-day operations of the clinic as the group has the right to appoint the majority of the managing directors of the clinic. The group is entitled to 99.65 % of the profits of the clinic and is therefore exposed to variable returns. Management can control distributions of dividends and as the group is able to appoint the majority of managing directors, the group is able to control the distribution of dividends. The group therefore has control over the clinic and must consolidate 100 % line by line into its group consolidated financial statements.

Inter-company transactions and balances held between members of the Group are eliminated in full.

Intra-group losses may indicate an impairment that requires recognition in the separate financial statements.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder's share of changes in equity since the date of the combination.

Business combination

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the Consolidated Statement of Financial Position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Profit or Loss from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Goodwill represents the excess of the consideration transferred in a business combination over the Group's interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired.

Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in the acquisition cost at its fair value and, is classified as a financial liability, remeasured subsequently through profit or loss to fair value. In determining the fair value of contingent consideration, the amounts expected to be payable in the future are discounted to their present value as at the date of acquisition, if the impact is considered material. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. See note 4 of the consolidated financial statements for further details.

Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess, being a gain from bargain purchase, is credited in full to the Consolidated Income Statement on the acquisition date.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out on pages 2 to 5. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described on pages 42 to 47. In addition, the notes to the consolidated financial statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The Group meets its day-to-day working capital requirements through operating cashflows and its acquisition requirements through senior debt facilities. The Group's forecasts and projections, covering a period of at least 12 months from the approval of these consolidated financial statements, show that the Group should be able to operate within the level of its current debt facilities. After taking account of reasonably possible changes in trading performance, no material uncertainty exists regarding covenant compliance on the existing facilities as described in Note 21.

As part of the going concern assessment, the Group modelled various scenarios to show worsening positions related to a break case scenario, i.e.an increase in cost base large enough to cause a breach of financial covenants. The increase in cost base required in the break case is so significant that it was considered that the chance of this occurring is extremely unlikely and it is therefore not a reasonably possible scenario. However, even in the event of such cost increase, the Group would still have sufficient cashflows to allow it to service its debt and settle trading liabilities within the going concern period of 15 months.

The directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the annual consolidated financial statements.

Revenue recognition

Revenue represents amounts earned from customers for veterinary services, the sale of products on-line ("E- commerce") and crematoria services provided during the year. The Group identifies performance obligations arising from these services. The transaction price is derived from fixed prices. The Group assesses whether control of goods or services transfers to the customer at a point in time or over time to determine when satisfaction of performance obligations occurs. Revenue is recognised net of discounts.

Revenue for the delivery of veterinary services is recognised at the point in time a veterinary consultation or procedure is completed. A majority of veterinary services are performed as one-off treatments, however the Group also operates the Pet Health Club ("PHC"), where members pay an annual subscription fee on a monthly basis and receive a variety of benefits including various consultations and treatments periodically plus discounts for the year of membership. Those benefits which give members a material right that would not have been received without being a PHC member are identified as performance obligations. The transaction price, being the annual subscription fee, is allocated to each of the identified performance obligations based on the stand-alone selling prices of the performance obligations. Revenue from the PHC is recognised as performance obligations are satisfied which is at the point in time services are provided to customers, with the exception of worm and flea treatments which are recognised over time. Where transfer of PHC services to the customer does not match the pattern of monthly payments made by members, contract assets or contract liabilities are recognised. The IFRS 15 Revenue from Contracts with Customers ("IFRS 15") practical expedient to not disclose information about performance obligations not yet satisfied at the reporting date has been applied in respect of the PHC since these performance obligations are part of a contract originally expected to have a duration of one year.

Revenue from the sale of products, primarily being those sold in the E-commerce revenue stream but also including the sale of products within veterinary practices, is recognised when title has passed to the customer. For E-commerce, this is the point customers receive goods following delivery. The Group uses 3rd party providers to deliver goods and acts as principal in arranging this delivery for the customer. Delivery costs are therefore presented gross in the Consolidated Income Statement.

Revenue for the delivery of crematoria services is recognised at the point in time when cremation is complete.

Rebates

The Group receives cash refunds or credits against purchases from suppliers for purchasing a certain amount of inventories or participating in promotions. Rebates are recognised within cost of sales in the Consolidated Income Statement and are recognised as they are earnt by the Group based on the expected entitlement for each relevant supplier contract up to the reporting date. To ensure that rebates are reflected within inventory valuation, an adjustment is made by the Group at the reporting date to reduce inventories by the average percentage manufacturer rebate received in the year, with the corresponding entry recognised in cost of sales. For rebates receivable in cash, amounts accrued are included within other receivables in the Consolidated Statement of Financial Position.

Grants

The Group records both grants from governments and grants or donations from other organised bodies or individuals. The Group has applied the same accounting treatment to all grants and donations recognised in the period. Grants and donations are recognised only when there is reasonable assurance that the Group will comply with any conditions of the grant and that the grants will be received. Conditions include specific requests from the donor or government that the proceeds should be spent on a certain items of equipment.

Grants are recognised based on the accrual model and are measured at the fair value of the asset received or receivable. Grants are classified as relating either to income or to assets. Grants relating to income are recognised in 'Other operating income' or netted against the associated expense, over the period in which the related costs are recognised. Grants relating to assets are recognised in deferred income and released to the Consolidated Statement of Profit or Loss over the expected useful life of the asset. The Group has not participated in any such asset schemes in the year ended 30 September 2022. Where there are associated conditions attached to a grant, recognition within the Consolidated Statement of Profit or Loss reflects the fulfilment of those conditions. The impact of these grants is a reduction in the expense which the grant covers or a reduction in depreciation or amortisation if relating to an asset.

Research and development (R&D) tax credit recognition

Judgement is required around the timing and quantum of the recognition of income from R&D tax credits. These are recognised within operating profit or loss, matching the income with the associated labour costs incurred in conducting the research.

R&D claims are prepared on behalf of the group by specialist tax advisors with a history of successful claims using a proven methodology. Accordingly, they are submitted with a high degree of certainty that they will be approved.

Therefore, Management has determined that the income related to R&D tax credits should be recognised in the Income Statement in the period in which the R&D claim is submitted to the tax authorities, and in amount equal to the amount claimed.

Where more than one year of claim is submitted in a single financial year, the additional claims are recorded as exceptional income below Adjusted EBITDA.

Other operating income

Other operating income mainly comprises income from training courses led by the group and R&D tax credits and is recognised on an accrual basis in accordance with the substance of the relevant agreement.

Interest income

Interest income is recognised using the effective interest method.

Borrowing costs

Interest expense is recognised on the basis of the effective interest method and is included in finance expense in the Consolidated Income Statement.

Foreign currency transactions and balances

Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. At each reporting date, monetary assets and liabilities denominated in foreign currencies are retranslated into the respective functional currency of the entity at the rates prevailing on the reporting period end date. Any exchange gains or losses arising on the re-translation of monetary items are recorded within finance income or finance costs as the gains and losses relate primarily to movements in loans and borrowings which are financing activities. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the initial transaction dates.

Non-monetary items measured in terms of historical cost in a foreign currency are not retranslated.

On consolidation the individual financial statements of overseas subsidiary undertakings are translated to Pound Sterling at the rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. The exchange differences arising on the retranslation of opening net assets and the results of overseas subsidiary undertakings are recognised within other comprehensive income and accumulated in the translation reserve. Tax charges and credits attributable to exchange differences on those borrowings are also recognised within the translation reserve.

A summary of the key currencies and exchange rates used are below:

	30 September 2022 closing rate	Year ended 30 September 2022 average rate	30 September 2021 closing rate	Year ended 30 September 2021 average rate
GBP : EUR	1.136436	1.180504	1.161335	1.145146
GBP : CAD	1.529908	1.634389	1.710764	1.729946
GBP : SEK	12.39959	12.307694	11.816257	11.658347

Share based payments

All share-based payment arrangements are recognised in the consolidated financial statements in accordance with IFRS 2.

During the year the group entered into an equity settled share-based payment scheme with certain employees whereby shares could be acquired in the Group's ultimate parent company. Management has determined that these awards did not give rise to vesting conditions and as such the awards have been recognised in full within employee benefits costs.

There was also a loan with a member of management and Browne Holding sarl, the owner of the ultimate parent undertaking that falls within the scope of IFRS 2. More information on this is within note 19 and represents £2.3M of the total £3.6M charged in the income statement. The remaining amount comes from other equity settled share- based payment schemes as described above.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Consolidated Income Statement, except that a charge attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income.

Current tax is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Group operates and generates taxable income.

Deferred tax is provided on temporary differences arising between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, except for differences arising on:

• The initial recognition of goodwill;

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

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

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the assets can be utilised.

Deferred tax is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date.

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

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

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

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

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 the 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.

IFRIC 23- Uncertain tax positions

IFRIC 23 provides clarity on how companies should reflect uncertainty in the recognition and measurement of tax treatments of items within the consolidated financial statements. IFRIC 23 is treated as applying to the Group from the date of adoption of IFRS.

IFRIC 23 only applies to taxes within the scope of IAS 12 and therefore it does not cover taxes such as payroll taxes or VAT. The adoption of this interpretation has not had a material effect on the Group's net assets or results.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.

A summary of the policies applied to the Group's intangible assets is:

Intangible asset	Customer relationships	Brand
Useful life	4 - 17 years	20 years
Amortisation method	Straight line basis over the useful life	Straight line basis over the useful life

Under IFRS 3 there is a requirement to consider what types of intangible assets are acquired through business combinations. In assessing what intangible assets are likely to exist within the Group, Management has considered what are the main drivers for customers choosing an IVC Evidensia practice, crematorium or other service, and why they stay with their chosen provider.

For Vet operations, Management's view is that customers choose a practice primarily based on location, typically searching the internet or obtaining a personal reference for a nearby veterinary practice with a good reputation, and will remain with that practice as long as the service and care they receive meets their needs and expectations. Therefore, future economic benefits and the ability to attract of new customers will flow from repeat business and the goodwill of a practice's customers at the date of acquisition. Management has therefore concluded that a customer relationship intangible asset is appropriate to be recognised for all veterinary practice acquisitions.

During the year the group completed the material acquisition of VetStrategy. The acquisition resulted in customer list intangible assets being recognised for its clinic, pharmacies and 24-hour hospitals.

For crematoria operations, Management have identified stable and established customer bases which provide a recurring stream of income. Management therefore considers the crematorium's relationship with its customers to represent a material identifiable intangible asset. Given this reliable income stream, customer lists intangible assets are recognised for Crematoria as a proportion of the goodwill, are higher than for vet sites.

Another type of intangible asset that may be relevant is that associated with brand value. For veterinary practices in countries other than the Nordics, the IVC Evidensia brand name is not used and in other countries practices typically do not significantly market their brand name. For the Nordics, Evidensia was acquired prior to the IFRS conversion date of 1 October 2017 and so no brand value is assigned. Management has determined that for other veterinary practices, no brand value is assigned because of this.

Vets Now and Tierkliniek Hofheim are specific exceptions to this. Vets Now, being nationally recognised as a brand and as a leading provider of out of hours veterinary services in the UK. Therefore, a brand intangible asset has been recognised for this acquisition in FY20. The 'Hofheim' brand is an important value driver to the hospital referral revenue stream and enjoys recognition by vet practices throughout Germany. Hofheim is not only seen as the best hospital in the region, but the best in Germany and among the top clinics in Europe. Therefore, a brand intangible asset has been recognised for this acquisition in FY22. Other brands have been recognised for certain smaller acquisitions, but these are wholly immaterial.

A brand intangible asset has not been recognised upon acquisition of VetStrategy. In Canada, vet practices typically do not significantly market their brand name. VetStrategy's brand in itself has a record of attracting vets to join its group. Attracting more single site clinics has the benefit of creating further buying synergies, which are not allowed to be capitalised separately under IFRS 3 and therefore this perceived brand is held in goodwill.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Consolidated Income Statement in the expense category that is consistent with the function of the intangible assets.

An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Consolidated Income Statement.

Property, plant and equipment Property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. As well as the purchase price, cost includes directly attributable costs. Depreciation on assets is calculated so as to write off the cost of an asset, less its residual value, over their estimated useful lives as follows:

Asset class	Depreciation method and rate
Freehold land	Nil
Freehold property	Straight line over 50 years
Leasehold improvements	Over the term of the lease
Fixtures and surgery equipment	Straight line over 5 years
Motor vehicles	Straight line over 5 years
Computer equipment	Straight line over 5 years

Impairment of non-financial assets (excluding inventories and deferred tax assets)

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. This involves an assessment of the carrying value of the asset against its recoverable amount. If the recoverable amount is deemed to be lower than the carrying value, an impairment on the asset is recognised. The recoverable amount is the higher of the value in use (based on discounted estimated future cashflows) and the fair value at which the underlying business could be sold less costs to sell. There are uncertainties associated with estimating the value in use amount, particularly in regards to future cash flow estimations and the determination of discount rates. Whilst these cash flow estimations are based on the Group's current best estimates of future performance, there may be changes in these assumptions when conducting impairment tests in subsequent years. There are also uncertainties associated with estimating the fair value less costs to sell. The value at which a business could be sold involves judgement, as does the determination of the costs to sell. Details of goodwill and intangible asset impairment assessments are in included in note 16.

For non-financial assets with definite useful economic lives, which are amortised or depreciated, the useful economic life and recoverable amounts are estimated based upon the expectation of the amount and time period during which an intangible asset will support future cashflows. Due to estimation uncertainties, the useful economic lives and associated amortisation rates have to be reviewed and revised where necessary. These non- financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may be higher than the recoverable amount. If this is the case, an impairment in the carrying value of the asset may be required.

Impairment of non-financial assets (excluding inventories and deferred tax assets) (continued)

Factors that could trigger an impairment review of intangible assets include the following:

- Significant underperformance compared to historical or budgeted operating results.

- Significant change in the use of the acquired assets or the strategy of the overall business.

- Significant negative market trends that suggest that the future performance of the business may decline.

The complexity of the estimation process and the assumptions, risks and uncertainties inherent in the calculation of the useful economic life of those non-financial assets with definite lives means that if business conditions materially change, it is likely that materially different amounts could be reported in the Group's consolidated financial statements.

Goodwill is allocated on initial recognition to sites expected to benefit from a business combination that gives rise to the goodwill.

Impairment charges are included in profit or loss. An impairment loss recognised for goodwill cannot be reversed.

Inventories

Inventories comprise drugs and consumables at practices.

Inventories are stated at the lower of cost and net realisable value (i.e. estimated selling price in the ordinary course of business less the estimated costs to complete and the estimated costs necessary to make the sale). Cost comprises all cost of purchase and other costs incurred in bringing the inventories to their present condition and location. The cost of inventories is assigned using the first in-first out (FIFO) formula.

Inventories are assessed for impairment at each reporting date. The carrying amount of each item of inventory, or group of similar items, is compared with its selling price less costs to complete and sell. If an item is found to be impaired, its carrying amount is reduced to selling price less costs to complete and sell, and an impairment loss recognised immediately in profit or loss.

Financial instruments

Financial instruments held by the Group and Company are classified in accordance with the provisions of IFRS 9 Financial Instruments ("IFRS 9").

Financial assets

All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

Classification of financial assets

Debt instruments that meet the following conditions are measured subsequently at amortised cost:

- The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other financial assets are measured subsequently at fair value through profit or loss ("FVTPL").

Fair value through other comprehensive income

The Group and Company does not have any financial assets classified as being at fair value through other comprehensive income.

Amortised cost

These assets arise principally from the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect the contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or (where appropriate) a shorter period, to the amortised cost of a financial instrument.

Impairment provisions for current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses ("ECL"). Current trade receivables are grouped by those that share similar credit risk characteristics. During this process the probability of the non-payment of the trade receivables is assessed based on the number of days that they have been past due. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account, with the loss being recognised within administrative expenses in the Consolidated Statement of Profit or Loss. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

For all other financial assets, the Group and Company recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. The Group defines a default event as a breach of contract and amounts past due. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group and Company compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default that was expected to occur at the reporting date on the financial instrument as estimated at the date of initial recognition. In making this assessment, the Group and Company considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward- looking information that is available without undue cost or effort.

The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the Consolidated Statement of Financial Position. The Company's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the Statement of Financial Position.

Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.

Fair value through profit or loss

The Group and Company does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.

Financial liabilities

The Group and Company does not have any financial liabilities held for trading.

Financial liabilities includes loans and borrowings, contingent consideration, exchangeable share and put option liabilities which are initially recognised at fair value net of any transaction cost directly attributable to the issue of the instrument. Loans and borrowings are subsequently measured at amortised cost using the effective interest method, which ensures that any interest expense over the period of repayment is at a constant rate on the balance of the liability carried in the Statement of Financial Position. Contingent consideration, exchangeable shares and put option liabilities are measured at fair value through profit or loss.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid and received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or (where appropriate) a shorter period, to the amortised cost of a financial instrument.

Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.

Modification of financial instruments

If the terms of a financial instrument are modified, then the Group and Company evaluates whether the cash flows of the modified financial instrument are substantially different in qualitative and quantitative terms. The cash flows are considered to be substantially different in quantitative terms if the difference between the adjusted discounted present value and the original carrying amount of the financial instrument is more than ten percent. If this is the case, or the modification is substantial qualitatively by virtue of the nature of the change to the terms, then the contractual rights to cash flows from the original financial instrument are deemed to have expired. In this case, the original financial instrument is derecognised and a new financial instrument is recognised at fair value plus any eligible transaction costs. Deferred financing costs are deferred and amortised to financial costs over the term of the relevant loan, using the effective interest method. When the relevant loan is terminated or extinguished, the unamortised loan fees are written-off in the Consolidated Statement of Profit or Loss.

If the modification of a financial instrument measured at amortised cost or FVOCI does not result in derecognition of the financial instrument, then the Group and Company first recalculates the gross carrying amount of the financial instrument using the original effective interest rate of the financial instrument and recognises the resulting difference as a modification gain or loss in profit or loss. For floating-rate financial instruments, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification. Any costs or fees incurred and modification fees received adjust the gross carrying amount of the modified financial instrument and are amortised over the remaining term of the modified financial instrument.

Put and call options held by non-controlling interest shareholders

The Group has arrangements whereby certain non-controlling interest shareholders hold options to put (sell) their shares to the Group. The Group has a corresponding Call option to acquire the shares held by non-controlling interest shareholders.

The obligation to pay out to non-controlling interest shareholders when the put option is exercised is a financial liability and is accounted for initially at the present value of the redemption amount. Subsequently, the financial liability is measured in accordance with IFRS 9.

At each reporting date the liability is remeasured to fair value with gains and losses being reported in profit or loss below operating profit.

The dividends on the shares held by non-controlling interest shareholders are linked to continuing employment. As such these distributions are accounted for as short term employee benefits in profit and loss.

