Announcement PDF RNS Number : 2799H Equipmake Holdings PLC 23 November 2022 Equipmake Holdings PLC ("Equipmake" or the "Company") Results for the year ended 31 May 2022 Equipmake, the UK developer and manufacturer of best-in-class electrification products for the provision of electric vehicle ("EV") drivetrains, globally, is pleased to announce its audited results for the 12-month period ended 31 May 2022 with a revenue performance ahead of initial expectations, reflecting progress in commercialisation in target markets. Financial highlights · Revenue from commercial and production contracts up 51.9% to £2.67m (2021 £1.76m) · Total revenue (inc. grant revenue) up 2.9% to £3.71m (2021 £3.60m) · Post -period end, completed an IPO on the Aquis Access Stock Exchange (AQSE), raising gross proceeds of £10m Operational Highlights · Developed a prototype repowered solution for a double deck bus for London - a retrofit for the iconic TfL Routemaster bus fleet · Developed a fully electric bus chassis for the South American market · Secured a £4.5million multi-year production contract to supply Equipmake's own ASIL-D compliant motor drive inverter, to a leading European electric hyper-car developer · Secured a £2.2 million contract with First York Limited (part of FirstGroup PLC) to retrofit 12 vehicles with Equipmake's full EV powertrain solution; first vehicle due to be delivered in Q4 2022 · Commenced supply of EV drivetrains to Emergency One, the UK's leading manufacturer of fire and rescue vehicles, one of which is being actively marketed to the fire truck market in the USA · Signed non-binding MOUs with PT Vktr Technologi Mobilitas and a large Indian Tier 1 automotive supplier for evaluation of multiple unit EV conversions in local markets · Strengthened the Board with appointments of James Bishop as COO and Steven McGillivray as CFO, and post - period end, Clive Scrivener, Jonathan Beasley, and Dena Bellamy as independent non-executive directors Commenting on the results, Ian Foley, Equipmake CEO, said: "We are pleased with this set of results, which reflects a revenue performance ahead of expectations for the period prior to our IPO on the Aquis Exchange. We were able to shift our revenue mix towards more commercial and production contracts and secured a number of high-profile customers and partnerships. This is an excellent demonstration of our progress in bringing our leading range of EV solutions into our chosen markets, with strong traction and high-quality partners. "With the funds raised at IPO, we have been able to maintain this momentum and invest in the business to ensure Equipmake is in a strong position to deliver on its healthy pipeline for the coming year and beyond. Whilst we continue to be cognisant of the impact of supply chain issues on our ability to meet project timelines, with our expectations for FY 2023 underpinned by work fully contracted and with advanced discussions underway to facilitate the conversion of our significant medium-term pipeline into orders, we move into the remainder of our current financial year with confidence." -ENDS- For further information, please contact: Equipmake Via MHP Ian Foley, Founder and CEO Steven McGillivray, CFO Panmure Gordon (Corporate Adviser & Broker) Tel: +44 (0)20 7886 2500 John Prior / James Sinclair-Ford / Soman Thakran (Corporate Finance) Hugh Rich / Sam Elder (Corporate Broking) MHP (Financial PR Adviser) Tel: +44 (0)20 3128 8100 Tim Rowntree equipmake@mhpgroup.com Eleni Menikou Alan Tovey About Equipmake Equipmake is a UK-based technology company which has developed a range of electrification products for the provision of electric vehicle drivetrains to meet the needs of the automotive, aerospace and other sectors in support of the transition from fossil-fuelled to zero-emission powertrains. Equipmake a leader in ultra-high performance electric motors and complete EV drivetrains and ultra-fast power electronic systems. As well as developing proprietary technology - such as an ultra-compact, lightweight high performance spoke motor - it also offers industry-leading EV consultancy too. Equipmake believes that its vertically integrated solution will enable it to offer more competitive pricing than others, who are integrating bought-in system components, with the benefit of higher margins. Following a number of years of engagement with potential customers, the Company now has a significant pipeline of opportunities, as demand for electric vehicles increases as part of the global decarbonisation movement. Equipmake listed on the Aquis Stock Exchange Growth Market in July 2022 and the £10 million raised is being used to scale up the business to meet its pipeline of opportunities. CEO review Introduction We delivered a strong performance in FY 2022, with revenue ahead of expectations prior to our IPO on the Aqius Access Exchange and a rebalanced revenue mix, as commercial and production contracts revenue rose by 51.9% against FY 2021. This performance was driven by growth in orders and their subsequent conversion to contracts, as the global move towards a zero-emission transport network continues to accelerate. Business Overview We secured several major contracts during the year, including a multi-year production contract to supply our ASIL-D compliant motor drive inverter to a leading