For the 12 months ended 31 March 2023

NOTES TO THE FINANCIAL INFORMATION

1.   Basis of preparation

This financial information has been prepared and approved by the Directors in accordance with UK adopted International Accounting Standards ("UK adopted IFRS").

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2023 or 2022 but is derived from those accounts. Statutory accounts for 2022 have been delivered to the Registrar of Companies and those for 2023 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts; the report was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or (3) Companies Act 2006.

During the year, the Group made the decision to close its German business which has been treated and presented as a discontinued operation in the year ended 31 March 2023 which includes restating comparatives (see note 12).

Certain financial data have been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data.

Adoption of new and revised standards

The accounting policies set out in Note 3 of the Group financial statements have been applied in preparing this financial information.

New accounting standards in issue but not yet effective

New standards and interpretations that are in issue but not yet effective are listed below:

•    IFRS 17 Insurance Contracts, Amendments to IFRS 17 and Initial Application of IFRS 17 and IFRS 9 - Comparative Information (effective date 1 January 2023).

•    Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current (effective date to be confirmed).

•    Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to introduce a new definition for accounting estimates (effective date 1 January 2023).

•    Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statements 2 Making Materiality Judgements (effective date 1 January 2023).

•    Amendments to IAS 12 Income Taxes - Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (effective date 1 January 2023).

The Group continues to monitor the potential impact of other new standards and interpretations which may be endorsed and require adoption by the Group in future reporting periods. The Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable, will have a significant impact on the financial statements.

Going concern

Notwithstanding net current liabilities of £47.9 m as at 31 March 2023 and a cash outflow of £0.3m in the year ended 31 March 2023, the financial statements have been prepared on a going concern basis which the Directors consider to be appropriate for the following reasons:

The Group meets its day-to-day working capital requirements from its cash balances and the availability of its £80m revolving credit facility (which was renewed in April 2023 to now expire in April 2026). At 30 June 2023 total liquidity amounted to £62.8m.

The Directors have prepared base and sensitised cash flow forecasts for the Group covering the period to 31 March 2025 ("the going concern period") which indicate that the Group will remain compliant with its covenants and will have sufficient funds through its existing cash balances and availability of funds from its revolving credit facility to meet its liabilities as they fall due for that period. The forecasts take account of current trading, management's view on future performance and their assessment of the impact of market uncertainty and volatility.

In assessing the going concern basis, the Directors have taken into account severe but plausible downsides to sensitise its base case and have also run these in combination. These primarily include:

•    Negative growth in FY24 and in the subsequent periods to account for how the overall electrical online market could be impacted by the continuing macro-economic factors such as inflation, consumer confidence, interest rate increases;

•    Changes in margin including the impact of any changes in the Group's policy with regard to charging;

•    The impact of a change in product protection plan cancellations as a result of a macroeconomic event e.g., continued interest rate increases, utilising data seen where other events have happened (e.g., Covid outbreak, initial cost of living crisis); and

•    Changes in other revenue including the impact of a reduction in logistics third-party income.

Under these severe but plausible downside scenarios the Group continues to demonstrate headroom on its banking facilities and remains compliant with its quarterly covenants which are  interest cover (Adjusted EBITDA being at least 4x net finance costs) and leverage (Net debt to be no more than 2.5x EBITDA). The likelihood of a breach of covenants is considered remote and hence headroom against its covenants has not been disclosed.

In addition, the Directors have considered mitigating actions including limiting discretionary spend and managing working capital should there be any pressure on headroom. These would provide additional headroom but have not been built into the going concern forecast. Consequently, the Directors are confident that the Group and Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis.

Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are set out in Note 3 of the Group financial statements, the Directors are required to make judgements, 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 and are reviewed on an ongoing basis.

Actual results could differ from these estimates and any subsequent changes are accounted for with an effect on income at the time such updated information becomes available.

Accounting standards require the Directors to disclose those areas of critical accounting judgement and key sources of estimation uncertainty that carry a significant risk of causing material adjustment to the carrying value of assets and liabilities within the next 12 months.  

As a result of macro-economic factors in recent years, the Directors consider that the revenue recognition in respect of commission for product protection plans and network connections include significant areas of accounting estimation. The Directors have applied the variable consideration guidance in IFRS 15 and as a result of revenue restrictions do not believe there is a significant risk of a material downward adjustment. Revenue has been restricted to ensure that it is only recognised when it is highly probable and therefore subsequently, there could be a material reversal of restrictions.