Exchangeable shares

The Group has arrangements with ex VetStrategy owners to convert shares in VetStrategy into shares in the Group's ultimate parent company, Islay New Group Holding S.A. at a later date. As such, they are treated as financial liabilities under IFRS 9 and initially at fair value at the date the Group acquired VetStrategy. The exchangeable shares are subsequently measured at fair value at each reporting date. The remeasurement of the liability is recognised in profit or loss below operating profit.

Financial guarantee contracts

Financial guarantee contracts are recognised as at the time the financial guarantee contract is issued.

Liabilities arising are initially measured at fair value and subsequently at the higher of:

- the amount determined in accordance with the expected credit loss model under IFRS 9; and

- the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the requirements of IFRS 15.

The fair value of financial guarantee contracts is determined based on the present value of the difference in cash flows between the contractual payments required under the debt instrument and the payments that would be required without the financial guarantee contract or the estimated amount that would be payable to a third party for assuming the obligations. The fair values of financial guarantee contracts that are issued in relation to borrowings or other payables of group undertakings for no compensation are recognised as part of the cost of the investment.

Share capital

Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.

Defined contribution pension obligation

Defined benefit surpluses and deficit are measured at:

- The fair value of plan assets at the reporting date; less

- Plan liabilities calculated using the project unit credit method discounted to its present value using yields available on high quality corporate bonds that have maturity dates approximating to the terms of the liabilities and are denominated in the same currency as the post-employment benefit obligation; less

- The effect of minimum funding requirements agreed with scheme trustees.

Remeasurements of the net defined obligation are recognised directly within equity. The remeasurements include:

- Actuarial gains and losses

- Return on plan assets (interest exclusive): and

- Any asset ceiling effects (interest exclusive).

Service costs are recognised in profit or loss, and include current and past service costs as well as gains and losses on curtailments.

Net interest expense (income) is recognised in profit or loss, and is calculated by applying the discount rate used to measure the defined benefit obligation (asset) at the beginning of the annual period to the balance of the net defined benefit obligation (asset), considering the effects of contributions and benefit payments during the period.

Gains or losses arising from changes to scheme benefits or scheme curtailment are recognised immediately in profit or loss.

Settlements of defined benefit schemes are recognised in the period in which the settlement occurs.

Leases

Identifying Leases

The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy the following criteria: (a) There is an identified asset;

(b) The Group obtains substantially all the economic benefits from use of the identified asset; and

(c) The Group has the right to direct use of the identified asset.

The Group considers whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract is not identified as giving rise to a lease.

In determining whether the Group obtains substantially all the economic benefits from use of the asset, the Group considers only the economic benefits that arise from use of the asset, not those incidental to legal ownership or other potential benefits.

In determining whether the Group has the right to direct use of the asset, the Group considers whether it directs how and for what purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are pre-determined due to the nature of the asset, the Group considers whether it was involved in the design of the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use. If the contract or portion of a contract does not satisfy these criteria, the Group applies other applicable IFRSs rather than IFRS 16 Leases ("IFRS 16").

All leases are accounted for by recognising a right-of-use asset and a lease liability except for:

- Leases of low value assets; and

- Leases with a term of 12 months

The Group has elected to use the recognition exemptions listed above and thus does not apply the right-of-use asset and lease liability measurement requirements to these items. Leases of low value assets and short-term leases are expensed on a straight-line basis over the life of the lease.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used. To determine the IBR, the Group has used entity-specific synthetic credit ratings for each operating territory as a starting point and has adjusted this for conditions specific to each lease, such as its term and security. Based on this methodology, the Group has assessed IBRs in the range of 2.6 % to 21.8 %. The large majority of the portfolio was within 4 %-8 %.

Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

On initial recognition, the carrying value of the lease liability also includes:

- amounts expected to be payable under any residual value guarantee;

- the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option; and

- any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of the termination option being exercised.

Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

- lease payments made at or before commencement of the lease;

- initial direct costs incurred; and

- the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations).

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to be made over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.

Where a variable lease payment that is dependent on an index or rate is present in the lease, the lease liability and right-of-use asset is re-measured once the rate is known. Any variable lease payments that are not dependent on an index or rate are expensed in the period they are incurred.

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

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

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

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

A key consideration in the accounting treatment of leases under IFRS 16 Leases is the term of each lease used to calculate the lease liability and related right-of-use assets. A large majority by value of the Group's leases are for the rental of properties from which the Group carries out veterinary services. The leases may contain break clauses or options to extend the lease. A key judgment has to be made regarding the term of the leases, and importantly is whether or not break or extensions options will be exercised. Frequently, the leases are newly entered into at the date of acquisition and are for periods of fifteen or more years, i.e. are terminating at a point of time well into the future. Therefore, Management considers there is no basis on which to assess that the leases will be extended. In addition, there are very limited circumstances in which we have or would exercise a break option. Accordingly, for the purpose of IFRS 16, the lease term for each lease is considered to be the period to the lease termination date in each lease agreement.

For contracts that both convey a right to the Group to use an identified asset and require services to be provided to the Group by the lessor, the Group has elected to account for the entire contract as a lease, i.e. it does allocate any amount of the contractual payments to, and account separately for, any services provided by the supplier as part of the contract.

3 Changes in accounting policy

Standards adopted by the Group for the first time during the year

A number of revised standards, including the following are effective for the reporting periods beginning on or after 1 January 2021:

Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

These amendments to various IFRS standards are mandatorily effective for reporting periods beginning on or after 1 January 2021. The amendments provide relief to Group in respect of LIBOR linked loans whose contractual terms are affected by interest benchmark reform.

Amendment to IFRS 4 Insurance Contracts - Deferral of IFRS 9

The Exposure Draft on the Amendments to IFRS 17 that was issued in May 2019, proposed to extend the temporary exemption from IFRS 9 by one year. Subsequently, based on the IASB's re-deliberations, the effective date of IFRS 9 has been extended further to 1 January 2023 in order to align with the effective date of IFRS 17 Insurance Contracts.

The following amendments are effective for reporting periods beginning on or after 1 April 2021:

IFRS 16 Leases ("IFRS 16") (Amendment - Covid-19-Related Rent Concessions beyond 30 June 2021)

The amendment extends, by one year, the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification. The amendments are effective for reporting periods beginning on or after 1 April 2021. Due to the Group's size, there were no rent reliefs or rent concessions given as a result of the Covid-19 pandemic.

Adoption of these standards has not had an impact on the Group's consolidated financial statements.

New standards, interpretation and amendments not yet effective

There are a number of standards, amendments to standards and interpretations which have been issued by the International Accounting Standards Board ("IASB") that are effective in future accounting periods that the Group has decided not to adopt early.

The following amendments are effective for reporting periods beginning on or after 1 January 2022:

- IFRS 3 Business Combinations ("IFRS 3") (Amendment - Reference to the revised Conceptual Framework)

- IAS 16 Property, Plant and Equipment ("IAS 16") (Amendment - Proceeds before Intended Use)

- IAS 37 Provisions, Contingent Liabilities and Contingent Assets ("IAS 37") (Amendment - Onerous Contracts-Cost of Fulfilling a Contract)

- Annual Improvements to IFRSs (2018-2020 Cycle) - IFRS 9, Illustrative Examples accompanying IFRS 16

The following amendments are effective for reporting periods beginning on or after 1 January 2023:

- IAS 1 Presentation of Financial Statements ("IAS 1") and IFRS Practice Statement 2 (Amendment - Disclosure of Accounting Policies)

- IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors ("IAS 8") (Amendment - Definition of Accounting Estimates)

- IAS 12 Income Taxes ("IAS 12") (Amendment - Deferred Tax related to Assets and Liabilities arising from a Single Transaction)

- IFRS 17 Insurance Contracts ("IFRS 17") (Including amendments to IFRS 17)

The directors are currently assessing the impact of these new accounting standards and amendments. The directors do not expect any standards issued by the IASB, but not yet effective, to have a material impact on the Group.

4 Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's and Company's accounting policies, the directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the Group's accounting policies

Management has considered the application of the Group's and Company's accounting policies, and related judgements (other than those involving estimations) that have a significant impact on the amounts recognised, and related estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.

Valuation of intangible assets acquired in business combinations

The attrition rates and discount rates used to value intangible assets acquired in business combinations are critical judgements as the rates selected have a material impact on the value assigned to intangible assets on the acquisition date.

The Group has performed a valuation analysis in order to determine the value of intangible assets, customer relationships, to be recorded in relation to each acquisition. Management has grouped acquisitions by geographical location, in line with geographical analysis as disclosed in the consolidated financial statements and then by acquisition types based on similarities in historical performance and financial trends. The details of carrying amounts of intangible assets acquired are disclosed in note 15 and note 29.

The calculation utilised a multiple period excess earnings model, an income-based valuation approach. This analysis involves certain assumptions requiring some judgement, including the following:

	Range used for VetStrategy and other material acquisitions (over £20m or strategic acquisitions e.g. Medivet)	Range used for portfolio (all other acquisitions under £20m)
Attrition rates applied	4 % - 50 % ^*	15 % - 22 %
Discount rates	6.6 % - 14.5 %	5.9 % - 11 %

^* The vast majority of material acquisitions had a 20 % or 25 % attrition rate applied. The 4 % and 50 % attrition rates were for specific acquisitions of a specialist nature.

For details on sensitivity analysis of these inputs refer to note 15.

Management have concluded that there are no other critical judgements (other than those involving estimations).

Key sources of estimation uncertainty in the consolidated financial statements

Contingent consideration

The Consolidated Statement of Financial Position includes remaining amounts payable for the acquisition of subsidiaries or businesses which are dependent on the future performance of the business acquired. They are estimated based on the terms of the purchase contract, the group's knowledge of the business acquired and how the current economic environment is likely to impact its trading performance. Determining these contingent consideration liabilities involves making certain assumptions requiring judgement. The assumptions utilised in the calculations are based on financial performance including projected revenue and/or Adjusted EBITDA and risk adjusted discount rates.

In certain cases, payments of contingent consideration are dependent on the continued employment of the vendor. These payments are treated as employment costs and accrued on a time basis over the period for which they are assessable. They are not classified as deferred consideration for the purposes of this assessment. For such contracts, where a waiver has been agreed to remove the condition of employment for the vendor to be entitled to the payment, then on a time basis, the associated employment cost is recognised as an expense up to the date the waiver is signed, and thereafter any remaining deferred consideration liability is estimated as outlined below.

Where payments are not or no longer dependent on an employment condition, which is the vast majority of cases, a provision for the expected payment is made (less any amount accrued as an employment cost as outlined above). In accordance with the group accounting policy, the amounts payable are estimated at each accounting reference date based on information and projections available at that date. Payments due after more than one year are discounted to a present value. The actual amounts payable may vary, depending on subsequent financial performance.

For potential payments related to financial performance, changes in the fair value of the contingent consideration are normally recognised in the Consolidated Income Statement. An exception to this is if the change is due to additional information of circumstances at the date of acquisition which is known within 12 months of the acquisition. In this case the change in fair value is booked to Goodwill in accordance with IFRS 3.

For acquisitions of more than £20m, and for all acquisitions made prior to six months before the accounting reference date, the default provision calculation method is to apply actual and future projected results to the terms of the agreement with the vendor that determine the amount payable. Management judgement may be applied to adjust the calculated provision, for example if the financial performance is projected to be marginally below the threshold for payment and it is likely that the business would step up to achieve the threshold.

For acquisitions below £20m within 6 months of the accounting reference date, the provision for contingent consideration is, by default, calculated based on historical payout percentages. Again, management judgement may be applied if warranted by exceptional circumstances to achieve a provision that is more considered to be more reflective of the expected outcome.

The amount recognised as a liability in respect of contingent consideration as at 30 September 2022 amounted to £168.5M. This is a present value after discounting cashflows due after more than one year at country specific WACC rates. The balance has increased year on year, in part reflecting the high levels of M&A activity in the year, including the acquisition of VetStrategy, which, although being a share for share deal, added a legacy portfolio of deferred consideration and which has made further acquisitions since joining the group.

The group provision represents 52 % of the maximum (undiscounted) liability of £326M. This is a lower percentage provision than for FY21, reflecting the increase in WACC rates, plus a dampening of expected future financial performance, both resulting from changes in the global economy, which has seen interest rate increase and a reduction in spending in general.

For acquisitions made during FY22 (including those provisioned based on actual and projected financial performance), the contingent consideration provision recognised as at 30 September 2022 was £39.5M and the range of possible outcomes in respect of these payments was between zero and £97.9M.

The historical payment rates used were determined as follows:

Provisions based on historical payment rates

25 % (£41.4M) of the total group provision at 30 September 2022 was estimated based on historical payout percentages, up from 15 % for FY21. For these provisions an average of 58 % of the maximum amounts payable has been provided. This compares to 55 % in FY21, with the high payout rates in Canada (83 %) being a driver of the increase.

The historical payment rates (actual payments made as a percentage of maximum liability) are calculated as weighted average of the 3 years to the accounting reference date. The calculation gives greater weighting to more recent payments, as follows:

[FY22 payout rate ^* 1/2] + [FY21 payout rate ^* 1/3] + [FY20 payout rate ^* 1/6]

The three-year period is broadly reflective of the periods during which payouts are payable for an acquisition. Country specific historical payout percentages were calculated per the formula above, except as noted below where the rates were adjusted for the reasons stated:

- Norway - due to the limited number of acquisitions, and the most recent earn out payments being in FY20, the weighted average method was not appropriate for this country. Instead an unweighted life to date historical payout rate of 54.9 % was used.

- Austria, Portugal, Spain - as relatively new operations to the group, these territories have a limited history of payouts. The European average percentage of payouts of 61.7 % was used for these countries.

- Switzerland - due to the limited number of acquisitions, Switzerland had no significant recent history of payouts to form a basis on which to provide. Accordingly, the European average percentage of payouts, 61.7 % was used for this country.

- Canada - FY20 payments were excluded from the calculation as these were made under different earnout structures so are not representative of payments that will be made in the future. Therefore, the historical payout rate of 95.7 % was calculated as [FY22 payout rate ^* 3/5] + [FY21 payout rate ^* 2/5].

Provisions made based on actual and projected results

Of the total provision at 30 September 2022, 75 % (£127.1M) was estimated based on actual and projected, down from 85 % for FY21. For these provisions, an average of 50 % of the maximum amounts payable has been provided. This compares to 72 % in FY21, with lower payout rates in France and UK (51 % versus 81 % and 57 % versus 72 % respectively) being a key driver, with these countries making up 66 % of the £127.1M provision.

Sensitivity analysis has been presented in note 23. The key unobservable inputs in the valuation of the contingent consideration are revenue growth rates and payroll. A sensitivity analysis relating to a change in revenue growth rates has been presented. No sensitivity for payroll is presented as the payroll cost is more controllable than revenue growth.

Put option liability

At acquisition, VetStrategy had put option liabilities valued at £67.0M by local management under Canadian GAAP. Historically, when VetStrategy has acquired clinics, it has left a stake in the business for the individual vet seller to keep (usually between 10-30 % of the business). A put option is granted, giving the individual vet the right to sell its remaining stake in the business at a future date to VetStrategy. The price is based on the Adjusted EBITDA the clinic has at the time of redemption multiplied by a multiple agreed at the acquisition date. As such, it is considered a financial liability under IFRS and the liabilities have to be valued.

Due to the acquisitive growth of VetStrategy, there are minimal instances of put options being exercised. Judgements have been made taking into account management's experience with the vendors and their expectations of when they might exercise their options. The main assumptions used are as follows:

Assumption	30 Sep 2022	2 Nov 2021
Discount rate	8.5 %	5.9 %
Expected time to redemption	7 years	8 years
Adjusted EBITDA Growth rate	8.9 %	15.6 %
Long term growth rate	3.0 %	3.0 %

Based on the above assumptions, the liability at the acquisition date of 2 November 2021 was £72.6M (£5.6M higher than the Canadian GAAP amount) and this has been adjusted in the opening balance sheet. As at year end the assumptions have been revised to reflect changes in the incremental borrowing rate and a revision to budgeted Adjusted EBITDA growth. The expected time to redemption has reduced by one year reflecting the passage of time since the acquisition date.

VetStrategy have guaranteed a floor exercise price for the put options. At the acquisition date this had no impact on the value of the liability as the exercise price exceeded the floor price at that date. However, the value of the put options have declined between the acquisition date and year end. As a result, the expected exercise price for three clinics fell below the guaranteed floor price. As such the valuation at year end for these three clinics reflects the guaranteed floor price.

The fair value of the put options has declined to £62.5M by 30 September 2022 due to the decline in expected EBITDA growth and an increase in the discount rate.

Key inputs to the valuation are the Adjusted EBITDA growth rate and the discount rate. The expected time to redemption does not have a significant impact beyond five years due to the impact of discounting. The long-term growth rate also does not have a significant impact as it only impacts the last two years before expected redemption.

A 1 % increase or decrease in the Adjusted EBITDA growth rate will increase or decrease the put option liability by £2.8M. A 1 % increase or decrease in the discount rate will increase or decrease the put option liability by £4.0M.

Impairment of goodwill

The Consolidated Income Statement includes amounts in relation to the impairment of goodwill in Canada, Spain and USA. The impairment charge is based on the difference between the carrying value of the goodwill on the Consolidated Statement of Financial Position and its recoverable amount. The lower the recoverable amount, the higher the impairment charge will be. The value of the recoverable amount is dependent on a number of inputs which involve estimation and uncertainty. For inputs such as the expected cash flows of these businesses, management's estimate at year end may be higher or lower than the actual cash flows received in future years. The estimation of the discount rate also has a significant impact on the final amount of impairment. For more details on the specific impairments and the key sensitivities, refer to note 16 and the impairment of non-financial assets accounting policy above.

Exchangeable shares

The Group, via a share for share exchange in its ultimate parent company, Islay New Group Holding S.A.(Islay) acquired 100 % of the share capital of VetStrategy. Changes in the fair value of exchangeable shares liability arises when the value of the underlying shares change and also when shares are exchanged. The exchangeable shares were valued at £185.1M at the acquisition date of 2 November 2021. At 30 September 2022 the exchangeable shares were remeasured to fair value of £182.9M. The value was determined with reference a multiple of the 18 month proforma EBITDA.

The key unobservable inputs to the valuation are the 18 month proforma EBITDA and the multiple. The impact of a 1 % increase or decrease in the 18 month proforma EBITDA on the valuation at 30 September 2022 is an increase or decrease of £2.6M. An increase or decrease of 1x in the multiple at 30 September 2022 has the impact of increasing or decreasing the value by £12.3M.

5 Revenue

The directors assess that the Group has one class of business relating to the provision of veterinary goods and services and crematoria services.

Disaggregation of Revenue

The Group has disaggregated revenue into various categories in the following table which is intended to:

- depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors; and

- enable users to understand the relationship with revenue geographical analysis provided in note 10.

Please see note 10 for disclosures related to the disaggregation of revenue by geographical market.