European electric hyper-car developer. This is a major milestone for the Company, marking the transition from an R&D phase to production. Delivery commenced in October 2021 and this inverter is now being utilised in one of the fastest accelerating production cars in the world. The Company also started working with a division of FirstGroup, First York Limited, to fully convert 12 Optare Versa buses from an EV Generation one system to Equipmake's Zero Emission Drivetrain. This project, one of a number of similar projects we are exploring, is in line with our strategy to retrofit older, typically diesel or dieselelectric hybrid engine buses, extending lifespans and reducing emissions associated with manufacturing new vehicles. We expect to deliver the first of these vehicles to First York during Q4 2022. We commenced delivery of EV drivetrains for Fire Trucks to Emergency One, the UK's leading manufacturer of fire and rescue vehicles, one of which is being actively marketed by one of the largest suppliers of fire trucks in the USA. In addition, we entered a non-binding Memorandum of Understanding (MoU) with a major Tier 1 Indian supplier to the global automotive industry, to help establish a manufacturing plant in India to manufacture EV powertrains, their sub-systems, and components for passenger buses and/or heavy commercial vehicles utilising Equipmake IP. Whilst the main commercial focus of the Company remains the development of heavy-duty powertrain systems for buses and fire trucks globally, we continue to make progress in other sectors. During the period, the Company announced it had been chosen as a development partner of Gilmour Space of Australia who are developing a low earth orbit satellite launch rocket; a project requiring a high performance (low weight) solution. Equipmake has already achieved the target specification and delivered the first product to Gilmour who have incorporated the Company's cutting-edge motors and inverters to power the rocket fuel pumps. The first prototype units have been delivered and successfully trialled and the first rocket is due to launch in 2023, with production units due to be supplied in 2024. Aerospace projects such as this solidify Equipmake's reputation in the marketplace as a leading developer of highperformance electric drivetrain technology and have led to interest from several other companies in the sector. Ahead of our IPO, we strengthened our board, appointing James Bishop as COO Steven McGillivray as CFO. Clive Scrivener, Jonathan Beasley, and Dena Bellamy also joined as independent non-executive directors, all of whom bring a wealth of experience to the Equipmake board, which is invaluable as we execute our growth strategy. Current Trading On 29th July 2022, Equipmake Holdings PLC was admitted to the Aquis Stock Exchange Growth Market (ticker: EQIP), raising gross proceeds of £10m (before expenses), which are being invested in executing the Company's growth strategy. We are investing in capacity and people to meet the increasing production demand, with work on our proposed additional site extension due to commence in Q1 2023. This will allow us to convert and deliver our substantial medium-term pipeline. As the fundraising was completed after our financial year end, the results here do not reflect the impact of this investment in the business. The business is trading in line with management expectations, with positive momentum maintained into the current financial year. Delivery of contracts secured in the previous financial year is on track, and discussions with new and existing customers regarding projects across both our core bus market and adjacent markets are ongoing. We continue to develop our range of electrification products, investing significantly in R&D through FY22 and into the current year. Post-year end, in collaboration with our South American partner, Agrale, Equipmake successfully launched an electric bus in Argentina featuring the Company's latest-generation zero-emission powertrain. The bus has successfully completed pre-service trials and commenced in-service trials in November 2022. On 18th August 2022, we signed a non-binding MOU with PT Transportasi Jakarta and PT Vktr Teknologi Mobilitas for an implementation plan for an electric bus retrofit trial in Jakarta, Indonesia. This underlines progress made in respect of bus opportunities in Indonesia, with our strong local partnerships ensuring Equipmake is well placed to capitalise on these. Development of the first trial vehicle is underway, with trials in Jakarta expected to start in Q2 2023. With support from Transport for London (TfL), Equipmake recently showcased an all-electric repower of the Iconic London Routemaster bus at the main industry bus show, Euro Bus Expo in November 2022, commencing preservice trials with Metroline immediately following this. The bus, which features a 400kWh battery (with an expected in-service range of 150 miles), will complete in-service trials over a six-month period and will provide valuable test data as TfL continues to evaluate a range of clean technologies, including state-of-the-art repower systems such as Equipmake's Zero Emission Drivetrain. Outlook The successes detailed above have been achieved in a challenging environment for the industry, with electronic component shortages causing