The information below sets out the estimates and judgements used in recognising revenue in these two areas.

Revenue recognition and recoverability of income from product protection plans

Revenue recognised in respect of commissions receivable over the lifetime of the plan for the sale of product protection plans is recognised in line with the principles of IFRS 15, when the Group obtains the right to consideration as a result of performance of its contractual obligations (acting as an agent for a third party).

Revenue in any one year therefore represents an estimate of the commission due on the plans sold, which management estimate reliably based upon a number of key inputs, including:

•    the contractual agreed margins;

•    the number of live plans;

•    the discount rate;

•    the estimated length of the plan;

•    the estimated historic rate of attrition; and

•    the estimated overall performance of the scheme.

Commission receivable also depends for certain transactions on customer behaviour after the point of sale. Assumptions are therefore required, particularly in relation to levels of customer attrition within the contract period, expected levels of customer spend, and customer behaviour beyond the initial contract period. Such assumptions are based on extensive historical evidence, and adjustment to the amount of revenue recognised is made for the risk of potential changes in customer behaviour, but they are nonetheless inherently uncertain e.g., changes seen in FY21 as a result of Covid-19.

Reliance on historical data assumes that current and future experience will follow past trends. The Directors believe that the quantity and quality of historical data available provides an appropriate proxy for current and future trends. Any information about future market trends, or economic conditions that we believe suggests historical experience would need to be adjusted, is taken into account when finalising our assumptions each year. Our experience over the last decade, which has been a turbulent period for the UK economy as a whole, is that variations in economic conditions have not had a material impact on consumer behaviour and, therefore, no adjustment to commissions is made for future market trends and economic conditions.

In assessing how consistent our observations have been, we compare cash received in a period versus the forecast expectation for that period as we believe this is the most appropriate check on revenue recognised. Small variations in this measure support the assumptions made.

For plans sold prior to 1 December 2016, the commission rates receivable are based on pre-determined rates. For plans sold after that date, base-assumed commissions will continue to be earned on pre-determined rates but overall commissions now include a variable element based on the future overall performance of the scheme.

Changes in estimates recognised as an increase or decrease to revenue may be made, where for example, more reliable information is available, and any such changes are required to be recognised in the income statement. During the year, management have refined estimations in relation to plan cancellations which has resulted in a £1.7m reversal of previously recognised revenue.  As with all years, other small refinements have been made but have had an immaterial impact on the revenue recognised.

The commission receivable balance as at 31 March 2023 was £93.1m (2022: £90.7m). The rate used to discount the revenue for the FY23 cohort is 5.45% (2022: 3.54%). The weighted average of discount rates used in the years prior to FY23 was 3.91% (2022: 4.12%).

Revenue recognition and recoverability of income in relation to network commissions

Revenue in respect of commissions receivable from the Mobile Network Operators ("MNOs") for the brokerage of network contracts is recognised in line with the principles of IFRS 15, when the Group obtains the right to consideration as a result of performance of its contractual obligations (acting as an agent for a third party).

Revenue in any one year therefore represents an estimate of the commission due on the contracts sold, which management estimates reliably based upon a number of key inputs, including:

•    The contractually agreed revenue share percentage - the percentage of the consumer's spend (to MNOs) to which the Group is entitled;

•    The discount rate using external market data (including risk free rate and counter party credit risk) 2.86% (2022: 0.53%);

•    The length of contract entered into by the consumer (12 - 24 months) and the resulting estimated consumer average tenure which takes account of both the default rate during the contract period and the expectations that some customers will continue beyond the initial contract period and generate out of contract ("OOC") revenue (c2%).

The commission receivable on mobile phone connections can therefore depend on customer behaviour after the point of sale. The revenue recognised and associated receivable in the month of connection is estimated based on all future cash flows that will be received from the MNO and these are discounted based on the timing of receipt. This also takes into account the potential clawback of commission by the MNOs and any additional churn expected as a result of recent price increases announced and applied by the MNOs, for which a reduction to revenue is made based on historical experience.

The Directors consider that the quality and quantity of the data available from the MNOs is appropriate for making these estimates and, as the contracts are primarily for 24 months, the period over which the amounts are estimated is relatively short. As with commissions recognised on the sale of product protection plans, the Directors compare the cash received to the initial amount recognised in assessing the appropriateness of the assumptions used.