Type of good or service

	2022 £M	2021 £M
Sale of goods	126.3	102.6
Rendering of services	2,596.8	1,569.1
Pet Health Club	120.9	99.5
	2,844.0	1,771.2

Timing of transfer of goods and services

	2022 £M	2021 £M
Point in time - sale of goods	126.3	102.6
Point in time - rendering of services	2,630.7	1,593.0
Over time - rendering of services (all relates to Pet Health Club)	87.0	75.6
	2,844.0	1,771.2

Revenue alternative performance measures have been presented in note 35.

6 Expenses by nature

Cost of sales	2022 £M	2021 £M
Cost of inventories recognised as expense	506.8	291.7
Write-down of inventory to net realisable value	7.1	1.8
Reversal of write-down of inventory to net realisable value	(11.5)	(7.9)
Employee benefit costs (note 9)	972.4	642.0
Grants	-	(0.5)
Lab costs and other direct costs	102.9	59.9
	1,577.7	987.0
Administrative expenses
Advertising	21.5	11.1
Amortisation of intangibles (note 15)	84.1	40.4
Amortisation of other assets	(4.5)	-
Auditors' remuneration (note 8)	5.0	6.1
Costs of entering significant new markets	29.6	5.1
Depreciation of property plant and equipment (note 13)	88.3	51.4
Depreciation of Right-of-use assets (note 13)	87.2	60.0
Employee benefit costs (note 9)	444.7	215.0
Exceptional items (note 35)	29.6	20.7
Gain on disposal of property, plant and equipment	(1.2)	(0.2)
Gain on disposal of subsidiaries	(3.1)
Grants	-	(0.4)
Impairment of Right-of-use assets (note 13)	-	2.6
Loss allowance on trade receivables (note 19)	2.4	1.9
Other admin costs	141.4	93.6
Property related costs	52.5	37.8
Repairs and maintenance	21.9	15.1
Staff travel and training	26.0	15.2
Technology costs	39.2	23.2
	1,064.6	598.6

Reversal of write down of inventories have been recognised mainly where the obsolescence rate applied to inventory on acquisition is reduced in years subsequent to the acquisition date.

Included within other admin costs are sundry office costs including light and heat, insurance, cleaning, telephone and postage costs.

Amortisation charges on the Group's intangible assets and depreciation charges on the Group's property, plant and equipment, including right-of-use assets, are recognised in administrative expenses in the Consolidated Statement of Profit or Loss.

Grants relate to income received in respect of the United Kingdom furlough scheme. There are no unfulfilled conditions or other contingences attached to these grants.

7 Other operating income

	2022 £M	2021 £M
Sundry income	7.1	2.9
Out of hours/Licence fees	0.3	0.1
Donations received	-	0.9
Rent received - Sub Leases	0.7	1.5
R&D tax credit	14.1	3.6
Grants	0.5	0.7
	22.7	9.7

Sundry income is comprised of multiple, recurring items such as funding from manufacturers for training courses and income from non-IVC Evidensia employees attending IVC Evidensia led training courses.

Of the £14.1M (2021: £3.6M) R&D tax credit, £6.0M (2021: £0.0M) was excluded from adjusted EBITDA. Where more than one year of claim is submitted in a single financial year, it is group policy to record the additional claims as exceptional income below adjusted EBITDA.

8 Auditors' remuneration

The analysis of the auditor's remuneration is as follows:

Fees payable to the Company's auditor and their associates for:	2022 £M	2021 £M
The audit of the Company's financial statements	2.8	2.3
The audit of the Company's subsidiaries financial statements ^*	1.7	1.3
Total audit fees	4.5	3.6
Other assurance services ^*	0.5	2.5
Total non-audit fees	0.5	2.5

^* Relates to reporting accountant assurance services as performed by the auditor as they were considered to be best placed.

9 Employee benefit costs

The monthly average number of persons employed by the Group (including directors) during the year, analysed by category was as follows:

	2022 No.	2021 No.
Vets	9,736	6,829
Nurses	12,866	8,794
Support staff	14,003	8,059
	36,605	23,682

Their aggregate employee benefit expenses (including directors' remuneration) were as follows:

	2022 £M	2021 £M
Wages and salaries	1,250.9	744.0
Social security costs	127.0	80.7
Expenses of defined contribution pension scheme	38.6	31.2
Expenses of defined benefits pension scheme	0.6	0.5
Grants	-	(0.4)
Share based payments	3.6	7.8
	1,420.7	863.8

Directors' remuneration and key management personnel

The directors' remuneration for the year was as follows:

	2022 £M	2021 £M
Remuneration (including benefits in kind)	1.2	4.7

During the year 1 director accrued benefits under money purchase schemes (2021 - 1).

In respect of the highest paid director:

	2022 £M	2021 £M
Remuneration (including benefits in kind)	0.8	1.9

The directors are also directors of another group company and are remunerated by this company that resides outside of this reporting Group. It is not practicable to allocate their remuneration between their services as director of this Group and as directors of other group companies.

In relation to the Group, the board members of Islay New Group Holding S.A., IVC New Topco Holding S.A, IVC Acquisition Topco Limited, IVC Acquisition Pikco Limited, IVC Acquisition Midco Limited and IVC Acquisition Limited are considered key management personnel.

Key management personnel compensation is as follows:

	2022 £M	2021 £M
Wages and salaries	4.3	4.9
Expenses of defined contribution pension scheme	0.0	0.0
	4.3	4.9

10 Geographical analysis

The Group has three regions, United Kingdom, Europe and North America. The Europe region consists of the Group's operations in Belgium, Denmark, Finland, France, Germany, the Netherlands, Norway, the Republic of Ireland, Spain, Sweden, Switzerland and other. North America consists of USA and Canada and is a new region following the acquisition of Veternity.

Description of the types of products and services from which each region derives its revenues

The Group provides a wide range of veterinary products and services from which both regions derive their revenues. This includes the treatment of animals, prevention services, pet health plans, crematoria services and also the supply of products such as medicines and pet food.

30 September 2022	UK £M	Europe £M	North America £M	Total £M
Total revenue	1,200.4	1,054.6	589.0	2,844.0
Total revenue from external customers	1,200.4	1,054.6	589.0	2,844.0
Group revenue per Consolidated Statement of Profit or Loss				2,844.0
30 September 2021
Total revenue	1,068.6	701.6	1.0	1,771.2
Total revenue from external customers	1,068.6	701.6	1.0	1,771.2
Group revenue per Consolidated Statement of Profit or Loss				1,771.2

External revenue by location of customers	2022 £M	2021 £M
United Kingdom	1,200.4	1,068.6
Canada	585.3	-
Netherlands	235.1	198.8
France	234.4	87.1
Other	588.8	416.7
	2,844.0	1,771.2

11 Finance income and expense

Recognised in profit or loss	2022 £M	2021 £M
Finance income
Interest income	0.7	0.2
Other interest income	4.6	-
Foreign exchange gains on loans and borrowings	-	33.7
Foreign exchange on intercompany balances	28.9	-
Total finance income	34.2	33.9
Finance expense
Interest expense on lease liabilities	(32.4)	(21.5)
Interest expense on bank borrowings	(227.3)	(98.8)
Other loan interest	(2.6)	(2.9)
Foreign exchange losses on loans and borrowings	(62.0)	-
Foreign exchange losses on intercompany balances ^*	-	(30.0)
Other financing costs	(2.7)	(2.0)
Total finance expense	(327.0)	(155.2)

^* Intercompany balances which do not eliminate on consolidation.

Included within interest on bank borrowings are previously capitalised debt issue costs that were written off of £Nil (2021 - £12,110,000).

Finance income and expense includes the following in respect of assets/(liabilities) not at fair value through profit or loss:

	2022 £M	2021 £M
Total interest income on financial assets	34.2	33.9
Total interest expense on financial liabilities	(327.0)	(155.2)
	(292.8)	(121.3)

12 Taxation

	2022 £M	2021 £M
Current tax
Corporation tax	29.6	38.3
Corporation tax - prior year adjustments	4.6	1.6
Total current tax	34.2	39.9
Deferred tax
Origination and reversal of timing differences	(2.8)	(1.8)
Effect of changes in tax rates	0.3	7.6
Differences relating to a prior period	7.4	(1.9)
Recognition of previously unrecognised deferred tax assets	11.2	(3.4)
Total deferred tax (note 24)	16.1	0.5
Tax charge / (credit)	50.3	40.4

The tax on the Group's profits before tax differs from the amounts that would arise using the average Luxembourg corporation tax rate of 17.0 per cent (2021: 17.0 per cent) as follows:

	2022 £M	2021 £M
(Loss)/(profit) before tax	(418.4)	32.2
Tax at the Luxembourg corporation tax rate of 17 % (2021 - 17 %)	(71.1)	5.5
Non-deductible expenses	100.4	25.2
Non- taxable income	(2.8)	-
Current tax - Adjustment to tax charge in respect of prior years	4.6	1.8
Deferred tax - Adjustment to tax charge in respect of prior years	7.4	(1.8)
Differences in effective tax rates on overseas earnings	(8.5)	(1.7)
Unrecognised deferred tax movement	18.7	0.6
Other items	1.3	3.2
Remeasurement of deferred tax balances arising from change in tax rates	0.3	7.6
Total tax charge / (credit)	50.3	40.4

The group considers whether it is probable that a tax authority will accept an uncertain tax treatment. Where tax exposures can be quantified, a provision is made. These positions can be complex and judgemental, therefore in determining the provision, management judgement is based on interpretation of legislation, management experience and professional advice. During the year a provision for £1.3M (FY21 - £3.1M) has been made.

In addition to the amount charged to the income statement, £12.4M foreign exchange loss (2021: £1.4M credit) relating to tax on intangible assets has been recognised in other comprehensive income.

Changes in tax rates and factors affecting the future tax charge

The Group's deferred tax assets and liabilities are calculated using tax rates that are expected to apply in the period when the liability is settled or the asset realised based on tax rates that have been enacted or substantively enacted by the reporting date.

United Kingdom

As announced in the Chancellor's budget on 3 March 2021 the main rate of corporation tax in the United Kingdom will increase from 19.0 per cent to 25.0 per cent from April 2023. This rate has been substantively enacted at the balance sheet date. In September 2022 the Chancellor's "mini-budget" proposed to repeal the enacted 25.0 per cent rate and maintain the rate at 19.0 per cent. This was never enacted and the proposal reversed in the Chancellor's November 2022 Autumn Statement.

France

The French corporate income tax rate reduced for fiscal years starting on or after 1 January 2021 to 26.5 per cent where French consolidated tax revenue is below €250M and 27.5 per cent above that threshold. For fiscal years starting on or after 1 January 2022 the rate will reduce further to 25.0 per cent, with the revenue thresholds removed.

Sweden

The Swedish corporate income tax rate reduced for fiscal years starting on or after 1 January 2021 from 21.4 per cent to 20.6 per cent.

Netherlands

The Dutch corporate income tax rate increased from 25.0 per cent to 25.8 per cent with effect from 1 January 2022.

13 Property, plant and equipment

Group	Land and buildings £M	Fixtures and surgery equipment £M	Motor vehicles £M	Computer equipment £M	Right-of-use assets £M	Total £M
Cost
At 1 October 2020	80.1	135.9	5.9	57.3	437.2	716.4
Additions	11.7	34.2	0.5	27.2	68.3	141.9
Acquired through business combinations	23.1	37.4	0.8	4.0	46.7	112.0
Disposals	(0.1)	(0.2)	(0.7)	(0.6)	-	(1.6)
Remeasured and modified leases	-	-	-	-	2.4	2.4
Termination of leases	-	-	-	-	(11.0)	(11.0)
Exchange differences	12.4	(25.8)	2.0	0.2	(30.8)	(42.0)
At 30 September 2021	127.2	181.5	8.5	88.1	512.8	918.1
Additions	19.3	43.3	0.6	58.2	90.6	212.0
Acquired through business combinations	59.3	45.7	1.5	6.1	178.7	291.3
Disposals	(1.1)	(0.9)	(1.0)	(0.1)	(14.2)	(17.3)
Reclassification	3.2	-	(3.2)	-	-	-
Remeasured and modified leases	-	-	-	-	9.0	9.0
Termination of leases	-	-	-	-	(0.5)	(0.5)
Exchange differences	5.8	9.0	0.2	0.7	3.0	18.7
At 30 September 2022	213.7	278.6	6.6	153.0	779.4	1,431.3

Total property, plant and equipment additions presented in the Consolidated Statement of Cash Flows amounts to £121.4M (2021 - £73.6M), being the total additions above excluding additions of Right-of-use assets.

Group	Land and buildings £M	Fixtures and surgery equipment £M	Motor vehicles £M	Computer equipment £M	Right-of-use assets £M	Total £M
Accumulated depreciation and impairment
At 1 October 2020	26.2	77.3	4.8	31.5	112.0	251.8
Charge for the year	8.1	29.0	0.9	13.4	60.0	111.4
Disposals	(0.1)	(0.1)	(0.7)	(0.6)	-	(1.5)
Impairment	-	-	-	-	2.6	2.6
Termination of leases	-	-	-	-	(11.0)	(11.0)
Exchange differences	4.7	(5.9)	0.4	2.0	(20.2)	(19.0)
At 30 September 2021	38.9	100.3	5.4	46.3	143.4	334.3
Charge for the year	16.8	43.7	1.2	26.6	87.2	175.5
Disposals	(0.1)	(0.2)	(0.7)	(0.0)	(13.7)	(14.7)
Termination of leases	-	-	-	-	(0.5)	(0.5)
Exchange differences	2.6	3.8	0.1	0.4	2.5	9.4
At 30 September 2022	58.2	147.6	6.0	73.3	218.9	504.0
Net book value
At 30 September 2022	155.5	131.0	0.6	79.7	560.5	927.3
At 30 September 2021	88.3	81.2	3.1	41.8	369.4	583.8
At 30 September 2020	53.9	58.6	1.1	25.8	325.2	464.6

The net book value and depreciation charge for right-of-use assets by class of underlying asset is as follows:

Group Right-of-use assets	Land and buildings £M	surgical equipment £M	Motor vehicles £M	Computer equipment £M	Total £M
Cost
At 1 October 2020	408.6	19.1	8.3	1.2	437.2
Additions	67.1	0.9	0.3	-	68.3
Acquired through business combinations	42.4	0.5	3.6	0.2	46.7
Remeasured and modified leases	2.4	-	-	-	2.4
Terminations	(9.0)	(0.7)	(1.1)	(0.2)	(11.0)
Exchange differences	(10.4)	(14.9)	(5.0)	(0.5)	(30.8)
At 30 September 2021	501.1	4.9	6.1	0.7	512.8
Additions	70.5	9.2	10.9	-	90.6
Disposals	(9.2)	(2.4)	(2.1)	(0.5)	(14.2)
Acquired through business combinations	175.1	3.5	0.1	-	178.7
Remeasured and modified leases	9.0	-	-	-	9.0
Terminations	(0.5)	-	-	-	(0.5)
Exchange differences	2.9	-	0.1	-	3.0
At 30 September 2022	748.9	15.2	15.1	0.2	779.4
Accumulated depreciation and impairment
At 1 October 2020	91.6	14.5	5.1	0.8	112.0
Charge for the year	57.6	0.9	1.3	0.2	60.0
Impairment	2.6	-	-	-	2.6
Terminations	(9.0)	(0.7)	(1.1)	(0.2)	(11.0)
Exchange differences	(4.4)	(12.0)	(3.4)	(0.4)	(20.2)
At 30 September 2021	138.4	2.7	1.9	0.4	143.4
Charge for the year	75.4	5.0	6.6	0.2	87.2
Disposals	(9.2)	(2.4)	(2.1)	-	(13.7)
Terminations	(0.5)	-	-	-	(0.5)
Exchange differences	2.3	0.5	0.2	(0.5)	2.5
At 30 September 2022	206.4	5.8	6.6	0.1	218.9
Net book value
At 30 September 2022	542.5	9.4	8.5	0.1	560.5
At 30 September 2021	362.7	2.2	4.2	0.3	369.4
At 30 September 2020	317.0	4.6	3.2	0.4	325.2

Income received from the sub-letting of right of use assets can be found in Note 7.

Included within the net book value of land and buildings at 30 September 2022 is £42.7M (30 September 2021 - £5.7M) in respect of freehold land and buildings and £89.1M (30 September 2021 - £55.9M) in respect of short leasehold improvements. Of this amount at 30 September 2022, £8.4M relates to freehold land which is not depreciated (30 September 2021 - £2.8M).

At 30 September 2022, property, plant and equipment pledged as security for liabilities or where there is restricted title amounted to £0.4M (30 September 2021 - £14M).

At 30 September 2022, contractual commitments for the acquisition of property, plant and equipment at amounted to £0.8M (30 September 2021 - £1.8M).

In the year ended 30 September 2022, an impairment charge of £Nil (30 September 2021 - £2.6M) was made to the right-of-use asset in respect of onerous leases. Those leases that were deemed to be onerous at each period end were subject to an impairment review in line with IAS 36. Given the onerous leases arose as a result of the Group abandoning the properties, these are deemed to no longer be revenue-generating and would therefore have no value in use. As such, these right-of-use assets were written down in full through an impairment charge.

14 Lease liabilities

Group

Nature of lease activities

The Group leases a number of properties in the multiple jurisdictions from which it operates. In these jurisdictions the periodic rent is fixed over the lease term. Where rental agreements include market rate escalations that are unknown at the time of the lease inception, the lease liability is re-measured when the change in cash payments takes effect.

The Group also leases fixtures and surgery equipment, motor vehicles and computer equipment. All equipment leases comprise only fixed payments over the lease terms.

The Group sometimes negotiates break clauses in its property leases. On a case-by-case basis, the Group will consider whether the absence of a break clause would expose the Group to excessive risk.

Typically factors considered in deciding to negotiate a break clause include:

• the length of the lease term;

• the economic stability of the environment in which the property is located; and

• whether the location represents a new area of operations for the Group.

At 30 September 2022 and 30 September 2021, the carrying amounts of lease liabilities are not reduced by the amount of payments that would be avoided from exercising break clauses because on all dates it was considered reasonably certain that the Group would not exercise its right to exercise any right to break the lease. Total lease payments of £193.4M (30 September 2021 - £118.2M) are potentially avoidable were the Group to exercise break clauses at the earliest opportunity.