supply risk and inflationary pressures. Our vertically integrated model, which means that we are the design authority for most of our systems, has provided resilience to these challenges, enabling us to navigate difficulties and maintain supply whilst controlling costs. While we remain mindful of challenges, we are encouraged by the level of demand and interest in both our core bus markets and the adjacent markets we are exploring. Equipmake continues to be well-positioned in these highly favourable markets, with strong EV market growth expected in line with the ongoing global decarbonisation movement. As outlined at the time of the IPO, we remain fully committed to growing the business and to that end, are focused on investing in the following areas: · Capital and operational expenditure to establish a manufacturing facility, providing the capacity to deliver up to 250 vehicles per year · Securing additional in-house expertise and aligning operational resource and processes to facilitate the scaling up process · Ongoing training of our workforce to ensure we remain at the forefront of the industry · Securing long-term resilient supply chain relationships for key components Whilst we continue to be cognisant of the impact of supply chain issues on our ability to meet project timelines, with our expectations for FY 2023 underpinned by work fully contracted and with advanced discussions underway to facilitate the conversion of our significant medium-term pipeline into orders, we move into the remainder of our current financial year with confidence. Ian Foley Chief Executive Officer CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MAY 2022 As restated 2022 2021 £ £ 3,706,785 3,603,568 Cost of sales (6,087,868) (4,640,103) Gross loss (2,381,083) (1,036,535) Administrative expenses (1,919,378) (1,032,513) Note Turnover 4 Other operating income 5 565,132 495,143 Share based payment charge 28 (574,227) - Fair value adjustment ‑ convertible loan note 23 (750,000) - Operating loss 6 (5,059,556) (1,573,905) Interest receivable and similar income 10 (1,182) 3,534 Interest payable and similar expenses 11 (144,994) (22,727) (5,205,732) (1,593,098) (104,499) (82,839) Loss for the financial year (5,310,231) (1,675,937) Total comprehensive income for the year (5,310,231) (1,675,937) (692,772) (418,976) (4,617,459) (1,256,961) Loss before taxation Tax on loss 12 (Loss) for the year attributable to: Non‑controlling interests Owners of the parent Company Basic loss per share in pence (5,310,231) (1,675,937) (22.6) (60.0) 26 CONSOLIDATED BALANCE SHEET AS AT 31 MAY 2022 As restated 2022 2021 Note £ £ 15 527,139 612,560 527,139 612,560 Fixed assets Tangible assets Current assets Stocks 17 807,973 44,447 Debtors: amounts falling due within one year 18 1,920,728 1,384,768 Cash at bank and in hand 19 1,876,083 3,841,299 4,604,784 5,270,514 (5,794,645) (1,277,149) (1,189,861) 3,993,365 (662,722) 4,605,925 21 (307,169) (455,099) 24 (44,057) - (44,057) - (1,013,948) 4,150,826 Creditors: amounts falling due within one year 20 Net current (liabilities)/assets Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities Other provisions Net (liabilities)/assets Capital and reserves Called up share capital 25 50,000 2 Other reserves 27 5,748,311 5,835,579 Profit and loss account 27 (7,386,486) (2,987,394) Share-based payments reserve 27 574,227 - Equity attributable to owners of the parent Company (1,013,948) 2,848,187 - 1,302,639 (1,013,948) 4,150,826 Non‑controlling interests The financial statements were approved and authorised for issue by the board and were signed on its behalf on 22 November 2022 Ian Foley Chief Executive Officer COMPANY BALANCE SHEET AS AT 31 MAY 2022 As restated 2022 2021 Note £ £ 16 6,458,087 82 6,458,087 82 Fixed assets Investments Current assets Debtors: amounts falling due within one year 18 1,269,386 99,264 Cash at bank and in hand 19 1,737,118 337,206 3,006,504 436,470 (3,859,315) - Net current (liabilities)/assets (852,811) 436,470 Total assets less current liabilities 5,602,276 436,552 Net assets 5,602,276 436,552 Creditors: amounts falling due within one year 20 Capital and reserves Called up share capital 25 50,000 2 Other reserves 27 4,962,502 - Merger relief reserve 27 849,982 Profit and loss account 27 (831,435) 436,550 Share-based payments reserve 27 574,227 - 5,605,276 436,552 As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company's loss for the year was £876,485 (2021: £34). The financial statements were approved and authorised for issue by the board and were signed on its behalf on 22 November 2022 Ian Foley Chief Executive Officer CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MAY 2022 Called up Other Profit and Share- Equity Non‑controlling Total share capital reserves loss account based payments reserve attributable to owners of parent Company interests equity £ £ £ £ £ £ £ At 1 June 2021 (as previously stated) 2 5,835,579 (1,203,929) - 4,631,652 1,398,394 6,030,046 Prior year adjustment (note 29) - - (1,783,465) - (1,783,465) (95,755) (1,879,220) At 1 June 2021 (as restated) 2 5,835,579 (2,987,394) - 2,848,187 1,302,639 4,150,826 Loss for the year - - (4,617,459) - (4,617,459) (692,772) (5,310,231) Total comprehensive income for the year - - (4,617,459) - (4,617,459) (692,772) (5,310,231) Reclassify noncontrolling