Changes in estimates recognised as an increase or decrease to revenue may be made where, for example, more reliable information is available, and any such changes are required to be recognised in the income statement. During the year, management have refined the estimations in relation to the assumed collection of commissions once customers reach out-of-contract periods. This has resulted in a restriction of revenue in FY23, compared to the prior methodology, of £2.9m. In addition, as a result of the increase in commission rates driven by the significant increase in inflation, previously restricted revenue of £4.4m has been recognised in FY23.

Other small refinements have been made which have had an immaterial impact on the revenue recognised. The total revenue restricted at 31 March 2023 is £8.7m.

The commission receivable balance as at 31 March 2023 was £81.3m (2022: £83.4m). The rate used to discount the current year revenue is 2.83% (2022: 0.53%).

Impairment of intangible assets and goodwill

As part of the acquisition of Mobile Phones Direct Limited in 2018, the Group recognised amounts totalling £16.3m in relation to the valuation of the intangible assets and £14.7m in relation to residual goodwill. At 31 March 2023 these amounted to £23.5m.

Intangible assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is reviewed for impairment on an annual basis. When a review for impairment is conducted, the recoverable amount is determined based on the higher of value in use and fair value less costs to sell. The value in use method requires the Group to determine appropriate assumptions (which are sources of estimation uncertainty) in relation to the cash flow projections over the three-year strategic plan period and the long-term growth rate to be applied beyond this three-year period.

Whilst at 31 March 2023 the Directors have concluded that the carrying value of the intangibles and goodwill is appropriate, significant changes in any of these assumptions, which could be driven by the end customer behaviour with the Mobile Network Operators, could give rise to an impairment in the carrying value.

Recoverability of deferred tax asset

At 31 March 2023, the Group has UK tax losses of £26.1m and accordingly has recognised a deferred tax asset of £6.5m in respect of these losses.

In recognising the asset, management have taken account of the historic profitability of the UK business together with its forecasts (utilising the same information as in the going concern and viability statement). In recent years, other than FY22, the UK business has been profitable. The unprecedented circumstances which affected the post Covid trading period had been the prime reason for the result in FY22. Since then, and following the closure of the German business, the Group has changed its strategy to focus on profit and cash generation. The results in the second half of FY23 reflect the measures taken to reduce costs and improve margin despite the ongoing impacts of the cost of living squeeze and difficult macro-economic conditions which have restricted growth. The business therefore expects this profitability to continue in the future and therefore has assessed that utilising the losses is probable and as such the asset has been recognised.

Management acknowledge that the economic environment is providing a difficult backdrop on which to forecast but believes that its forecasts reflect the impact of the current challenges. However, as a consequence of the significance of the asset, this is disclosed as an area of accounting judgement.

2.   Revenue

The table below shows the Group's revenue by major business area. All revenue is accounted for at a point in time as the Group has satisfied its performance obligations on the sale of its products/ services.

3.   Segmental analysis

In the periods prior to the current period, the Group had two reportable segments; online retailing of domestic appliances and ancillary services to customers in the UK, and online retailing of domestic appliances and ancillary services to customers in Germany. Following the decision in June 2022 to close the German operations (which are now treated as discontinued (see note 12)), the UK operation is now the only reportable segment.

Operating segments are determined by the internal reporting regularly provided to the Group's Chief Operating Decision Maker. The Chief Operating Decision Maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Directors and has determined that the UK operations now form three reportable segments after considering the threshold guidance in IFRS 8, being retail, logistics and recycling.

However, having consideration for the economic characteristics of each of these segments including the nature of products and services, the type of customer and methods used to distribute product, the Chief Operating Decision Maker has concluded that the majority of the Group's business is retail related and has determined it is appropriate to aggregate these segments into one reportable segment.

4.   Finance income

5.   Finance costs

6.   Taxation

The expected corporation tax charge for the year is calculated at the UK corporation tax rate of 19% (2022: 19%) on the profit/ (loss) before tax for the year.

The charge/ (credit) for the year can be reconciled to the profit/ (loss) in the statement of comprehensive income as follows:

An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. The impact of the rate change is reflected in the deferred tax asset as at 31 March 2023.

The Group have offset a proportion of its German losses against profits arising within the UK continuing operations, in the relevant overlapping period, through its registered branch structure in Germany.

7.   Earnings/ (loss) per share

The calculation of the basic and diluted earnings/ (loss) per share is based on the following data:

In the prior year, the diluted loss per share has been restricted to the basic loss per share to prevent having an anti-dilutive effect.