Lease liabilities
Group	Land and buildings £M	Fixtures and surgical equipment £M	Motor vehicles £M	Computer equipment £M	Total £M
At 1 October 2020	(330.8)	(7.4)	(3.1)	(0.3)	(341.6)
Additions	(101.8)	(8.7)	(4.3)	(0.2)	(115.0)
Disposals	1.9	-	0.0	-	1.9
Lease modifications	(2.4)	-	-	-	(2.4)
Interest expense	(20.1)	(0.8)	(0.2)	(0.0)	(21.1)
Lease payments	69.3	5.4	1.5	0.2	76.4
Exchange differences	0.3	5.6	1.5	0.0	7.4
At 30 September 2021	(383.6)	(5.9)	(4.6)	(0.3)	(394.4)
Additions	(254.0)	(10.3)	(11.0)	(0.1)	(275.4)
Disposals	0.5	-	-	-	0.5
Lease modifications	(9.0)	-	-	-	(9.0)
Interest expense	(30.0)	(1.1)	(0.9)	-	(32.0)
Lease payments	103.7	7.4	7.8	0.2	119.1
Exchange differences	(4.6)	(0.2)	(0.2)	-	(5.0)
At 30 September 2022	(577.0)	(10.1)	(8.9)	(0.2)	(596.2)

Amounts not included in the measurement of lease liabilities are as follows:

Group	30 September 2022 £M	30 September 2021 £M
Short-term lease expense	0.8	0.8
Low value lease expense	0.1	0.1
Aggregate undiscounted commitments for short-term leases	0.4	0.6

The total cash outflow of leases during the reporting period was £119.1M (2021 - £76.4M).

The maturity of lease liabilities are as follows:

Group	Within 1 year £M	Between 1 and 5 years £M	Over 5 years £M	Total £M
30 September 2022
Lease liabilities	(77.2)	(248.0)	(271.0)	(596.2)
30 September 2021
Lease liabilities	(46.5)	(130.5)	(217.4)	(394.4)

The total undiscounted commitments for leases are as follows:

Group	Within 1 year £M	Between 1 and 5 years £M	Over 5 years £M	Total £M
30 September 2022
Lease liabilities	(107.4)	(330.2)	(339.8)	(777.4)
30 September 2021
Lease liabilities	(60.8)	(193.8)	(235.4)	(490.0)

The right-of-use asset disclosures are given in note 13.

15 Other intangible assets

Group	Customer Relationships £M	Brands £M	Total Other intangible assets £M
Cost
At 1 October 2020	317.9	5.5	323.4
Acquired through business combinations	111.8	0.4	112.2
Foreign exchange differences	(7.8)	0.1	(7.7)
At 30 September 2021	421.9	6.0	427.9
Acquired through business combinations	562.7	2.3	565.0
Foreign exchange differences	35.6	0.1	35.7
At 30 September 2022	1,020.2	8.4	1,028.6
Amortisation and impairment
At 1 October 2020	(50.9)	(0.4)	(51.3)
Amortisation charge for the year	(40.1)	(0.3)	(40.4)
Foreign exchange differences	0.8	-	0.8
At 30 September 2021	(90.2)	(0.7)	(90.9)
Amortisation charge for the year	(83.4)	(0.7)	(84.1)
Foreign exchange differences	(13.1)	0.1	(13.0)
At 30 September 2022	(186.7)	(1.3)	(188.0)
Carrying amount
At 30 September 2022	833.5	7.1	840.6
At 30 September 2021	331.7	5.3	337.0
At 30 September 2020	267.0	5.1	272.1

As noted in note 4, the valuation of customer relationship intangible assets includes the use of key estimates, including customer attrition rates and discount rates. A change of 50 basis points in discount rates or 250 basis points in customer attrition rates at the period end date would have increased/(decreased) the intangible assets recognised by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for the comparative periods.

	30 September 2022 £M	30 September 2021 £M
Increase in discount rate	(3.7)	(3.1)
Decrease in discount rate	3.8	4.4
Increase in attrition rate	(23.0)	(19.3)
Decrease in attrition rate	23.6	21.3

There are no contractual commitments for the acquisition of intangibles as at 30 September 2022 (30 September 2021 - £Nil).

There are no intangible assets with restricted title or pledged as security for liabilities.

16 Goodwill and Impairment

Group	Goodwill £M
Cost
At 1 October 2020	2,110.5
Acquired through business combinations	411.2
Foreign exchange differences	(36.6)
At 30 September 2021	2,485.1
Acquired through business combinations	3,849.5
Foreign exchange differences	347.6
At 30 September 2022	6,682.2
Impairment
At 1 October 2020	(90.2)
Foreign exchange differences	2.9
At 30 September 2021	(87.3)
Foreign exchange differences	2.7
Impairment charge	(416.7)
At 30 September 2022	(501.3)
Carrying amount
At 30 September 2022	6,180.9
At 30 September 2021	2,397.8
At 30 September 2020	2,020.3

The Group is required to test whether goodwill has suffered any impairment on an annual basis or more frequently if there are indications that goodwill might be impaired. For the years ended 30 September 2022 and 30 September 2021, value in use (VIU) represented the recoverable amount used in the impairment tests, with the exception of VetStrategy (Canada) which was acquired during the current year and Spain where the Group's operations are still in its early stages of development. For VetStrategy and Spain, the fair value less costs to sell represents the recoverable amount used in the impairment test, as this is higher than the VIU. Given the significant scale and complexity of the Canadian business and the consequent extended timeline for implementing the Group's management system, the Group believes that it is appropriate to adopt the fair value less cost of disposal basis for the current financial year. Once appropriate changes have been made to the Canadian business to bring in Group processes, a value in use calculation will be performed in future. For Spain, once there has been further development in the country and Group systems and processes are embedded, a value in use calculation will also be performed here.

Group management have determined that all the operations in a country expected to benefit from the synergies of an acquisition in the that same country, as a result of shared central resources and supply chain leverage. Accordingly, it has allocated goodwill on a country by country basis. The carrying amount of goodwill is allocated as follows:

	30 September 2022 £M	30 September 2021 £M
UK	1,687.7	1,557.8
Canada	2,825.6	-
Netherlands	300.3	224.6
Sweden	167.3	158.9
France	548.1	180.4
Other	651.9	276.1
	6,180.9	2,397.8

The number of countries included in other is 14 (2021 - 9).

The impairment is allocated as follows:

	30 September 2022 £M	30 September 2021 £M
UK	-	-
Canada	(393.7)	-
Netherlands	-	-
Sweden	(61.8)	(64.8)
France	-	-
Other	(45.8)	(22.5)
	(501.3)	(87.3)

Impairment

The Group has recognised an impairment charge of £416.7M in the year which is represented as follows:

	30 September 2022 £M	30 September 2021 £M
Canada (VetStrategy)	(393.7)	-
Spain	(14.5)	-
USA	(8.5)	-
	(416.7)	-

VetStrategy

During the current financial year, an impairment of £393.7M has been recognised in relation to the Canadian business. On 3 November 2021, the Group acquired 100 % of the shares of VetStrategy Canada Top Holdings Inc via a share for share exchange. The value of the consideration at acquisition was based on a share of the fair value of the Group at the time of the acquisition. This was calculated by taking the EBITDA for VetStrategy and the rest of the Group combined and then multiplied by a multiple that was management's best estimate at the time of the acquisition.

Since acquisition, a number of vet practices in Canada have been acquired by the Group, which increased the amount of goodwill on the balance sheet. Management have re-assessed the recoverable value including these new practices using a fair value less costs of disposal approach. This was deemed to be a level 3 fair value calculation as per IFRS 13. This approach took the current / 18 month trailing EBITDA of the VetStrategy business and applied a different multiple than what was used as part of the share for share exchange based on updated market conditions. The new valuation produced a recoverable value of £3,360.3M compared to the carrying value of £3,754.0M and so an impairment has occurred. The impairment is driven by a combination of the premium attached to market-leading businesses of scale in the industry plus the impact of 62 further deals at the high multiples typical of the Canadian market. This is also compounded by the relatively high level of WACC at c13 %.

The fair value estimate is based on assumptions which have estimation uncertainty and small movements in these assumptions could lead to further impairment. Management have performed sensitivity analysis on the key assumptions for the fair value less costs of disposal approach and the following changes to the assumptions would have the following impact on the impairment charge:

Assumption	Increase / decrease in assumption	Effect on the value in use calculation
Multiple used	+/-1	+/-£162.5m

Spain

There has been an impairment in the Spain business of £14.5M during the year. Using a fair value less costs to sell, it has been determined that the recoverable value of 125.0M was less than the carrying value of £139.5M. The recoverable value was deemed to be a level 3 fair value calculation as per IFRS 13. This approach took the current trailing EBITDA and applied a multiple based on the Vet One acquisition in France, which is considered a similar size to the Spain business. The impairment represents the high premium multiple that the Group had to pay for acquisitions to gain a foothold in the market.

Given the Group is still in its early stages of development in this country, an impairment is considered appropriate. Management have performed sensitivity analysis on the key assumptions for the fair value less costs of disposal approach and the following changes to the assumptions would have the following impact on the impairment charge:

Assumption	Increase / decrease in assumption	Effect on the value in use calculation
Multiple used	+/-1	+/-£6.9m

USA

There has also been an impairment in relation to the goodwill in USA. This amounted to £8.5M. The USA business consists of crematoria acquired as part of the Veternity acquisition. The Group is currently reviewing its strategic options with regard to this non-core asset. As such, an impairment has been recorded following a review of the future cashflows of the business since the change in strategy and the increase in discount rate as described below. The recoverable value of the USA business was £3.9M compared to the carrying amount of £12.4M and so therefore an impairment has been recognised for the difference. The discount rate applied to the value in use calculation was 9.3 % compared to 6.6 % in the prior year.No reasonable change in the assumptions and estimations behind the recoverable value would have a material difference on the amount of the impairment.

Value in use

The recoverable amounts for the year ended 30 September 2022 have been determined from value in use calculations based on cash flow projections from formally approved budgets covering a four year period. Other major assumptions are as follows:

	Average year on year growth rate in EBITDA %	Pre-tax discount rate %	Long-term Growth rate ^* %
30 September 2022
UK	16.3 %	11.7 %	3 %
Netherlands	11.6 %	12.6 %	3 %
Sweden	21.0 %	11.9 %	3 %
France	17.0 %	12.7 %	3 %
Other	11.5 % - 27.6 %	10.4 % - 14.3 %	3 %

^* The long-term growth rate assumptions applies only to the period beyond the formal budgeted period with the value in use calculation based on an extrapolation of the estimated cash flows for year four.

The long-term growth rate assumptions apply to the period beyond the four year budgeted period with the value in use calculation based on an extrapolation of the estimated cash flows for year four. Long-term growth rates beyond the first four years are based on economic data pertaining to developed economies and the industry concerned.

For years one to four, the growth rates are based on operating cash flows and have been based on past experience and future expectations in the light of anticipated economic and market conditions. Management has taken into account the current economic headwinds and cost-of-living crisis when setting the like-for-like (LFL) sales growth rate in the budget. The business is also facing levels of inflation across all markets that are unprecedented in recent times (ranging from 8 % to 15 %+) which further impacts EBITDA growth in FY23.

Discount rates for each country are based on the Group's weighted average cost of capital ("WACC") adjusted to reflect management's assessment of specific risks related to each country. The discount rate is independent of the group's capital structure and the way the group financed the purchase of the asset. The WACC has been determined with reference to country specific risk free rates adjusted for country specific equity risk premiums and the cost of debt associated with investment grade corporate bonds. The capital structure used in determining the WACC rate is based on the capital structure of a blend of comparable companies.

On assessing the asset impairment of the France business, the recoverable value on a VIU basis was initially lower than the asset carrying value.

With regards to France, there were two material acquisitions in the year, being the acquisitions of SAS Vet One Holding and Groupe Animedis. These larger businesses tend to attract larger premiums to purchase due to their market position and a competitive tender process, which increased the carrying value of the goodwill in France considerably, as shown in note 29. France is still a relatively new market for the Group. With the number of sites approximately trebling during the financial year, significant investment in systems and people is needed to improve margins, the benefit of which will only become apparent in the long term. Therefore, management believe it is appropriate to take a longer term view of France's recoverable value rather than the four year budget method described above. Using margins similar to those in more mature, consolidated markets such as Netherlands in a longer term assessment based VIU calculation, there is significant headroom in the French business and so no impairment has been recognised.

Sensitivity analysis

Management has performed a sensitivity analysis on the key assumptions mentioned above. For the vast majority of countries, management have concluded that there is no reasonably possible change in a key assumption on which management has based its determination of the recoverable amount that would cause the country's carrying amount to exceed its recoverable amount significantly.

However for the countries cited below, a reasonably possible change in key assumptions could lead to the carrying value of a number of countries' goodwill carrying value exceeding its recoverable amount significantly. The table below shows how a reasonably possible change in a key assumption would make the recoverable value lower than the carrying value.

	Deficit between recoverable value and carrying value under new assumption	Deficit between recoverable value and carrying value under new assumption
Country	-200bps on gross margin	+200bps on pre-tax discount rate
Germany	-	£11.9m (3.3 % of carrying value)

17 Other investments

Group	Other investments £M
Cost
At 1 October 2020	0.2
Additions	1.1
Revaluation	-
Foreign exchange	-
At 30 September 2021	1.3
Additions	0.7
Revaluation	(0.1)
Disposals	(0.5)
Foreign exchange	0.1
At 30 September 2022	1.5
At 30 September 2022	1.5
At 30 September 2021	1.3
At 30 September 2020	0.2

Group

Other investments mainly relate to a number of funds and securities that the Group has obtained from acquisitions or from donations.

Subsidiary undertakings and associated undertakings

The undertakings in which the Company's and Group's interest at the year end is 20 % or more is shown in note 36.

18 Inventories

Group

	30 September 2022 £M	30 September 2021 £M
Finished goods and consumables	96.1	54.9

Inventories recognised as an expense during the period amounted to £509.7m.

There are no material differences between the carrying value of inventories and their replacement cost.

There is no inventory pledged as securities for liabilities.

19 Trade and other receivables

Group Current	30 September 2022 £M	30 September 2021 £M
Trade receivables at amortised cost	121.2	81.2
Less: expected credit loss provision	(24.1)	(18.8)
Trade receivables at amortised cost - net	97.1	62.4
Other receivables	124.1	69.8
Contract assets	9.0	-
Prepayments	28.9	21.8
Total current trade and other receivables	259.1	154.0

Other receivables include rebate receivables of £52.3M (30 September 2021 - £19.8M).

Group Non-Current	30 September 2022 £M	30 September 2021 £M
Amounts owed by parent company	8.3	-
Long term employee loan	11.7	-
Total non-current trade and other receivables	20.0	-

Amounts owed by the parent company relates to amounts owed by Islay New Group Holding S.A., which become repayable in 2028. Interest is charged at 11 % per annum. Credit risk for amounts owed by the parent company has not increased significantly since its initial recognition.

The long term employee loan of £11.7M relates to an outstanding receivable to various members of VetStrategy management so that these members could purchase shares in VetStrategy. These loans were initiated on 31 July 2020 before the acquisition of VetStrategy. Following the completion of the VetStrategy acquisition, the shares were converted into exchangeable shares. These are interest free loans and are repayable in full on 31 July 2030. The loan is secured against the value of the shares. There is no expected credit loss provision against these debtors or any expense in relation to bad debt.

As part of the acquisition of VetStrategy, there was also a loan made to a member of VetStrategy management by the parent of the Group's ultimate parent company, Browne Holding Sarl in Luxembourg. This was so the key member of management could purchase exchangeable shares in the Group. This loan amounted to £15.6M and was interest free and is repayable in full on 12 November 2031. The loan is secured against the value of the shares. This is not in the Consolidated Balance Sheet of the Group as Browne Holding Sarl is a company above the Group structure.

The loan mentioned above with a VetStrategy employee falls within the scope of IFRS 2 share based payments. This is because the loan is with recourse only to the shares and the proceeds of selling the shares would be used to pay off the loan. The number of shares granted and therefore immediately vested and exercised during the period was 244,907 exchangeable shares and 244,907 class D ordinary shares. There was no weighted average exercise price. None of these options have forfeited or expired during the period. There were no options outstanding or exercisable at the end of the financial year. The fair value of these options stated above was determined by the valuation of exchangeable shares as explained in note 23.

The total expense recognised for the period which was recognised immediately was £2.3M. There were no share based payment liabilities remaining at the end of the financial year.

Exposure to credit risk

The Group applies the IFRS 9 simplified approach to measuring expected credit losses for trade receivables. To measure lifetime expected credit losses on a collective basis, trade receivables are grouped based on ageing. The expected loss rates are based on the Group's historical credit loss experience and forward looking information where appropriate. As part of credit risk management practices, the Group differentiates between veterinaries that monitor and report cash flows in a robust manner and those that do not.

The table below reconciles the expected credit loss for trade receivables as at the beginning of the year to that of the end of the year.

Group	30 September 2022 £M	30 September 2021 £M
Opening provision for impairment of trade receivables	18.8	16.9
Increase during the year	5.3	1.9
Closing provision for impairment of trade receivables	24.1	18.8

The lifetime expected loss provision for trade receivables is as follows:

Group	Current £M	More than 30 days past due £M	More than 60 days past due £M	More than 120 days past due £M	Total £M
30 September 2022
Expected loss rate	2.04 %	11.77 %	30.36 %	59.81 %
Gross carrying amount	68.5	13.8	7.3	31.6	121.2
Loss provision	1.4	1.6	2.2	18.9	24.1
30 September 2021
Expected loss rate	0.00 %	0.00 %	45.45 %	82.47 %
Gross carrying amount	46.4	9.5	5.5	19.8	81.2
Loss provision	-	-	2.5	16.3	18.8

No loss provision has provided for balances less than 60 days past due in the prior year. This expected loss is not material. Expected credit losses arising in relation to other financial assets for which such a loss is to be measured under IFRS 9 are not material and associated expected credit loss disclosures are therefore not presented in these consolidated financial statements for these balances.

20 Trade and other payables

Group	30 September 2022 £M	30 September 2021 £M
Current
Trade payables	107.9	100.4
Accruals	197.5	118.7
Contract liability	0.8	-
Other payables	79.0	41.9
Other taxation and social security	61.9	87.5
Total current trade and other payables	447.1	348.5
Non-current
Amounts owed to parent company	0.3	-
Accruals	-	2.8
Total non-current trade and other payables	0.3	2.8

The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value. Amounts owed to the parent company relates to amounts to Islay New Group Holding S.A.. Amounts owed to the parent companies included in non-current payables are repayable in 2028. Interest is charged at 11 % per annum.

The maturity profile of amounts due after one year is below:

Group	Due within one and five years £M	Due after five years £M	Total £M
30 September 2022
Amounts owed to parent company	0.3	-	0.3
30 September 2021
Accruals	2.8	-	2.8

21 Loans and borrowings

Group	30 September 2022 £M	30 September 2021 £M
Current
Bank loans	15.6	-
Non-current
Bank loans	4,529.0	2,032.5

Total Loans and Borrowings

Total bank loans outstanding of £4,544.6M (30 September 2021 - £2,032.5M) are stated after deducting £53.1M (30 September 2021 - £20.2M) of costs associated with the raising of this finance, which are being charged to the Consolidated Income Statement over the term of the debt which is an average of 5 years (i.e. total bank debt was £4,597.7M at 30 September 2022 (£2,052.7M at 30 September 2021) and are repayable in 2025 and 2027. The rate of interest on each loan for each interest period is the percentage rate per annum, which is the aggregate of the applicable margin and SONIA/IBOR/CDOR as the case may be (between 3.25 % and 11.5 %). Interest is paid in instalments chosen by the Group typically quarterly, subject to the Group's compliance with banking covenants.