interest following share-forshare exchange - - 609,867 - 609,867 (609,867) - Dividends: Equity capital - - (395,000) - (395,000) - (395,000) Share-based payments movement - - - 574,227 574,227 - 574,227 Share‑for‑share exchange 16,000 (49,770) - - (33,770) - (33,770) Issue of B shares 5,000,000 (5,000,000) - - - - - Cancellation of B shares (5,000,000) 5,000,000 - - - - - Purchase of own shares (3,500) - 3,500 - - - - Bonus issue of shares 37,498 (37,498) - - - - - 49,998 (87,268) 218,367 574,227 145,457 - 145,457 50,000 5,748,311 (7,386,486) 574,227 (1,013,948) - (1,013,948) Comprehensive income for the year Total transactions with owners At 31 May 2022 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MAY 2021 Called up share capital Other reserves Profit and loss account Equity attributable to owners of parent Company Non‑controlling interests Total equity £ £ £ £ £ £ At 1 June 2020 (as previously stated) 2 5,835,579 188,616 6,024,197 1,862,565 7,886,762 Prior year adjustment (note 29) - - (1,919,050) (1,919,050) (140,950) (2,060,000) At 1 June 2020 (as restated) 2 5,835,579 (1,730,434) 4,105,147 1,721,615 5,826,762 Loss for the year - - (1,256,960) (1,256,960) (418,976) (1,675,936) At 31 May 2021 2 5,835,579 (2,987,394) 2,848,187 1,302,639 4,150,826 Comprehensive income for the year COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MAY 2022 Called up share capital Other reserves Merger relief reserve Profit and loss account Sharebased payments reserve Total equity £ £ £ £ £ £ 2 - - 436,584 - 436,586 Loss for the year - - - (34) - (34) At 1 June 2021 2 - - 436,550 - 436,552 - - - (876,485) - (876,485) Dividends: Equity capital - - - (395,000) - (395,000) Share-based payments charge - - - - 574,227 574,227 16,000 5,849,982 - - 5,865,982 Issue of B shares 5,000,000 (5,000,000) - - - Cancellation of B shares (5,000,000) - - - - At 1 June 2020 Comprehensive income for the year Comprehensive income for the year Loss for the year Contributions by and distributions to owners Share‑for‑share exchange 5,000,000 Purchase of own shares (3,500) - - 3,500 Bonus issue of shares 37,498 (37,498) - - Total transactions with owners 49,998 4,962,502 849,982 (1,267,985) At 31 May 2022 50,000 4,962,502 849,982 (831,435) - - 574,227 574,227 5,168,724 5,605,276 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MAY 2022 2022 2021 £ £ (5,310,231) (1,675,937) 220,668 265,858 - 25,268 144,994 22,727 1,182 (3,534) RDEC Taxation credit (net) (445,496) (353,149) (Increase) in stocks (763,526) (44,447) (Increase)/decrease in debtors (443,613) 73,218 Increase in creditors 598,558 738,546 Increase in provisions 44,057 - Corporation tax received 353,149 239,451 Share‑based payments charge 574,227 - Fair value losses ‑ convertible loan 750,000 - Stamp duty paid on share‑for‑share exchange (33,770) - Net cash generated from operating activities (4,309,801) (711,999) (135,248) (452,491) - 3,534 Cash flows from operating activities Loss for the financial year Adjustments for: Depreciation of tangible assets Loss on disposal of tangible assets Interest paid Interest received Cash flows from investing activities Purchase of tangible fixed assets Interest received Net cash from investing activities (135,248) (448,957) Cash flows from financing activities New finance leases and hire purchase contracts - 289,350 Repayment of obligations under finance leases and hire purchase contracts (89,488) (64,440) Dividends paid (395,000) - Interest paid (35,679) (22,727) New convertible loan 3,000,000 - Net cash used in financing activities 2,479,833 202,183 Net (decrease) in cash and cash equivalents (1,965,216) (958,773) Cash and cash equivalents at beginning of year 3,841,299 4,800,072 Cash and cash equivalents at the end of year 1,876,083 3,841,299 1,876,083 3,841,299 1,876,083 3,841,299 Cash and cash equivalents at the end of year comprise: Cash at bank and in hand CONSOLIDATED ANALYSIS OF NET DEBT FOR THE YEAR ENDED 31 MAY 2022 At 1 June 2021 Cash flows Payments made in year Fair value adjustments At 31 May 2022 £ £ £ £ £ Cash at bank and in hand 3,841,299 (1,965,216) - - 1,876,083 Finance leases (534,168) - 89,487 - (444,681) - (3,000,000) (750,000) (3,750,000) 3,307,131 (4,965,216) (750,000) (2,318,598) Convertible loan notes 89,487 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MAY 2022 1. General information Equipmake (Holdings) Plc is a public company limited by shares incorporated in England and Wales. The company registration number is 04303233. The registered office is Unit 7, Snetterton Business Park,Snetterton, Norfolk, NR16 2JU. The group consists of the parent Equipmake (Holdings) Limited and subsidiary Equipmake Limited. All group entities are included within the consolidation These financial statements are presented in sterling which is the functional currency of the entity and are rounded to the nearest £1. 