8.   Goodwill

Goodwill relates to purchase of Expert Logistics Limited, the purchase by DRL Holdings Limited (now AO World PLC) of DRL Limited (now AO Retail Limited), the acquisition of AO Recycling Limited (formerly The Recycling Group Limited) and the acquisition of Mobile Phones Direct Limited (now AO Mobile Limited) by AO Limited.

Impairment of goodwill

UK CGU - £13.5m

At 31 March 2023, goodwill acquired through UK business combinations (excluding Mobile Phones Direct Limited) was allocated to the UK cash-generating unit ("CGU") which is part of the UK operating segment.

This represents the lowest level within the Group at which goodwill is monitored for internal management purposes.

The Group performed its annual impairment test as at 31 March 2023. The recoverable amount of the CGU has been determined based on the value in use calculations. The Group prepares cash flow forecasts derived from the most recent financial budget and financial plan for three years. The final year cash flow is used to calculate a terminal value and is based on an estimated growth rate of 1%. This rate does not exceed the average long term growth rate for the market.

Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to this CGU. In arriving at the appropriate discount rate to use, we adjust the CGU's post-tax weighted average cost of capital to reflect the impact of risks and tax effects specific to the cash flows. The weighted average pre-tax discount rate we used was approximately 13.1% (2022: 9.7%).

The key assumptions, which take account of historic trends, upon which management has based their cash flow projections are sales growth rates, selling prices and product margin.

Management do not believe that any reasonable possible sensitivity would result in any impairment to this goodwill.

Mobile Phones Direct Limited - £14.7m

The Group has assessed the goodwill arising on the acquisition of Mobile Phones Direct Limited ("MPD") in December 2018. This was performed based on a value in use calculation in the same way as for the UK business noted previously, but using a pre- tax weighted average cost of capital appropriate for MPD as a standalone business of 19.2% (2022: 14.8%).

The total recoverable amount for this CGU group is greater than its carrying value by £11.9m in management's base case.

The main assumptions underlying the value in use calculation is revenue where growth is forecast at c3% per annum and EBITDA margin, which has been impacted by higher levels of inflation for recent cohorts, and is assumed to be c5%.

The Directors have performed sensitivity analysis on the numbers included in the three-year strategic plan for the business in assessing the value in use. The final year cash flow is used to calculate a terminal value and includes an estimated long term growth rate of 3% per annum which does not exceed the average long term growth rate for the market. Management believes that the key assumptions are revenue and EBITDA margin. If there was no revenue growth post FY26 (i.e. the period beyond the three-year strategic plan), then this would have an impact of (£6.9m) on the amount of headroom.

The sensitivities analysed demonstrate that it would require a total reduction in revenue over the three year strategic plan of £68.8m (c15% of total revenue over the three years), or a total reduction in EBITDA over the three year strategic plan of £4.2m (c19% of total EBITDA over the three years) with, in both cases, a continued reduction into perpetuity to eliminate the headroom on the recoverable amount. This is without considering any mitigating actions.

Management believes that based on the range of possible outcomes noted above and given the value in use is significantly higher than the carrying value, there is no current impairment.

9.    Trade and other receivables

The trade and other receivables are classified as:

All of the amounts classified as non-current assets relate to contract assets.

Contract assets

Contract assets represent the expected future commissions receivable in respect of product protection plans and mobile phone connections. The Group recognises revenue in relation to these plans and connections when it obtains the right to consideration as a result of performance of its contractual obligations (acting as an agent for a third party). Revenue in any one year therefore represents the estimate of the commission due on the plans sold or connections made.

The reconciliation of opening and closing balances for contract assets is shown below:

* Revenue recognised is gross, that is, excluding the deduction of cashback payments, which are deducted from revenue in the Income statement but are shown as contract liabilities in the Statement of Financial Position.

Included in the contract asset balance in relation to product protection plans at 31 March 2022 was an amount of £1.7m in relation to variable consideration recognised as revenue up to that date which has reversed in the year ended 31 March 2023. This is included in the revisions to estimates above.

Included in the contract asset balance in relation to Network Commissions at 31 March 2022 was an amount of £4.4m in relation to previously constrained revenue which has now been recognised in the year ended 31 March 2023. This is included in the revisions to estimates above.

The Group still recognises that there is inherent risk in the amount of revenue recognised as it is dependent on future customer behaviour which is outside of the Group's control and therefore at 31 March 2023 an amount of £8.7m has been constrained in relation to revenue recognised in relation to Network commissions.