Long term bank borrowings

	30 September 2022 £M	30 September 2021 £M
Bank loans
Bank Loans	4,597.7	2,052.7
Less unamortised deferred debt costs	(53.1)	(20.2)
Total bank loans	4,544.6	2,032.5

Split Per Facility	£M	Repayment dates	Repayment	Rate of interest
30 September 2022
B3 Facility (GBP)	821.0	13.02.2026	Bullet	SONIA 5 NCCR LAG + CAS + 4.5 %
B4 Facility (EUR)	760.3	13.02.2026	Bullet	EURIBOR + 3.75 %
B5 Facility (EUR)	677.6	13.02.2026	Bullet	EURIBOR + 4 %
B6 Facility (EUR)	422.4	13.02.2026	Bullet	EURIBOR + 4.75 %
2nd LIEN Facility (GBP)	238.0	13.02.2027	Bullet	SONIA 5 NCCR LAG + CAS + 7.5 %
2nd LIEN Facility (CAD)	138.6	13.02.2027	Bullet	ICE LIBOR + 7 %
RCF (GBP)	504.5	13.08.2025	Revolving	SONIA 5 NCCR LAG +CAS + 3.5 %
RCF (SEK)	27.0	13.08.2025	Revolving	STIBOR + 3.5 %
RCF (NOK)	27.0	13.08.2025	Revolving	NIBOR + 3.5 %
Delayed Draw Tern Loan 1	51.4	31.07.2027	Quarterly	8 %
Delayed Draw Tern Loan 2	51.4	31.07.2027	Quarterly	8 %
Delayed Draw Tern Loan 3	128.9	31.07.2027	Quarterly	8 %
Delayed Draw Tern Loan 4	226.8	31.07.2027	Quarterly	6.75 %
Delayed Draw Tern Loan 5	162.2	31.07.2027	Quarterly	6.75 %
Subordinated Loan	78.7	02.03.2031	Accrued Interest	11.5 %
Closing Date Term Loan	275.4	31.07.2027	Quarterly	8 %
Revolving Credit Facility	6.5	Current	-	7.95 %
	4,597.7
30 September 2021
B3 Facility (GBP)	821.0	13.02.2026	Bullet	SONIA+4.25 %
B4 Facility (EUR)	744.0	13.02.2026	Bullet	EURIBOR+3.5 %
2nd LIEN Facility (GBP)	238.0	13.02.2027	Bullet	SONIA+7.5 %
RCF (GBP)	50.0	13.08.2025	Revolving	SONIA+3.25 %
RCF (EUR)	94.7	13.08.2025	Revolving	EURIBOR+3.25 %
RCF (SEK)	90.6	13.08.2025	Revolving	STIBOR+3.25 %
RCF (NOK)	14.4	13.08.2025	Revolving	NIBOR+3.25 %
	2,052.7

In November 2021, the group drew down additional Borrowing on a new B5 Facility (EUR) this amounted to £652M, this was used to repay the existing revolving credit facility.

In March 2022, the group drew down additional Borrowing on a new B6 Facility (EUR) and a new Second Lien Facility (CAN) that amounted to £406M and £126M respectively. This was used to repay the existing revolving credit facility.

In May 2022, the commitment for the existing revolving credit facility was increased to £617M.

The First Lien Senior facilities bears interest of SONIA plus a margin of 4.5 % on the B3 facilities, EURIBOR plus a margin of 3.75 % on the B4 facilities, EURIBOR plus a margin of 4 % on the B5 facilities, EURIBOR plus a margin of 4.75 % on the B6 facilities, all having a maturity date of 13 February 2026. The RCF facility bears interest at a rate of GBP loans SONIA plus a margin of 3.5 %, NOK loans NIBOR plus a margin of 3.5 %, SEK loans STIBOR plus a margin of 3.5 % and has a maturity date of 13 August 2025. The Second Lien GBP facility bears interest of SONIA plus a margin of 7.5 % and has a maturity date of 13 February 2027.The Second Lien CAN facility bears interest of ICE LIBOR plus a margin of 7 % and has a maturity date of 13 February 2027.

The terms of the closing date term loan and delayed draw term loans require that the Group repay to the administrative agent, on the last business day of each March, June, September and December prior to the term loan maturity date, in each case in an amount equal to 0.25 %([2021: 0.25 %) of the original principal amount of the respective loan. On the maturity date, the Group shall repay in an amount equal to the remainder of the principal amount of the term loan balance outstanding, together with accrued and unpaid interest on the principal amount. The amount of any interest set forth above shall be adjusted to account for the addition of any incremental term loans, extended term loans or refinancing term loans that result in an increase or decrease to the aggregate principal amount.

The Group shall pay to the administrative agent a ticking fee that will accrue at 1 % (2021: 1 %) per annum of the aggregate unfunded delayed draw term loan commitments and subordinate debt on the one-year anniversary of the closing date, and 2 % (2021: 2 %) per annum on or after the one year anniversary of the closing date. Any accrued and unpaid amounts of the ticking fee shall be due and payable on the first business day of each of March, June, September and December, commencing with the first such date to occur following the closing date. In addition, the Group shall pay to the administrative agent a closing payment equal to 1.5 % (2021: 1.5 %) of the principal amount of delayed draw term loans funded by the term lenders on each delayed draw borrowing date.

The B3 to B6 Facilities as well as the 2nd Lien Facilities are secured. The security on the loans is provided by the material companies in the Group (those each compromising more than 5 % of the Groups' EBITDA, in addition to each wholly owned direct holding of a material company, together representing at least 80 % of the Group's EBITDA), pledging their share capital as security.

Under all facilities the Group can select an interest payment schedule of every one, three or six months or and other period agreed between the parent and the Agent. To ensure effectiveness in our hedging strategy, we have chosen interest periods of between 3 and 6 months in line with our executed hedges which are now in place.

The Closing Date Term Loan, the Delayed Drawdown Term Loans and the Subordinated Loan are secured by the following:

- All of the properties held by the VetStrategy Group;

- All debt securities, intercompany note, and any other debt securities now owned or acquired in the future by the VetStrategy Group;

- All other property that may be delivered to and held by the administrative agent;

- All payments of principal or interest, dividends, cash, instruments, and other property from time to time received related to the equity, debt, and property outlined above; and

- All rights and privileges with respect to the property outlined above. There are no significant restrictions from borrowing arrangements or regulatory requirements on the ability of subsidiaries to transfer funds to the Group in the form of cash dividends or to repay loans.

The only financial covenant associated with the Senior Facilities (B3 to B6 and 2nd Lien) is that the Parent shall ensure that the Consolidated Net Leverage Ratio in respect of each testing period shall not exceed 9.12:1 prior to the IFRS effective date and 8.68:1 on or after the IFRS effective date.

Solely with respect to the VetStrategy Group Initial Revolving Credit Facility, commencing with the first full quarter after the Closing Date, the Borrower will not permit the Secured Net Leverage Ratio as of the last day of any Test Period ending during any Compliance Period to be greater than 9.75:1.00.

All loans are measured at amortised cost.

There are no significant restrictions from borrowing arrangements or regulatory requirements on the ability of subsidiaries to transfer funds to the Group in the form of cash dividends or to repay loans.

The maturity profile of amounts due after one year is below:

Group	Due within one year £M	Due within one and five years £M	Due after five years £M	Total £M
30 September 2022
Loans and borrowings	15.6	4,450.3	78.7	4,544.6
30 September 2021
Loans and borrowings	-	1,794.5	238.0	2,032.5

22 Employee benefit liabilities

Group	30 September 2022 £M	30 September 2021 £M
Current
Accrual for annual leave	21.4	8.6
Non-current
Defined benefit schemes (note 28)	0.8	1.4
Other long term employee benefits	6.4	-
	7.2	1.4

23 Financial liabilities at fair value

Group

The Group has a number of different financial liabilities at both the current and prior year end.

Contingent consideration

The Group carries certain contingent liabilities resulting from its business combinations. Certain sellers of the Group's acquired entities are entitled to earn additional earn-out payments in cash based on the entities' subsequent operating performance or future acquisitions by the acquired business. This operating performance is based on actual revenues or earnings before interest, tax, depreciation and amortisation to be achieved by the acquiree and the earn outs are usually contingent on maintaining historical levels of staff costs and operating expenses. The Group recorded the acquisition date fair values of these contingent liabilities, based on the likelihood of contingent earn-out payments at that time. The earn-out payments are subsequently remeasured to fair value at each reporting date, based on actual and forecasted operating performance.

The contingent consideration balance is a Level 3 fair value measurement, as the calculation of these amounts utilises unobservable inputs. The significant inputs included are projected revenue and payroll cost. The discount rate utilised in the calculation of these fair value measurements ranges from 3.25 % - 3.41 %. There have been no transfers between Level 1 or 2 throughout the year ending 2022.

The following table provides a roll-forward of the fair value of contingent consideration for the years ended 30 September 2022, 2021 and 2020:

Group	Contingent consideration £M	Exchangeable shares £M	Put option liability £M	Total £M
At 1 October 2020	81.5	-	-	81.5
Issuance in connection with acquisition	72.0	-	-	72.0
Change in fair value	41.6	-	-	41.6
Payments	(62.2)	-	-	(62.2)
Foreign exchange differences	(1.9)	-	-	(1.9)
At 30 September 2021	131.0	-	-	131.0
Issuance in connection with acquisition	97.9	184.8	72.6	355.3
Change in fair value	(30.9)	(24.2)	(11.6)	(66.7)
Share based payments	-	2.3	-	2.3
Payments	(39.5)	-	(0.5)	(40.0)
Interest	6.7	-	(9.0)	(2.3)
Foreign exchange differences	3.3	20.0	11.0	34.3
At 30 September 2022	168.5	182.9	62.5	413.9

Total amount recognised in the Consolidated Statement of Profit or Loss in each year is:

	30 September 2022 £M	30 September 2021 £M
Revaluation (gain)/loss of financial instruments	(66.7)	41.6

The fair value is determined considering the expected payment, discounted to present value using a risk adjusted discount rate. The expected payment is determined separately in respect of each individual earn-out agreement taking into consideration the expected level of profitability of each acquisition. The provision for contingent consideration is principally in respect of acquisitions completed during 2017 to 2022.

The significant unobservable input is forecast revenue growth rates. For the reporting period ended 30 September 2022 these were (3 %) - 13 % (30 September 2021: 5 % - 12 %).

The estimated fair value would increase/(decrease) if the revenue growth rate was higher/(lower). If projected revenues increased or decreased by 5 %, then the amount payable would increase by £13.0M or decrease by £57.6M respectively.

Put option liabilities

The Group carries liabilities for put options held by non-controlling interest shareholders. The liabilities arose from the acquisitions of VetStrategy and VetOne, which have a number of put option arrangements with their non-controlling shareholders.

The liability is measured at the present value of the expected redemption amount to be paid to the non-controlling interest shareholder when the option is exercised. The redemption amount contractually set at a multiple of EBITDA and multiples vary depending on the clinic acquired.

The expected payment is determined separately in respect of each individual option agreement taking into consideration the forecast EBITDA of each acquisition and is discounted using the incremental borrowing rate of VetStrategy.

The liability is calculated with reference to the contractual multiple and the forecast EBITDA for the relevant clinic and discounted.

The significant unobservable input for the put option liability is the Adjusted EBITDA growth rate and the discount rate. For the reporting period ended 30 September 2022 these were 8.9 % and 8.5 %.

A 1 % increase or decrease in the EBITDA growth rate would increase or decrease the put option liability at 30

September 2022 by £2.8M. A 1 % increase or decrease in the discount rate would increase or decrease the put option liability at 30 September 2022 by £4.8M.

Exchangeable shares

The Group, via a share for share exchange in its ultimate parent company, Islay New Group Holding S.A. (Islay) acquired 100 % of the share capital of VetStrategy. Changes in the fair value of exchangeable shares liability arises when the value of the underlying shares change and also when shares are exchanged.

The significant unobservable inputs to the valuation are the 18 month proforma EBITDA and the multiple. The impact of a 1 % increase or decrease in the 18 month proforma EBITDA on the valuation at 30 September 2022 is an increase or decrease of £2.6M. An increase or decrease of 1x in the multiple at 30 September 2022 has the impact of increasing or decreasing the value by £12.3M.

The maturity profile of the group's financial liabilities is as follows:

The maturity profile of contingent consideration is as follows:

Group	Due within one year £M	Due after more than one year £M	Total £M
30 September 2022
Contingent consideration	55.2	113.3	168.5
Exchangeable shares	182.9	-	182.9
Put option liability	62.5	-	62.5
	300.6	113.3	413.9
30 September 2021
Contingent consideration	44.1	86.9	131.0

24 Deferred tax liability

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon:

Group	Property, plant and equipment £M	Other temporary differences £M	Tax losses £M	Leases £M	Business combinations £M	Total £M
At 1 October 2020	2.7	(1.9)	9.8	1.5	(58.8)	(46.7)
On acquisition	-	-	-	-	(19.8)	(19.8)
Credit/(charge) to other comprehensive income	0.1	-	-	-	1.3	1.4
Credit/(charge) to income statement	0.6	0.4	0.7	4.2	(6.4)	(0.5)
At 30 September 2021	3.4	(1.5)	10.5	5.7	(83.7)	(65.6)
On acquisition	(4.8)	0.4	2.4	0.2	(91.7)	(93.5)
Credit/(charge) to other comprehensive income	-	-	-	-	(12.4)	(12.4)
Credit/(charge) to income statement	(0.6)	(16.4)	(5.6)	(9.0)	15.5	(16.1)
At 30 September 2022	(2.0)	(17.5)	7.3	(3.1)	(172.3)	(187.6)

Deferred tax assets have not been recognised on the following as it is not considered probable that there will be future taxable profits, including taxable temporary differences relating to the same tax authority and entity, available against which the assets can unwind:

Group	30 September 2022 £M	30 September 2021 £M
Unused tax losses	62.7	27.6
Temporary differences	-	3.5
Employee benefits	-	1.7
	62.7	32.8

Included in unrecognised tax losses are £0.4M which should be used by 2027 and £0.5M which should be used by 2030 (2021: nil). The remaining £61.8M (2021: £27.6M) have no time expiry.

The Group does not have any unrecognised deferred tax liabilities arising from its investments in subsidiaries and associates.

Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

Group	30 September 2022 £M	30 September 2021 £M
Deferred tax asset	7.3	22.1
Deferred tax liability	(194.9)	(87.7)
Net deferred tax	(187.6)	(65.6)

25 Share capital

Authorised, issued and fully paid:	30 September 2022 Number (M)	30 September 2021 Number (M)
Ordinary Shares of £.0.01 each	2,063.2	1,736.6
Authorised, issued and fully paid:	£M	£M
Ordinary shares of £0.01 each	20.6	17.4

	30 September 2022 Number (M)	30 September 2022 £M	30 September 2021 Number (M)	30 September 2021 £M
Ordinary shares of £0.01 each
At 1 October	1,736.6	17.4	29.0	0.3
Other issue for cash	326.6	3.2	-	-
Conversion of preferred shares	-	-	1,707.7	17.1
At 30 September	2,063.2	20.6	1,736.6	17.4
Preferred shares of £0.01 each
At 1 October	-	-	1,707.7	17.1
Other issue for cash	-	-	-	-
Conversion to ordinary shares	-	-	1,707.7	17.1
At 30 September	-	-	-	-

Share premium	30 September 2022 £M	30 September 2021 £M
Ordinary shares of £0.01 each
At 1 October	1,719.3	45501
Issue of shares	1,833.0	-
Conversion of preferred shares	-	1,690.6
At 30 September	3,552.3	1,719.3
Preference shares of £0.01 each
At 1 October	-	1,690.6
Other issue for cash	-	-
Conversion to ordinary shares	-	(1,690.6)
At 30 September	-	-

New shares allotted

New shares were allotted by the Company during the financial year ended 30 September 2022. On 3 November 2021, the Group via a share for share exchange in its parent company, Islay New Group Holding S.A. in Luxembourg acquired 100 % of the share capital of VetStrategy Canada Top Holdings Inc ("VetStrategy") in Canada. The investment was passed down internally to the Company on the same day. The value of the shares issued in the shares for share transaction was £1,766.6M. This was a non-cash transaction.

A further share issue of 8,957,968 Ordinary £0.01 shares were issued for a cash consideration of £57.9M.

Rights and restrictions

The shares have attached to them full voting, dividend and capital distribution rights (including on winding up). They do not confer any right of redemption. All shares have been allotted, called-up and fully-paid.

The Company has one class of ordinary shares which carry no right to fixed income.

26 Reserves

The following describes the nature and purpose of each reserve within equity: Called up share capital represents the nominal value of shares subscribed for.

The share premium reserve contains the premium arising on issue of equity shares, net of issue expenses.

The accumulated deficit represents cumulative profits or losses, net of dividends paid and other adjustments. The translation reserve represents gains/losses on retranslating the net assets of overseas operations into Pound Sterling.

The Merger reserve is the reserve that arises from the application of merger accounting in a common control transaction on incorporation of the Company in 2018. The reserve represents the difference between the value of the shares issued by the Group's parents at the time before and after the common control transaction.

27 Financial Instruments

Group

Capital risk management

The Group's objectives when managing capital, which is deemed to be total equity plus loans and borrowings, are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain a strong credit rating and headroom on financial covenants.

The Group manages its capital structure and makes appropriate decisions in light of the current economic conditions and strategic objectives of the Group.

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the Group.

Categories of financial instruments

Carrying amount Financial assets	30 September 2022 £M	30 September 2021 £M
Amortised cost
Other investments	1.5	1.3
Cash and cash equivalents	231.3	186.7
Trade receivables (note 19)	97.1	62.4
Other receivables (note 19)	124.1	69.8
Amounts owed by parent company	8.3	-
Total financial assets held at amortised cost	462.3	320.2
Financial liabilities
Amortised cost
Trade payables (note 20)	107.9	100.4
Accruals (note 20)	197.5	118.7
Other payables (note 20)	79.0	41.9
Loans and borrowings (note 21)	4,544.6	2,032.5
Employee benefit liabilities (note 22)	27.8	8.6
Amounts owed to parent company	0.3	-
Total financial liabilities held at amortised cost	4,957.1	2,302.1

Fair values of financial instruments

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, and based on the lowest level input that is significant to the fair value measurement as a whole.

At 30 September 2022 and, 2021 the carrying amounts of cash at bank, receivables, payables, accrued expenses, short-term advances to related parties and short-term borrowings from related parties reflected in the consolidated financial statements are reasonable estimates of fair value in view of the nature of these instruments or the relatively short period of time between the origination of the instruments and their expected realisation. The fair value of floating interest rate bank borrowings at the end of the reporting periods is not significantly different from the carrying amounts.

The following table provides the fair value disclosures of the Group's remaining long term borrowings for which the carrying amount does not approximate fair value and contingent consideration:

	30 September 2022 £M	30 September 2021 £M
Financial liabilities measured at fair value
Contingent consideration (note 23)	168.5	131.0
Exchangeable shares	182.9	-
	351.4	131.0
Financial liabilities not measured at fair value
Amounts owed to parent companies (note 20)	0.3	-
Non-controlling interest put options	62.5	-
	62.8	-
Fair values (Level 3): significant unobservable inputs
Contingent consideration (note 23)	168.5	131.0
Exchangeable shares	182.9	-
Non-controlling interest put options	62.5	-
Amounts owed to parent companies	0.3	-
	414.2	131.0

There have been no transfers between levels during the year.

The valuation techniques for Level 3 financial instruments have been disclosed below.

Areas	Valuation Technique
Contingent consideration	Refer to note 23.
Exchangeable shares	Refer to note 23.
Put option liabilities	Refer to note 23.
Amounts owed to parent companies	A discounted cash flow approach has been adopted, applying a yield comprising a term- appropriate risk free rate and credit spread based on the Group's credit risk profile and the instrument's security.

Financial risk management

Overview

The Group is exposed to the following risks from its use of financial instruments:

• Credit risk;

• Market risk (currency risk, interest rate risk and price risk) and;

• Liquidity risk.

The Group's risk management policies are established to identify and analyse the risks faced by the Group, ensuring mitigation is in place to address them while monitoring adherence to appropriate limits and controls set by the Board. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.

Risk management in respect of financial risks is carried out by the Group Treasury function under policies approved by the Board of Directors. The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Board provides written principles through its Group Treasury Policy for overall risk management.

There has been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and process for managing those risks or the methods used to measure them from previous periods.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk on loans receivable, trade and other receivables, cash and cash equivalents and intra-group receivables.

The Group ensures that the banks used for financing hold an acceptable risk rating by independent parties. Trade receivables and other receivables consist of a large number of customers. The Group does not have any significant credit risk exposure to any single counterparty.

Under the general approach there is to be assessment of whether there has been a significant increase in the credit risk since initial recognition. If there has been a significant increase in credit risk, then the loss allowance is calculated based on lifetime expected credit losses. If not, then the loss allowance is based on 12 month expected credit losses. This determination is made at the end of each financial period.

Thus the basis of the loss allowance for a specific financial asset could change year on year. For trade receivables which do not contain a significant financing component, the loss allowance is determined as the lifetime expected credit losses of the instruments. For financial assets other than trade receivables the general approach under IFRS 9 is followed.

When assessing credit risk, the Group consider past due information and external credit rating as issued by external credit rating agencies when these are available. This also includes consideration of existing changes in business, financial and economic conditions of counterparty associated with the financial asset.

Management has assessed all of the Group's financial assets to be in Stage 1, where credit risk has not increased since initial recognition, based on consideration of the credit quality of the respective counterparties.

The Group only deposits money with banks that have investment grade credit ratings of at least investment grade and above. These balances can be withdrawn on demand and therefore management would, in accordance with the Group's credit risk management practices, withdraws amounts should the credit risk associated with a particular bank increase beyond the Group's risk appetite. The Group also avails the low credit risk exemption under IFRS with regard to amounts owed by investment grade counterparties whereby it assumes that there is no significant increase in credit risk for said counterparties to the extent that they remain investment grade. The Group only deposits with money market funds that are AAA rated and provide diversified risk of investment in counterparties and instruments.

Further disclosures regarding trade and other receivables, which are neither past due nor impaired, are provided in note 19.

The Group's maximum exposure to credit risk, being the carrying amount of financial assets, is summarised as follows:

	30 September 2022 £M	30 September 2021 £M
Trade receivables (note 19)	97.1	62.4
Other receivables (note 19)	124.1	69.8
Cash and cash equivalents	231.3	186.7

Market risk

Market risk arises from the Group's use of interest bearing and foreign currency financial instruments. It is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk).

(i) Interest rate risk

The Group is exposed to cash flow interest rate risk from long-term borrowings at variable rate. The Group analyses the interest rate exposure. A sensitivity analysis is performed by applying a simulation technique to the liabilities that represent major interest-bearing positions. Based on the simulations performed, the impact on profit or loss of a 50-basis point shift (being the maximum reasonable expectation of changes in interest rates), the Group ensures the appropriate management of interest rate risk. Note terms of the interest rates for the Group is provided in note 21.

The Group has set up a Treasury Risk committee to review its financial risks and exposures including Interest rate risk. The committee reviews the Group's exposure to interest rate risks based upon the level of debt, the existing fixed/floating rate mix and existing market conditions and takes appropriate action to mitigate risk as appropriate.

At the reporting date the interest rate profile of the Group's interest-bearing financial instruments was:

Group Variable rate instruments	30 September 2022 £M	30 September 2021 £M
Financial liabilities	4,597.7	2,032.5
Total financial liabilities	4,597.7	2,032.5

Sensitivity analysis

A change of 200 basis points in interest rates at the period end, being management's assessment of a reasonably possible change in interest rate, would have increased/(decreased) profit or loss by the amounts shown below. This calculation assumes that the change occurred at the reporting date and had been applied to risk exposures existing at that date. This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial instruments with variable interest rates, financial instruments at fair value through profit or loss or available for sale with fixed interest rates and the fixed rate element of interest rate swaps. In the prior year, the analysis was performed using 50 basis points, being a reasonably possible change in interest rates at the time.

Group Profit or loss and Equity	30 September 2022 £M	30 September 2021 £M
Increase	92.0	10.3
Decrease	(92.0)	(10.3)

(ii) Foreign currency risk

Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. There is a risk that significant fluctuations in European currencies causes an adverse impact on the Group's profitability or ability to pay key suppliers or lenders. The Group mitigates this risk by having a portion of its debt in Euros so any weakening of the Euro which leads to lower profitability also leads to reduced debt for the Group.

The Group also looks to draw from its external debt to match its assets in currency.

The Group's exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments.

	Euro £M	SEK £M	CHF £M	DKK £M	USD £M	PLN £M
30 September 2022
Trade and other receivables	59.5	12.4	0.2	0.2	0.5	0.1
Cash and cash equivalents	107.5	20.3	5.2	2.4	0.2	0.4
Trade and other payables	(228.8)	(26.0)	(7.1)	(0.8)	(0.2)	(0.4)
Loans and borrowings	(1,860.2)	(26.9)	-	-	-	-
30 September 2021
Trade and other receivables	30.0	7.1	1.1	0.2	0.3	0.0
Cash and cash equivalents	82.5	15.0	2.5	1.5	0.2	-
Trade and other payables	(83.3)	(22.7)	(5.5)	(1.7)	(9.8)	(3.2)
Loans and borrowings	(838.7)	(90.6)	-	-	-	-
	CZK	CAD	AUD	NOK	Total
	£M	£M	£M	£M	£M
30 September 2022
Trade and other receivables	-	64.8	-	2.4	140.1
Cash and cash equivalents	0.1	13.2		3.1	152.4
Trade and other payables	(0.1)	(408.6)	-	(4.7)	(676.7)
Loans and borrowings	-	(1,101.4)	-	(27.0)	(3,015.5)
30 September 2021
Trade and other receivables	(0.0)	0.0	-	1.4	40.1
Cash and cash equivalents	0.0	0.3		3.1	105.1
Trade and other payables	(0.0)	(6.2)	-	(5.1)	(137.5)
Loans and borrowings	-	-	-	(14.4)	(943.7)

Sensitivity analysis

A 10 % weakening of the following currencies against the pound sterling at the period end date in each year would have increased/(decreased) profit or loss or equity by the amounts shown below. This calculation assumes that the change occurred at the reporting date and had been applied to risk exposures existing at that date.

This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant.

A 10 % strengthening of the above currencies against the pound sterling in any period would have had the equal but opposite effect on the above currencies to the amounts shown below, on the basis that all other variables remain constant.

Profit or loss and Equity	Euro £M	SEK £M	CHF £M	DKK £M	USD £M	PLN £M
30 September 2022
Increase	(192.2)	(2.0)	(0.2)	0.2	0.1	-
Decrease	192.2	2.0	0.2	(0.2)	(0.1)	-
30 September 2021
Increase	(40.4)	(4.6)	(0.1)	(0.0)	(0.5)	(0.2)
Decrease	40.4	4.6	0.1	0.0	0.5	0.2
	CZK	CAD	NOK	Total
	£M	£M	£M	£M
30 September 2022
Increase	-	(143.2)	(2.7)	(340.0)
Decrease	-	143.2	2.7	340.0
30 September 2021
Increase	0.0	(0.2)	(0.8)	(46.8)
Decrease	(0.0)	0.2	0.8	46.8

(iii) Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group's policy is to ensure that it will always have sufficient liquid assets to allow it to meets its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements.

The Group reviews liquidity on a weekly basis reviewing cash in each country and at the Group level against forecast, taking into consideration cash requirement for operations and potential investments in acquisitions. Where possible, operational cash is utilised for acquisitions with the utilisation of a revolving credit facility being used as and when required for operational cash, acquisitions or capital projects. Intercompany loans from Group companies are advanced to operations that require funds.

Maturity analysis (undiscounted cash flows)

2022	Due within one year £M	Due within one and five years £M	Due after five years £M	Total £M
Loans and borrowings	267.0	5,188.5	100.7	5,556.2
Trade payables	107.9	-	-	107.9
Other payables	79.0	-	-	79.0
Accruals	197.5	-	-	197.5
Employee benefit liabilities	21.4	6.4	-	27.8
Deferred consideration	55.2	113.3	-	168.5
Exchangeable shares	182.9	-	-	182.9
Non-controlling interest put options	62.5	-	-	62.5
Amounts owed to parent company	-	-	0.3	0.3
Total	973.4	5,308.2	101.0	6,382.6
2021	Due within one year £M	Due within one and five years £M	Due after five years £M	Total £M
Loans and borrowings	87.4	2,116.4	244.6	2,448.4
Trade payables	100.4	-	-	100.4
Other payables	41.9	-	-	41.9
Accruals	115.9	2.8	-	118.7
Employee benefit liabilities	8.6	-	-	8.6
Total	354.2	2,119.2	244.6	2,718.0

28 Retirement benefit schemes

Defined contribution schemes

Group

The Group operates defined contribution retirement benefit schemes. The pension cost charge for the year represented contributions payable by the Group to the schemes and amounted to £38.6M (30 September 2021 - £31.2M). Contributions totalling £3.5M (30 September 2021 - £3.3M) were payable to the schemes at the end of the year and are included in other creditors.

(i) Defined benefit plan characteristics and funding

The Group has 2 entities in Switzerland that are affiliated to 4 pension funds operating 13 post-employment defined benefit plans. The nature of the plans is similar for all plans:

• The retirement benefits are organised as "cash-balance plans":

o Each active insured has a savings account, which is accumulated by contributions of the employee as well as the employer.

o In addition, the savings accounts are augmented by an interest rate, which is determined by the board of the trustees on a yearly basis.

o In the case of an employee changing the employer, the savings account is transferred to the new employer's pension fund. The employee's savings process is continued in the new pension plan.

o At retirement age, the amount on the savings account is converted into an annuity by multiplication with the pension fund specific conversion rate. The employee has also the possibility to take the saving account fully or partly as an old-age lump sum. However, taking an old-age annuity is more common.

• Other benefits:

o In addition to retirement benefits, the employee has death and disability benefits. These benefits (annuities) are typically defined as a percentage of the employee's insured salary.

Differences and similarities of pension plans:

• The pension benefits are similar for each pension plan (similar in the kind of benefits they provide), but they are different in the amount, e.g. the disability annuity is generally higher in a management plan than in an usual employee plan.

Swiss pension funds are legally independent from the employer and are governed by the Swiss Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans (LPP/BVG). The pension plans adopted for Switzerland are affiliated to three different independent collective foundations. The board of trustees consists of the same number of employer and employee representatives. The duties of the board of trustees are detailed defined in Art. 51a BVG. They are in particular responsible for the administration of the pension fund, the investment and the definition of the pension plans and other relevant policies.

The vast majority of Swiss pension plans are defined contribution plans by nature (and by definition of local GAAP). Swiss pension plans are, however, categorised as defined benefit plans under IFRS because:

• Existing minimum guarantees on benefit levels (interest rate, conversion rate on compulsory part of the benefits)

• The employer can potentially be forced to pay extraordinary contributions in case of underfunding according to statutory law (based on paragraph 65d, law on occupation benefits in Switzerland)

As a consequence, the benefits do not depend solely on the amount contributed to the plan participant's account, the returns earned on investments of those contributions, and the forfeitures of other plan participants' benefits that may be allocated to that plan participant's account.

These two characteristics therefore cause Swiss pension plans to be treated as defined benefit according to IFRS.

In 2023, the Group expects to contribute £0.5M into its defined benefit plans.

Group

(ii) Reconciliation of defined benefit obligation and fair value of scheme assets

Movement in defined benefit obligation	30 September 2022 £M	30 September 2021 £M
At 1 October	15.3	13.7
Current service cost	0.6	0.5
Interest cost	0.1	0.0
Included in profit or loss	0.7	0.5
Actuarial (gains) / losses from:
- Financial assumptions	(3.4)	(0.3)
- Adjustments (experience)	(0.2)	0.2
Included in other comprehensive income	(3.6)	(0.1)
Contributions by plan participants	0.6	0.4
Business combinations	2.6	2.5
Exchange rate adjustment (gains)/losses	2.4	(0.8)
Benefits paid	-	(0.9)
Other Movements	5.6	1.2
At 30 September	18.0	15.3

Fair value of plan assets	30 September 2022 £M	30 September 2021 £M
At 1 October	13.9	10.7
Interest income	0.1	0.0
Included in profit or loss	0.1	0.0
Return on plan assets (excluding interest)	(2.4)	1.5
Included in other comprehensive income	(2.4)	1.5
Contributions by the employer	0.6	0.4
Contributions by plan participants	0.6	0.4
Business combinations	2.3	2.4
Exchange rate adjustment (losses)/gains	2.2	(0.6)
Benefits paid	-	(0.9)
Other Movements	5.7	1.7
At 30 September	17.3	13.9

Amounts recognised in the Consolidated Statement of Financial Position	30 September 2022 £M	30 September 2021 £M
Present value of funded obligation	18.0	15.3
Fair value of plan assets	(17.3)	(13.9)
Amount not recognised as an asset	0.1	-
Net liability	0.8	1.4

Consolidated Statement of Financial Position reconciliation	30 September 2022 £M	30 September 2021 £M
At 1 October	1.4	3.0
Pension expenses recognised in profit or loss	0.6	0.5
Amounts recognised in other comprehensive income	(1.1)	(1.7)
Employer contributions	(0.6)	(0.4)
Net transfer in/(out) including the effect of any business combinations/divestiture	0.3	0.1
Exchange rate adjustment (gains)/losses	0.2	(0.1)
At 30 September	0.8	1.4

Expense recognised in profit or loss	30 September 2022 £M	30 September 2021 £M
Current serve cost	0.6	0.5
Net interest cost	-	-
	0.6	0.5

(iii) Estimate of contributions in subsequent period

	30 September 2022 £M	30 September 2021 £M
Best estimate of expected contribution by the employer during the next financial period	0.5	0.4
Best estimate of expected contribution by plan participants during the next financial period	0.5	0.4

(iv) Principal actuarial assumptions used

	30 September 2022	30 September 2021
Discount rate (beginning of period)	0.40 %	0.20 %
Discount rate (end of period)	2.30 %	0.35 %
Expected return on plan assets (in period)	0.40 %	0.20 %
Interest on savings account	2.30 %	0.50 %
Salary increase rate	1.50 %	1.00 %
Pension increase rate	0.00 %	0.00 %
Lump-sum withdrawal rate	30.00 %	30.00 %
Mortality table	BVG 2020 GT	BVG 2020 GT
Disability table	BVG 2020	BVG 2020
Turnover table	BVG 2020	BVG 2020
Treatment of contributions from employees	IAS19.939b)	IAS19.93(b)

(v) Sensitivity (change in defined benefit obligation)

Discount rate	30 September 2022 £M	30 September 2021 £M
+0.50 %	(1.1)	(1.1)
- 0.50 %	1.3	1.2
Interest on savings-accounts
+0.50 %	0.4	0.3
- 0.50 %	(0.4)	(0.3)
Pension increase rate
+0.50 %	0.7	0.7
- 0.50 %	(0.6)	(0.7)
Salary increase rate
+0.50 %	0.2	0.2
- 0.50 %	(0.2)	(0.2)
Life expectancy
- 1 year	(0.3)	(0.3)
+ 1 year	0.3	0.4
Duration defined benefit obligation (years)	11 to 15	14 to 18

A sensitivity analysis for each significant actuarial assumption as of the end of the reporting period is performed, showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumption that were reasonably possible at that date. The whole valuations are re-performed by applying the sensitivities disclosed and the impact of the change of the assumptions on the liability is disclosed.

There have been no changes in method compared to the prior year.

(vi) Breakdown of defined benefit obligation by participant status at end of period

	30 September 2022 £M	30 September 2021 £M
Active members	15.0	11.5
Pensioners	3.0	3.8
	18.0	15.3

( vii) Allocation of plan assets at end of period

With quoted market price	30 September 2022 £M	30 September 2021 £M
Cash and cash equivalents	0.5	0.4
Equity instruments	5.6	4.2
Debt instruments	4.8	4.8
Real estate	4.6	3.3
Other	1.8	1.2
	17.3	13.9
Without quoted market price
Other	-	-
Total	17.3	13.9

29 Business combinations during the period

The Group has acquired veterinarian practices and groups throughout the United Kingdom and Europe. The primary reason for these acquisitions is to expand the Group's presence and increase future earnings in these geographical areas.

The material acquisitions acquired in the year ended 30 September 2022 are separately disclosed within this note. The directors have considered the accounting requirements of IFRSs and have concluded that there were no other material acquisitions which require separate disclosure. The below balances are provisions as IFRS 3: Business Combinations gives an entity a 12 month period after acquisition date to change fair values if new information arises. Pro forma disclosure of revenues and earnings for each of the material acquisitions disclosed in the notes below was not determined to be practicable due to the availability of financial information prior to acquisition in the applicable accounting standard.

VetStrategy Canada Top Holdings Inc

On 3 November 2021 the Group acquired 100 % of the voting equity instruments of VetStrategy Canada Top Holdings Inc and its subsidiaries in Canada via a share for share exchange. The principal activity of VetStrategy Canada Top Holdings Inc and its subsidiaries is veterinary services.

The business combination is a strategic acquisition which diversifies the group onto two continents. The consideration substantially exceeds the fair value of the identifiable net assets resulting in a significant goodwill balance being recognised. The goodwill represents the synergies expected to arise from the acquisition as well as the assembled workforce in VetStrategy.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows (note that fair value was not used as the measurement basis for assets and liabilities that require a different basis, which includes leases and income taxes):

	Provisional fair value on acquisition £M
Assets and liabilities acquired
Investments	0.2
Intangible assets	322.0
Property, plant and equipment	62.0
Right-of-use assets	73.6
Inventories	12.1
Trade and other receivables	50.5
Cash and cash equivalents	55.9
Payables	(987.5)
Current tax liability	1.2
Deferred tax liability	(55.3)
	(465.3)
Total fair value of identifiable net assets upon acquisition
Non-controlling interests	-
	(465.3)
Fair value of identifiable net assets upon acquisition
Fair value of consideration paid
Initial share for share exchange	1,766.6
Cash	8.3
Exchangeable shares	184.8
	1,959.7
Total consideration
Goodwill (see note 16)	2,425.0
Cash flow analysis:
Cash consideration	8.3
Less: cash and cash equivalent balances acquired	(55.9)
Net cash outflow on acquisition	(47.6)

Acquisition costs of £4.9M arose as a result of the transaction. These have been recognised as part of administrative expenses in the Consolidated Income Statement.

The main factors leading to the recognition of goodwill are:

• The presence of certain intangible assets, such as the assembled workforce of the acquired entity, vertical integration and other synergies, which do not qualify for separate recognition.

The goodwill recognised will not be deductible for tax purposes.

VetStrategy Canada Top Holdings Inc has contributed £584.3M to Group revenues and £16.6M of profit to Group loss between the date of acquisition and 30 September 2022.

SAS Vet One Holding

On 6 January 2022 the Group acquired 100 % of the voting equity instruments of SAS VetOne Holding and its subsidiaries in France. The principal activity of SAS VetOne Holding and its subsidiaries is veterinary services.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows (note that fair value was not used as the measurement basis for assets and liabilities that require a different basis, which includes leases and income taxes):

	Provisional fair value on acquisition £M
Assets and liabilities acquired
Intangible assets	24.9
Property, plant and equipment	10.3
Right-of-use assets	11.1
Inventories	1.4
Trade and other receivables	3.2
Cash and cash equivalents	4.1
Payables	(32.1)
Deferred tax liability	(6.3)
Total fair value of identifiable net assets upon acquisition	16.6
Non-controlling interests	(0.4)
Fair value of identifiable net assets upon acquisition	16.2
Fair value of consideration paid
Cash consideration	171.2
Total consideration	171.2
Goodwill (see note 16)	155.0
Cash flow analysis:
Cash consideration	171.2
Less: cash and cash equivalent balances acquired	(4.1)
Net cash outflow on acquisition	167.1

Non-controlling interest was measured at £0.4M representing the present ownership instruments' proportionate share in the recognised amounts of the acquiree's identifiable net assets.

Acquisition costs of £1.7M arose as a result of the transaction. These have been recognised as part of administrative expenses in the Consolidated Income Statement.

The main factors leading to the recognition of goodwill are:

• The presence of certain intangible assets, such as the assembled workforce of the acquired entity, vertical integration and other synergies, which do not qualify for separate recognition.

The goodwill recognised will not be deductible for tax purposes.

SAS VetOne Holding has contributed £36.9M to Group revenues and £2.8M of profit to Group loss between the date of acquisition and 30 September 2022.

Tierklinik Kalbach

On 1 March 2022 the Group acquired the trade and certain assets of Tierklinik Kalbach in Germany. The principal activity of Tierklinik Klabach is veterinary services.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows (note that fair value was not used as the measurement basis for assets and liabilities that require a different basis, which includes leases and income taxes):

	Provisional fair value on acquisition £M
Assets and liabilities acquired
Intangible assets	4.8
Property, plant and equipment	1.1
Right-of-use assets	1.3
Inventories	0.2
Payables	(1.3)
Deferred tax liability	(1.4)
Total fair value of identifiable net assets upon acquisition	4.7
Non-controlling interests	-
Fair value of identifiable net assets upon acquisition	4.7
Fair value of consideration paid
Cash consideration	35.9
Contingent consideration	0.5
Total consideration	36.4
Goodwill (see note 16)	31.7
Cash flow analysis:
Cash consideration	35.9
Less: cash and cash equivalent balances acquired	-
Net cash outflow on acquisition	35.9

Acquisition costs of £0.1M arose as a result of the transaction. These have been recognised as part of administrative expenses in the Consolidated Income Statement.

The main factors leading to the recognition of goodwill are:

• The presence of certain intangible assets, such as the assembled workforce of the acquired entity, vertical integration and other synergies, which do not qualify for separate recognition.

The goodwill recognised will not be deductible for tax purposes.

Tierklinik Kalbach has contributed £4.0M to Group revenues and £0.3M of profit to Group loss between the date of acquisition and 30 September 2022.

Swayne & Partners Topco Limited

On 22 October 2021 the Group acquired 100 % of the voting equity instruments of Swayne & Partners Topco Limited and its subsidiaries in the United Kingdom. The principal activity of Swayne & Partners Topco Limited and its subsidiaries is veterinary services.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows (note that fair value was not used as the measurement basis for assets and liabilities that require a different basis, which includes leases and income taxes):

	Provisional fair value on acquisition £M
Assets and liabilities acquired
Intangible assets	4.1
Property, plant and equipment	0.2
Right-of-use assets	1.1
Inventories	0.1
Trade and other receivables	1.3
Cash and cash equivalents	0.5
Payables	(3.1)
Corporation tax liability	(0.3)
Deferred tax liability	(1.2)
Total fair value of identifiable net assets upon acquisition	2.7
Non-controlling interests	-
Fair value of identifiable net assets upon acquisition	2.7
Fair value of consideration paid
Cash consideration	23.9
Contingent consideration	1.4
Total consideration	25.3
Goodwill (see note 16)	22.6
Cash flow analysis:
Cash consideration	23.9
Less: cash and cash equivalent balances acquired	(0.5)
Net cash outflow on acquisition	23.4

Acquisition costs of £3M arose as a result of the transaction. These have been recognised as part of administrative expenses in the Consolidated Income Statement.

The main factors leading to the recognition of goodwill are:

• The presence of certain intangible assets, such as the assembled workforce of the acquired entity, vertical integration and other synergies, which do not qualify for separate recognition.

The goodwill recognised will not be deductible for tax purposes.

Swayne & Partners Topco Limited and its subsidiaries has contributed £7.7M to Group revenues and £0.8M of profit to Group loss between the date of acquisition and 30 September 2022.

Groupe Animedis

On 4 February 2022 the Group acquired 100 % of the voting equity instruments of Groupe Animedis. The principal activity of Groupe Animedis is veterinary services.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows (note that fair value was not used as the measurement basis for assets and liabilities that require a different basis, which includes leases and income taxes):

	Provisional fair value on acquisition £M
Assets and liabilities acquired
Intangible assets	4.3
Property, plant and equipment	0.6
Right-of-use assets	1.0
Trade and other receivables	0.2
Cash and cash equivalents	0.4
Payables	(3.0)
Corporation tax liability	(0.1)
Deferred tax liability	(0.5)
Total fair value of identifiable net assets upon acquisition	2.9
Non-controlling interests	-
Fair value of identifiable net assets upon acquisition	2.9
Fair value of consideration paid
Cash consideration	23.5
Contingent consideration	4.1
Total consideration	27.6
Goodwill (see note 16)	24.7
Cash flow analysis:
Cash consideration	23.5
Less: cash and cash equivalent balances acquired	(0.4)
Net cash outflow on acquisition	23.1

Acquisition costs of £0.2M arose as a result of the transaction. These have been recognised as part of administrative expenses in the Consolidated Income Statement.

As part of the acquisition agreement, a contingent consideration arrangement exists that requires additional consideration to be paid by the Group to the sellers of Groupe Animedis based on the revenue growth and payroll expenses of Groupe Animedis over a six-year period. The potential undiscounted amount of all future payments that the Group could be required to make under the contingent consideration arrangement is between £Nil and £5.9M. The fair value of the contingent consideration recognised on the acquisition date of 4 February 2022 of £4.1M was estimated by applying the income approach. The measure is based on significant Level 3 inputs not observable in the market. Key assumptions include probability adjusted level of revenues.

The main factors leading to the recognition of goodwill are:

• The presence of certain intangible assets, such as the assembled workforce of the acquired entity, vertical integration and other synergies, which do not qualify for separate recognition.

The goodwill recognised will not be deductible for tax purposes.

Groupe Animedis has contributed £1.9M to Group revenues and £0.3M of loss to Group loss since the acquisition date to 30 September 2022.

Tierklinink Hofheim

On 1 August 2022 the Group acquired 100 % of the voting equity instruments of Tierklinik Hofheim. The principal activity of Tierklinik Hofheim is veterinary services.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows (note that fair value was not used as the measurement basis for assets and liabilities that require a different basis, which includes leases and income taxes):

	Provisional fair value on acquisition £M
Assets and liabilities acquired
Intangible assets	27.8
Property, plant and equipment	1.3
Right-of-use assets	9.4
Inventories	0.3
Payables	(9.7)
Deferred tax liability	(8.4)
Total fair value of identifiable net assets upon acquisition	20.7
Non-controlling interests	-
Fair value of identifiable net assets upon acquisition	20.7
Fair value of consideration paid
Cash consideration	125.7
Contingent consideration	5.2
Total consideration	130.9
Goodwill (see note 16)	110.2
Cash flow analysis:
Cash consideration	125.7
Less: cash and cash equivalent balances acquired	-
Net cash outflow on acquisition	125.7

Acquisition costs of £0.2M arose as a result of the transaction. These have been recognised as part of administrative expenses in the Consolidated Income Statement.

As part of the acquisition agreement, a contingent consideration arrangement exists that requires additional consideration to be paid by the Group to the sellers of Tierklinik Hofheim based on the revenue growth and payroll expenses of Tierklinik Hofheim over a six-year period. The potential undiscounted amount of all future payments that the Group could be required to make under the contingent consideration arrangement is between £Nil and

£12,568,000 The fair value of the contingent consideration recognised on the acquisition date of 1st August 2021 of £5,243,000 was estimated by applying the income approach. The measure is based on significant Level 3 inputs not observable in the market. Key assumptions include probability adjusted level of revenues.

The main factors leading to the recognition of goodwill are:

• The presence of certain intangible assets, such as the assembled workforce of the acquired entity, vertical integration and other synergies, which do not qualify for separate recognition.

The goodwill recognised will not be deductible for tax purposes.

Tierklinik Hofheim has contributed £3.2M to Group revenues and £0.3M of loss to Group loss since the acquisition date to 30 September 2022.

Hospital vet. Pierre-Boucher

On 1 March 2022 the Group acquired 100 % of the voting equity instruments of Hospital vet. Pierre-Boucher. The principal activity of Hospital vet. Pierre-Boucher is veterinary services.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows (note that fair value was not used as the measurement basis for assets and liabilities that require a different basis, which includes leases and income taxes):

	Provisional fair value on acquisition £M
Assets and liabilities acquired
Intangible assets	0.8
Property, plant and equipment	0.4
Right-of-use asset	1.0
Inventories	0.4
Cash and cash equivalents	0.1
Payables	(1.9)
Current tax asset	0.1
Deferred tax liability	(0.2)
Total fair value of identifiable net assets upon acquisition	0.7
Non-controlling interests	-
Fair value of net assets upon acquisition	0.7
Fair value of consideration paid
Cash	37.6
Total consideration transferred	37.6
Goodwill (see note 16)	36.9
Cash flow analysis:
Cash consideration	37.6
Less: cash and cash equivalent balances acquired	(0.1)
Net cash outflow on acquisition	37.5

Acquisition costs of £0.1M arose as a result of the transaction. These have been recognised as part of administrative expenses in the Consolidated Income Statement.

The main factors leading to the recognition of goodwill are

• The presence of certain intangible assets, such as the assembled workforce of the acquired entity, vertical integration and other synergies, which do not qualify for separate recognition.

The goodwill recognised will not be deductible for tax purposes.

Hospital vet. Pierre-Boucher have contributed £4.9M to Group revenues and £0.8M of profit to Group loss since the acquisition date to 30 September 2022.

Lintjeshof Holding B.V.

On 4th March 2022 the Group acquired 100 % of the voting equity instruments of Lintjeshof Holding B.V. The principal activity of Lintjeshof Holding B.V. is veterinary services.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows (note that fair value was not used as the measurement basis for assets and liabilities that require a different basis, which includes leases, contingent liabilities and income taxes):

	Provisional fair value on acquisition £M
Assets and liabilities acquired
Intangible assets	21.1
Trade and other receivables	7.0
Inventories	2.3
Cash and cash equivalents	2.3
Payables	(16.2)
Deferred tax liability	(5.4)
Total fair value of identifiable net assets upon acquisition	11.1
Non-controlling interests	-
Fair value of net assets upon acquisition	11.1
Fair value of consideration paid
Cash	36.1
Contingent consideration	4.5
Total consideration transferred	40.6
Goodwill (see note 16)	29.5
Cash flow analysis:
Cash consideration	36.1
Less: cash and cash equivalent balances acquired	(2.3)
Net cash outflow on acquisition	33.8

Acquisition costs of £0.3M arose as a result of the transaction. These have been recognised as part of administrative expenses in the Consolidated Income Statement.

The main factors leading to the recognition of goodwill are

• The presence of certain intangible assets, such as the assembled workforce of the acquired entity, vertical integration and other synergies, which do not qualify for separate recognition.

The goodwill recognised will not be deductible for tax purposes.

As part of the acquisition agreement, a contingent consideration arrangement exists that requires additional consideration to be paid by the Group to the sellers of Lintjeshof Holding B.V. based on the revenue growth and payroll expenses of Lintjeshof Holding B.V. over a six-year period. The potential undiscounted amount of all future payments that the Group could be required to make under the contingent consideration arrangement is between £Nil and £8,262,000 The fair value of the contingent consideration recognised on the acquisition date of 4 March 2022 of £4,507,000 was estimated by applying the income approach. The measure is based on significant Level 3 inputs not observable in the market. Key assumptions include probability adjusted level of revenues.

Lintjeshof Holding B.V. have contributed £13.3M to Group revenues and £1.6M of profit to Group loss since the acquisition date to 30 September 2022.

Other acquisitions - 2022

The Group acquired 286 other subsidiaries during the year which individually were not material (below £20M consideration) to include the identifiable assets acquired and liabilities assumed separately.

Details of the aggregate fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows (note that fair value was not used as the measurement basis for assets and liabilities that require a different basis, which includes leases, contingent liabilities and income taxes). The below table also includes fair value adjustments to acquired amounts in previous years:

	Provisional fair value on acquisition £M
Assets and liabilities acquired
Intangible assets	155.2
Property, plant and equipment	36.7
Right-of-use asset	80.4
Inventories	5.3
Trade and other receivables	(2.9)
Cash and cash equivalents	17.5
Payables	(103.0)
Current tax liability	(2.7)
Deferred tax liability	(13.8)
Total fair value of identifiable net assets upon acquisition	172.7
Non-controlling interests	(0.0)
Fair value of net assets upon acquisition	172.7
Fair value of consideration paid
Cash	1,065.8
Contingent consideration	82.2
Total consideration transferred	1,148.0
Goodwill (see note 16)	975.3
Cash flow analysis:
Cash consideration	1,065.8
Less: cash and cash equivalent balances acquired	(17.5)
Net cash outflow on acquisition	1,048.3

Acquisition costs of £20.0M arose as a result of these transactions. These have been recognised as part of administrative expenses in the Consolidated Income Statement.

The main factors leading to the recognition of goodwill are

• The presence of certain intangible assets, such as the assembled workforce of the acquired entity, vertical integration and other synergies, which do not qualify for separate recognition.

The goodwill recognised will not be deductible for tax purposes.

Since the acquisition date, other acquisitions have contributed £162.0M to Group revenues and £32.8M of profit/loss to Group loss since the acquisition date to 30 September 2022.

Trade and other receivables for all acquisitions reflect the best estimate of fair value at the acquisition date and represents the gross contractual amounts outstanding. The amounts not expected to be recoverable are not considered material.

30 Related party transactions

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The Company and Group has amounts owing to and from its parent company IVC Acquisition Topco Ltd and IVC Acquisition Pikco Limited. There were no transactions during the respective years in relation to these amounts other than interest on the associated balances which is disclosed in note 11.

During the year Group companies entered into the following transactions with related parties who are not members of the Group.

	Type of transaction	30 September 2022 £M	30 September 2021 £M	30 September 2022 £M	30 September 2021 £M
Other related parties	Purchase of goods	5.2	8.7	0.5	0.4

Transactions with related parties were at arm's length and on 30-day payment terms (30 September 2021 - 30 days).

Purchase of goods transactions were as follows:

Related party relationship	Type of transaction	Transactions 30 September 2022 £M	Transactions 30 September 2021 £M	Outstanding balance 30 September 2022 £M	Outstanding balance 30 September 2021 £M
Subsidiaries of a minority shareholder of the Group which is deemed to have significant influence over the Group	Purchase of goods	5.1	8.4	0.5	0.4
Companies in which directors have significant influence	Provision of services/Purchase of goods	0.1	0.3	0.0	0.0

On 30 September 2022, IVC Acquisition Ltd, a subsidiary of the Company, loaned £1.5M to a Company Director on IVC Acquisition Topco Ltd's behalf. This was used to purchase shares in Islay New Group Holding S.A., which is the ultimate parent entity of the Group. 3,556 class B ordinary shares and 201,124 class B preference shares were purchased. IVC Acquisition Topco Ltd is an intermediate parent company, but outside the Group and so the amount was settled via an intercompany loan. The interest on the loan is at an arms length market based rate. The loan is due on 31 July 2028 or earlier on sale of the Group. The loan will be repaid on proceeds of any share sale and any deficit will be waived by IVC Acquisition Topco Ltd. Loans balances with related parties are unsecured.

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group this has been determined to be the directors the Company. There are no related party transactions with key management personnel other than those disclosed in note 9.

31 Contingent liabilities

The Group is bound by an intra-group cross guarantee in respect of bank debt with other members of the Group headed by one of its UK parent undertakings, IVC Acquisition Limited. The amount guaranteed at 30 September 2022 is £3,616.4M (30 September 2021 - £2,052.7M) and is secured by a debenture over the assets and undertakings of certain companies in the Group.

Certain non-controlling interest shareholders have put options giving them the right, but not the obligation to sell their shares to the Group. The minimum exercise price is guaranteed in certain cases. The Group has also guaranteed loans held by non-controlling interest shareholders taken in order to acquire their minority shares. The total amount of the loans guaranteed by the Group and the minimum value guaranteed at 30 September 2022 is £10.4M (2021 - £0.0M).

Other contingent liabilities in the year consist of £0.9M relating to employee related contingencies. The employee related contingencies relate to legal disputes and claims made by employees. The outcome has been estimated internally, however the amount and timing of settlement remains uncertain as at year end.

Share based payment arrangements were entered into by employees of the Group during the year ended 30 September 2022. A contingent liability exists relating to these share arrangements, as they may have been issued below a fair market value for accounting purposes. A charge between £nil and £3.7M could crystallise upon a future exit event.

32 Events after the reporting date

Interest rate hedging

Following the Board-approved proposal to hedge in October 2022, the group has executed Interest rate hedges to cover its exposure to rising interest rates for EUR, GBP and CAD.

• 75 % of EUR debt is now hedged with a mix of Interest rate swaps and Interest rates caps for a period of 24 months. The Interest rate Swaps executed for a notional amount of €1,057m have resulted in an average fixed interest rate of 3.1061 % plus our margin. The interest rate caps have been executed with a strike rate - or maximum interest rate of 3.25 % spread over 24 months.

• 100 % of GBP debt has been hedged for 18-24 months with a mix of Interest rate swaps and Interest rate caps. The Interest rate swaps executed for a notional of £821m resulting in fixed rate of 4.8559 % plus our margin. The group's RCF GBP debt and 2nd Lien debt has been hedged with interest rate caps with a strike of 5.25 %

• 100 % of IVCE's CAD debt and 29 % of VetStrategy's debt has been hedged with interest rate swaps and Interest rate caps for a period of 18 months. Interest rate swaps executed for a notional of C$212m resulting in a fixed rate 4.628 % plus our margin. $400m of VetStrategy's term debt has been hedged using an interest rate cap with a strike rate - or maximum interest rate of 4.75 %.

Acquisitions

Since the year ended 30 September 2022 up to the date of signing, the Group has entered into agreements to acquire either 100 % of the issued shares of certain other acquisitions or 49 % of the issued shares for acquisitions in France, or the trade and net assets of 22 sites. The aggregate enterprise value of these acquisitions totals £52.6M. There have been no acquisitions over £20M in this period.

Issue of shares

On 18 November 2022, the Company resolved to increase the Company's share capital by an amount of £19,067.45 by issuance of 1,906,745 ordinary shares having a nominal value of GBP 0.01 together with share premium of £11,695,595.55.

33 Immediate and ultimate parent company and controlling party

The company is controlled by Islay New Group Holding S.A., incorporated in Luxembourg.

The largest group in which the results of the entity are consolidated is this set of financial statements. The smallest group in which the results of the entity are consolidated is this set of consolidated financial statements.

34 Notes supporting the cash flow

Cash and cash equivalents for the purposes of the cash flow statement comprises:

	30 September 2022 £M	30 September 2021 £M
Cash at bank and on demand	231.3	186.7

There are no significant amounts of cash and cash equivalents that are held by the Group that are not available to the Group.

Movements in the Groups loans and borrowings and lease liabilities have been analysed below.

	Non-current loans and borrowings £M	Current loans and borrowings £M	Group loans £M	Lease liabilities £M	Total £M
At 1 October 2020	(1,589.7)	-	-	(341.6)	(1,931.3)
Cash flows	(464.0)	-	-	76.5	(387.5)
Non cash flows
Acquired with subsidiary	-	-	-	(46.7)	(46.7)
New leases	-	-	-	(68.3)	(68.3)
Foreign exchange	33.3	-	-	7.3	40.6
Amortisation of debt issue costs	(12.1)	-	-	-	(12.1)
Other movement	-	-	-	(21.6)	(21.6)
At 30 September 2021	(2,032.5)	-	-	(394.4)	(2,426.9)
Cash flows	(1,618.6)	-	-	119.1	(1,499.5)
Non cash flows
Acquired with subsidiary	(802.3)	(15.6)	-	(178.7)	(996.6)
New leases	-	-	-	(96.7)	(96.7)
Foreign exchange	(62.0)	-	-	(5.0)	(67.0)
Amortisation of debt issue costs	(13.6)	-	-	-	(13.6)
Other movement	-	-	8.0	(40.5)	(32.5)
At 30 September 2022	(4,529.0)	(15.6)	8.0	(596.2)	(5,132.8)

Correction of prior year in the statement of cashflows

The correction relates to unrealised exchange difference external borrowing as well as foreign currency translation difference on leases and borrowings with a net value of £10.5M. This adjustment represents non-cash items erroneously included in the financing activities, thereby creating a corresponding erroneous value in operating activities of the statement of cashflows in FY2021. To correct the error, the exchange differences have been reversed from "financing activities" and "operating activities" of the statement of cashflows. There are no changes to net assets and loss in FY2021 as a result of this adjustment. The prior year ended 30 September 2021 has been restated to reflect the above.

	As originally presented at 30 September 2021 £M	Adjustment £M	As restated at 30 September 2021 £M
Exchange gains/losses - operating	9.6	(10.5)	(0.9)
Exchange gains/losses - financing	(10.5)	10.5	-

35 Alternative performance measures

EBITDA is defined as earnings before interest, tax, depreciation and amortisation. Adjusted EBITDA is defined as EBITDA adjusted for exceptional items and also the costs of entering markets with significant regulatory barriers to entry, gains/losses on foreign exchange and changes in fair value of contingent consideration.

Adjusted EBITDA is a non-GAAP measure and is the Group's measure of underlying profitability, which is used by the Board and senior management to measure and monitor the Group's performance.

In determining the adjustments to arrive at the Adjusted result, we use a set of established principles relating to the nature and materiality of individual items or groups of items, excluding, for example, events which are:

(i) outside the normal course of business,

(ii) incurred in a pattern that is unrelated to the trends in the underlying financial performance of our ongoing business or happen infrequently in a timeframe that could not have been foreseen, given the rate of technological, political and market trends in the veterinary sector.

(iii) related to major acquisitions, to ensure that investors' ability to evaluate and analyse the underlying

financial performance of our ongoing business is enhanced.

(iv) When inclusion is considered necessary to explain the underlying performance of the Group and to improve the comparability between periods and/or peers.

Adjusted financial measures merely allow investors to differentiate between different kinds of cost and they should not be used in isolation:

Impairment and write-offs of goodwill, fixed assets and intangible assets, including impairment reversals. These generally arise from business combinations. We adjust for these charges because their pattern of recognition is largely uncorrelated with the underlying performance of the business.

Exceptional items refer to items of income or expense within the consolidated statement of comprehensive income, which are of such size, nature or incidence that their exclusion is considered necessary to explain the performance of the Group and improve the comparability between periods. They are one-off, non-recurring events which the business considers exceptional in nature, therefore relevant to users of the accounts in analysing underlying trading performance. It is noted that these are costs that management considers are of a size, nature or incidence and therefore may not be material in size but in management's view are necessary to exclude in achieving comparability between periods. Exceptional Items, including: post-merger integration costs and transformation programmes; costs arising from corporate reconstruction; one-off charges relating to the Covid-19 pandemic; acquisition consideration deemed to be an employment clause. These can take place over a number of years, given the rapidly-growing scale of our business. We adjust for these charges and provisions because they primarily reflect the financial impact of change to legacy arrangements, rather than the underlying performance of our ongoing business. However, our adjusted results do reflect the benefits of certain of these exceptional initiatives.

Other specified items, principally comprising the change in fair value on contingent consideration, adjustment to lease liability in the current year, the impact of translation of the Group's outstanding loans to year-end FX rates and non-recurring costs such as the costs incurred in entering the new markets, mainly this year from acquiring Veternity and pre year end transaction costs for Vet Strategy, acquired in November 2021 (see note 32). It shouldbe noted that other specified items excluded from our Adjusted results, such as finance charges related to contingent consideration and the impact of translation of the Group's loans to year-end FX rates will recur in future years, and other excluded items such as impairments may recur in the future.

The following table provides a reconciliation of Adjusted EBITDA to IFRS Loss for the year:

	2022 £M	2021 £M
Revenue	2,844.0	1,771.2
Loss for the year	(468.7)	(8.1)
Depreciation	175.4	111.4
Amortisation	79.6	40.4
Impairment of goodwill	416.7	-
Interest expense on lease liabilities, bank borrowings, preference shares and other interest (note 11)	265.0	125.3
Interest income (note 11)	(5.3)	(0.2)
Tax charge / (credit)	50.3	40.4
EBITDA	513.0	309.2
Exceptional items	23.6	20.7
Costs of entering markets with significant regulatory barriers to entry	29.6	5.5
Gain on disposal of subsidiaries	(3.1)	-
Loss/(gain) on foreign exchange	33.1	(3.7)
Fair value of contingent consideration	(66.7)	41.6
Adjusted EBITDA	529.5	372.9
Margin	18.62 %	21.05 %
Growth	42.00 %	76.59 %

Adjusted EBITDA is defined as profit or loss for the period before interest, tax, depreciation and amortisation, adjusted for exceptional items and also the costs of entering markets with significant regulatory barriers to entry, gains/losses on foreign exchange and changes in fair value of contingent consideration.

Exceptional items include the following:

	2022 £M	2021 £M
Merger and integration costs of IVC and Evidensia	-	0.8
Corporate restructure including sale of minority interest and refinancing the Group	28.6	28.4
COVID-19 holiday pay accrual	(3.4)	(3.9)
Rental costs from prior years not previously adjusted according to IFRS 16	-	(14.5)
R&D tax credit (see note 7)	(6.0)	-
Acquisition related employment costs	4.4	9.9
	23.6	20.7

Included within the corporate restructuring costs are accruals for legal costs in relation to ongoing cases, including the CMA investigation and other matters.

Tax impact on exceptional items

Year ended 30 September 2022

The tax credit in respect of exceptional items is £15.1M. This represents a tax impact lower than the standard rate of tax for the Group

Year ended 30 September 2021

The tax credit in respect of exceptional items is £4.1m. This represents a tax impact lower than the standard rate of tax for the Group.

Revenue alternative performance measures

	2022	2021
Revenue Growth	61 %	35 %
LFL Revenue Growth ^*	6.2 %	15.3 %

^* Like for like revenue growth shows revenue generated from like for like operations compared to the prior year adjusted for number of working days. For example, for a practice acquired in April 2021, revenue is included from April 2022 in the like for like calculations for FY22. This shows the underlying growth in revenue across the business, excluding the impact of current year acquisitions and sites closed in the prior and current year.

36 List of companies

Exemption under section 357 of the Companies Act 2014

A subsidiary included in these consolidated financial statements has availed of the exemption from filing its individual financial statements with the Registrar of Companies as permitted by Section 357 of the Companies Act 2014, on the basis that it has satisfied the conditions as laid out in section 357(a) to section 357(h) of the Companies Act 2014.

264 (3) HGB

A subsidiary included in these consolidated financial statements (Cremare Tierkrematorien GmbH) has availed of the exemption from auditing and filing its individual financial statements with the Federal Gazette (Bundesanzeiger) as permitted by Section 264 (3) of the German Commercial Code (HGB), on the basis that it has satisfied the conditions as laid out in section 264 (3) HGB.

Lagebericht der Konzernmutter

Directors' Report for the Year Ended 30 September 2022

The Directors present their Annual Report together with the audited consolidated financial statements for IVC

New TopHolding S.à r.l. (the "Company") and its subsidiaries (the "Group") for the year ended 30 September 2022.

There have been a number of acquisitions in the UK and Europe during the year creating a Group of 2,488 practices as at 30 September 2022 (2021: 1,844).

The results for the year ended 30 September 2022 show turnover of £2,844.0M (2021: £1,771M) and Group adjusted EBITDA (earnings before interest, tax, depreciation, amortisation and exceptional costs) of £529.5M (2021: £372.8M) (see note 35). Loss before tax for the year ended 30 September 2022 was £418.4M (2021: Profit of £32.4M).

Principal activity

The principal activity of the Group is that of the provision of veterinary services in the United Kingdom, Europe and North America.

The principal activity of the Company is that of a non-trading holding company. The Company was established to play a role in funding the Group's acquisition strategy of independent veterinary groups that provide high quality care. A full list of subsidiaries is detailed in note 36. As disclosed in note 2 of page 51, the functional currency of the Company is pounds sterling.

Directors of the Company

The directors, who held office during the year and subsequently were as follows:

EQT Luxembourg Management S.à r.l.

Directors' insurance

The Group maintains insurance policies on behalf of all directors against liability arising from negligence, breach of duty and breach of trust in relation to the Group.

Dividends

The directors do not propose the payment of a dividend in the current year. No dividends were paid either in the current year or prior year.

Political and other donations

During the year, the Group donated £100,000 to the International Red Cross to support their vital humanitarian work in Ukraine. The Group also donated £100,000 to support Vetlife's initiative of developing their online resources library. In the prior year, the Group donated £100,000 to Nowzad.

Our clinic and central teams also provide support for a wide range of charities, both at a national and a local level.

To further support these charity partnerships, in December 2021, we launched the IVC Evidensia Local Community Grants Fund. Each veterinary group, crematorium or central team can apply for a Local Community Grant each year to support a local cause they care about. During the year, we have provided grants totalling £104,000 to 147 charities and non-profit organisations nominated by 107 different teams across eleven countries.

The grants have been well received by our community partners, but have also been well received by our vets, who value the contribution to staff well-being from being supported to undertake this kind of community engagement.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out on pages 2 to 4. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described on pages 42 to 47. In addition, the notes to the consolidated financial statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The Group meets its day-to-day working capital requirements through operating cashflows and its acquisition requirements through senior debt facilities. The Group's forecasts and projections, covering a period of at least 12 months from the approval of these consolidated financial statements, show that the Group should be able to operate within the level of its current debt facilities. After taking account of reasonably possible changes in trading performance, no material uncertainty exists regarding covenant compliance on the existing facilities as described in Note 21.

As part of the going concern assessment, the Group modelled various scenarios to show worsening positions related to a break case scenario, i.e., an increase in cost base large enough to cause a breach of financial covenants.

The increase in cost base required in the break case is so significant that it was considered that the chance of this occurring is extremely unlikely and it is therefore not a reasonably possible scenario. However, even in the event of such cost increase, the Group would still have sufficient cashflows to allow it to service its debt and settle trading liabilities within the going concern period of 15 months.

The directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the annual consolidated financial statements.

Employee engagement

For detail on how the Group engages with employees, refer to the S172 (1) statement on pages 15 to 17 and People pillar in Sustainability report on page 6.

Engagement with suppliers, customers and others

For more detail on how the Group engages with its suppliers and customers, refer to the Section 172 (1) statement on pages 15 to 17.

Energy and carbon reporting

Total UK energy use

Please refer to the Sustainability report on page 6 and s172 (1) statement section of the Strategic Report for more information in this area.

Events after the reporting period

As part of the CMAs routine monitoring of transactions, it has decided to review a small number of our acquisitions in the UK to consider whether they have the potential to raise any competition concerns. The review relates to 8 acquisitions of 19 clinics between September 2021 and March 2022 - The clinics are Penrose Veterinary Group Limited, Kevin Castle (Pet Care) Ltd, Swayne & Partners Ltd, Treforest Veterinary Clinic Ltd (including Treforest and Tonypandy Veterinary Clinics), Mercer & Hughes Limited, Swaffham Veterinary Centre Limited, Anglesey Pet Clinic Ltd, Chiltern Equine Clinic (including Chiltern Veterinary Services Limited & Chiltern Bury Farm Limited). We worked closely with the CMA and engaged constructively with this review.

On 17 Feb 2023 the CMA concluded their review, and published a summary of their decision that the acquisitions raise concerns of lessening competition in their local areas. We are disappointed by the outcome of the CMA's review and do not agree with their decision. However, we believe that what is best for all the clinics and employees involved, is to move as quickly as possible to resolve their ownership and give them certainty around the future, rather than enter into a likely protracted further in-depth review with the CMA. As a result, we have responded to the CMA with undertakings to divest ourselves of the acquisitions.

Acquisitions

Since the year ended 30 September 2022 up to the date of signing, the Group has entered into agreements to acquire 100 % of the issued shares of 6 sites, 49 % of the issued shares for acquisitions in France of 11 sites and the trade and net assets of 6 sites. The aggregate enterprise value of these acquisitions totals £55.8M. There have been no acquisitions over £20M in this period.

Issue of shares

On 18 November 2022, the Company resolved to increase the Company's share capital by an amount of £19,067.45 by issuance of 1,906,745 ordinary shares having a nominal value of GBP 0.01 together with share premium of £11,695,595.55.

Financial risk management objectives and policies

Apart from the Principal Risks summarised above, the Group's risk management policies are established to identify and analyse financial risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. The Group is exposed to credit risk, market risk and liquidity risk from its use of financial instruments. The Group's objective, policies and processes for managing those risks are described in further detail in note 27 to the consolidated financial statements.

Credit risk, foreign currency risk, liquidity risk and interest rate risk

Credit risk

The Group is exposed to credit risk from cash and cash equivalents with banks and financial institutions. The Group has policies in place to ensure that banks used for financing hold an acceptable risk rating by independent parties.

The Group is also exposed to credit risk on its trade receivables. Trade receivables consist of a large number of customers.

Foreign currency risk

There is a risk that significant fluctuations in European and Canadian currencies causes an adverse impact on the Group's profitability or ability to pay key suppliers or lenders. The Group mitigates this risk by having a portion of its debt in Euros and Canadian Dollars, so any weakening of the Euro or Canadian Dollar which leads to lower profitability also leads to reduced debt for the Group.

Liquidity risk

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements.

Interest rate risk

After the year end, the Group put in place interest rate hedges to protect against increases in interest rates. These hedge interest payable on 84.4 % of the outstanding debt at the year end.

• 75 % of EUR debt is now hedged with a mix of interest rate swaps and interest rates caps for a period of 24 months

• 100 % of GBP debt has been hedged for 18-24 months with a mix of interest rate swaps and interest rate caps

• 77.1 % of CAD debt has been hedged with a mix of interest rate swaps and interest rate caps for a period of 18 months

For further details on credit risk, foreign currency risk, liquidity risk and interest rate risk see note 27.

Future developments

For details on future developments see page 3 in the Strategic Report.

Information included in the Strategic Report

Information on Corporate Governance within the Group can be found in the Strategic Report.

Reappointment of auditor

Deloitte Audit Société à responsabilité limitée have expressed their willingness to continue in office as auditor and appropriate arrangements are being made for them to be deemed reappointed as auditor in the absence of an Annual General Meeting.

Approved by the board on 30.06. and signed on its behalf by:

Aiste Ramanauskaite
EQT Luxembourg Management S.à r.l.

Director

Loman Douvier, Manager

On behalf of EQT Luxembourg Management S.à r.l.

Aiste Ramanauskaite

Manager