2. Accounting policies 2.1 Basis of preparation of financial statements The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006. The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3). The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The following principal accounting policies have been applied: 2.2 Basis of consolidation The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance Sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. During the year, the company has acquired the remaining 25% shareholding in Equipmake Limited. Under FRS102 and Business Combinations, the company has applied fair value accounting for this acquisition, which has led to an uplift in valuation of £5,849,982. In accordance with the transitional exemption available in FRS 102, the group has chosen not to retrospectively apply the standard to business combinations that occurred before the date of transition to FRS 102, being 01 June 2016. 2.3 Going concern At the time of approving the financial statements, the directors have a reasonable expectation that the company and group has adequate resources to continue in operational existence for the foreseeable future. Thus, the directors continue to adopt the going concern basis of accounting in preparing the financial statements. The Directors have prepared detailed forecasts, models and cash flows (which cover a period in excess of 12 months from the date of approval of these financial statements), in order to support the going concern assumption for which these accounts are prepared. Although the Group has experienced a loss in the year, this is as expected due to the Group being in the development phase for a significant portion of its product line. The Group has previously received investment and government grants to support the development phase of operations. Post year‑end, the Company raised £10m of gross funding via an IPO on the Aquis Access Stock Exchange. This listing provides the Group with sufficient funds to meet the financial requirements of its growth plan for a period in excess that required for the going concern assumption. The Group will carefully monitor cash spend over the course of the ensuing year to ensure that it has sufficient funding as it moves into the production phase. The Directors believe that due to the ongoing development of the Group's products and its considerable pipeline of opportunities, they remain a going concern and therefore confirm that it is appropriate to prepare the accounts on a going concern basis As a result the directors believe that the company and group will be able to continue to meet its liabilities as they fall due for a period of at least twelve months from the date of approval of the financial statements. Consequently the financial statements have been prepared on a going concern basis. 2.4 Foreign currency translation Functional and presentation currency The Company's functional and presentational currency is GBP. Transactions and balances Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions. At each period end foreign currency monetary items are translated using the closing rate. Non‑monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non‑monetary items measured at fair value are measured using the exchange rate when fair value was determined. 2.5 Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding trade discounts, and net of VAT. Revenue is recognised on delivery of those goods and services or in the period in which related costs are incurred. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue from contracts for the provision of services is recognised by reference to the stage of completion when the stage of completion, costs incurred and costs to complete can be estimated reliably. The stage of completion is calculated by comparing costs incurred, mainly in relation to contractual hourly staff rates and materials, as a proportion of total costs. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that it is probable will be recovered. 2.6 Operating leases: the Group as lessee Rentals paid under operating leases are charged to profit or loss on a straight‑line basis over the lease term. Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight‑line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset. 2.7 Research and development In the research phase of an internal project it is not possible to demonstrate that the project will generate future economic benefits and hence all expenditure on research shall be recognised as an expense when it is incurred. Expenditure on internally generated development is recognised as an expense when incurred. If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only. No development costs are currently capitalised. 2.8 Government grants Grants are accounted under the accruals model as permitted by FRS 102. Grants relating to expenditure on tangible fixed assets are credited to profit or loss as other income at the same rate as the depreciation on the assets to which the grant relates. The deferred element of grants is included in creditors as deferred income. Grants of a revenue nature are recognised in the Consolidated Statement of Comprehensive Income within turnover in the same period as the related expenditure, which is recognised in cost of sales. These grants relate to the primary function of the business and facilitate the delivery of the Group's primary purpose. Other grants are shown within other operating income. 2.9 Interest income Interest income is recognised in profit or loss using the effective interest method. 2.10 Finance costs Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument. 2.11 Pensions Defined contribution pension plan The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations. The contributions are recognised as