Product protection plans

Under our arrangement with Domestic & General ("D&G"), the Group receives commission in relation to its role as agent for introducing its customers to D&G and recognises revenue at the point of sale as it has no future obligations following this introduction. A discounted cash flow methodology is used to measure the estimated value of the revenue and contract assets in the month of sale of the relevant plan, by estimating all future cash flows that will be received from D&G and discounting these based on the expected timing of receipt. Subsequently, the contract asset is measured at the present value of the estimated future cash flows. The key inputs into the model which forms the base case for management's considerations are:

·      the contractually agreed margins, which differ for each individual product covered by the plan as is included in the agreement with D&G;

·      the number of live plans based on information provided by D&G;

·      the discount rate for plans sold in the year using external market data - 5.45% (2022: 3.54%);

·      the estimate of profit share relating to the scheme as a whole based on information provided by D&G;

·      historic rate of customer attrition that uses actual cancellation data for each month for the previous 8 years to form an estimate of the cancellation rates to use by month going forward (range of 0% to 9.0% weighted average cancellation by month); and

·      the estimated length of the plan based on historical data plus external assessments of the potential life of products (5 to 16 years).

The last two inputs are estimated based on extensive historical evidence obtained from our own records and from D&G. The Group has accumulated historical empirical data over the last 14 years from c.3.1m plans that have been sold. Of these, c.1.08m are live. Applying all the information above, management calculates their initial estimate of commission receivable. Consideration is then given to other factors outside of the historical data noted above that could impact the valuation. This primarily considers the reliance on historical data as this assumes that current and future experience will follow past trends. There is, therefore, a risk that changes in consumer behaviour could reduce or increase the total cash flows ultimately realised over the forecast period. Management makes a regular assessment of the data and assumptions with a detailed review at half year and full year to ensure this continues to reflect the best estimate of expected future trends. As set out in Note 1, the Directors do not believe there is a significant risk of a downward material adjustment to the revenue recognised in relation to these plans over the next 12 months. The sensitivity analysis below is disclosed as we believe it provides useful insight to the users of the financial statements into the factors taken into account when calculating the revenue to be recognised.

The table shows the sensitivity of the carrying value of the commission receivables and revenue to a reasonably possible change in inputs to the discounted cash flow model over the next 12 months.

Cancellations

The number of cancellations and therefore the cancellation rate can fluctuate based on a number of factors. These include macroeconomic changes e.g., unemployment, but will also reflect the change in nature of the plan itself (insurance plan vs service plan). The impact of reasonable potential changes is shown in the sensitivities above.

Profit share

The profit share attaching to the overall scheme is dependent on factors such as the price of the plan, the cost of claims and the administration of the scheme itself. Given changes in macro-economic conditions, there is an increased risk that claims cost could increase but also the possibility that to counter any increase in cost that D&G could further increase the price per plan. The above sensitivity considers what any reasonable change in either of these could mean to the overall profit share.

Network commissions

The Group operates under contracts with a number of Mobile Network Operators ("MNOs"). Over the life of these contracts, the service provided by the Group to each MNO is the procurement of connections to the MNO's networks. The individual consumer enters into a contract with the MNO for the MNO to supply the ongoing airtime over that contract period. The Group earns a commission for the service provided to each MNO. Revenue is recognised at the point the individual consumer signs a contract and is connected with the MNO. Consideration from the MNO becomes receivable over the course of the contract between the MNO and the consumer. The Group has determined that the number and value of consumers provided to each MNO in any given month represents the measure of satisfaction of each performance obligation under the contract. A discounted cash flow methodology is used to measure the estimated value of the revenue and contract assets in the month of connection, by estimating all future cash flows that will be received from the MNOs and discounting these based on the expected timing of receipt. Subsequently, the contract asset is measured at the present value of the estimated future cash flows.

The key inputs to management's base case model are:

•    revenue share percentage, i.e. the percentage of the consumer's spend (to the MNO) to which the Group is entitled;

•    the discount rate using external market data - 2.83% (2022: 0.53%);

•    the length of contract entered into by the consumer (12 - 24 months) and the resulting estimated consumer average tenure that takes account of both the default rate during the contract period and the expectations that some customers will continue beyond the initial contract period and generate out of contract revenue.

The input is estimated based on extensive historical evidence obtained from the networks, and adjustment is made for the risk of potential changes in consumer behaviour. Applying all the information above, management calculates their initial estimate of commission receivable. Consideration is then given to other factors outside of the historical data noted above which could impact the valuation. This primarily considers the reliance on historical data as this assumes that current and future experience will follow past trends.

The risk remains that changes in consumer behaviour could reduce or increase the total cash flows ultimately realised over the forecast period. Management make a regular assessment of the data and assumptions with a detailed review at half year and full year to ensure this continues to reflect the best estimate of expected future trends and appropriate revisions are made to the estimates. As set out in Note 1, the Directors do not believe there is a significant risk of a downward material adjustment to the revenue recognised in relation to these plans over the next 12 months given the variable revenue constraints applied albeit there could be a material upward adjustment.

The sensitivity analysis below is disclosed as we believe it provides useful insight to the users of the financial statements by giving insight into the factors taken into account when calculating the revenue to be recognised. The table shows the sensitivity of the carrying value of the commission receivables and revenue to a reasonably possible change in inputs to the discounted cash flow model over the next 12 months, having taken account of the changes in behaviour experienced in the period.

Cancellations - in contract

The number of cancellations, and therefore the cancellation rate, can fluctuate based on a number of factors. These include macroeconomic changes e.g., unemployment, interest rates and inflation. The impact of reasonable potential changes is shown in the sensitivities above for customers with exit barriers in place.

Cancellations - out of contract ("OOC")

This sensitivity focuses on the period beyond month 24 when customers can exit contracts without penalty. During the year, management restricted £2.9m in revenue related to the assumed collection of commissions once customers reach out of contract periods due to heightened uncertainty of future cancellation rates in the recent inflationary economic environment. This equates to c40% of customers exiting their contract at month 24. The sensitivity reflects what may happen if more or fewer consumers cancel at month 24.

Prepayments and accrued income

At 31 March 2023, there is £14.4m (2022: £19.0m) included in prepayments and accrued income in relation to volume rebates receivable. The amounts are largely coterminous and are mainly agreed in the month after recognition.

At 31 May 2023, the balance outstanding was £2.7m (30 June 2022: £3.3m).

10.  Trade and other payables

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 51 days (2022: 47 days).

Contract liabilities includes payments on account from Mobile Network Operators where there is no right of set off with the contract asset within the mobile business.

Trade and other payables are classified as:

11.  Net debt and movement in financial liabilities

Whilst not required by IAS 1 Presentation of Financial Statements, the Group has elected to disclose its lease liabilities split by those which ownership transfers to the Group at the end of the lease ("Owned asset lease liabilities") and are disclosed within the Property Plant and Equipment table in note 18 of the Group financial statements, and those leases which are rental agreements and where ownership does not transfer to the Group at the end of the lease as Right of use asset lease liabilities which are disclosed within the Right of use assets table in the Group financial statements. This is to give additional information that the Directors feel will be useful to the understanding of the business.

Movement in financial liabilities in the year was as follows:

Reassessment of lease terms relate to leases the Group have exited during the period.

* In the prior period, the movement arising from new borrowings was presented within "Other changes". This should have been presented as a change in financing cash flows and as such the comparative analysis has been restated. There is no impact of this to the overall movement or closing balance of financial liabilities or cash flow presentation.

12.  Discontinued Operations

On 9 June 2022, it was announced that the Group had taken the decision to close its German business as a result of its continued losses. The website was closed on 1 July 2022 and in August, AO Deutschland completed the final deliveries on behalf of its third party customers. The majority of German employees have now left the business and we have now materially exited from the Company's property portfolio.

The German business is clearly distinguishable from the rest of the Group and its numbers have been reported separately as an operating segment in previous periods. Therefore, it meets the definition of a component of an entity and in line with IFRS 5 "Non-current assets held for sale and discontinued operations", the business has been treated and presented as a discontinued operation in the year ended 31 March 2023 which includes restating comparatives to present Germany as such. The tables below show the results of the German operation for the relevant reporting periods:

The gain/ (loss) on remeasurement of assets arose following the decision to close the business in June 2022. The balance sheet at 31 March 2022 reflected the Director's initial view of the impact on assets held based on information available at that date. As the closure proceeded during the year, and leases were exited, this gave rise to a £2.6m reversal of previous impairments during the period.

Basic loss per share from discontinued operations was 1.61p (2022: 5.58p loss per share). Diluted loss per share from discontinued operations is 1.56p (2022: restricted to basic loss per share of 5.58p to prevent having an anti-dilutive effect).

The table below summarises the cashflows of the German operation for the relevant reporting periods: